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Chapter 12 - International Trade Practices and Policies

International trade is important for countries to access goods they cannot produce themselves. While early economies were self-sufficient on the local barangay level, contact with other cultures during the Crusades introduced new goods and ideas that helped economies develop specialized production and trade. Today, no country is fully self-sufficient and all rely on international trade. However, developing countries have not fully participated in the diversification of global trade and still depend on only a few exports. Policies aim to expand their trade opportunities.

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Chelsea Anne Vidallo
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233 views24 pages

Chapter 12 - International Trade Practices and Policies

International trade is important for countries to access goods they cannot produce themselves. While early economies were self-sufficient on the local barangay level, contact with other cultures during the Crusades introduced new goods and ideas that helped economies develop specialized production and trade. Today, no country is fully self-sufficient and all rely on international trade. However, developing countries have not fully participated in the diversification of global trade and still depend on only a few exports. Policies aim to expand their trade opportunities.

Uploaded by

Chelsea Anne Vidallo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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International

Trade Practices
and Policies
THE NEED FOR TRADE
 Ifwe look around us, we will see many items we
use which are imported from abroad or which
have components imported abroad.
 “No man is an island”. We cannot afford to close

our doors from the influences of other countries


and other people.
 Commerce, communication, and trade have

brought countries of the world closer together.


We import some of the goods that other
countries produce and, in turn, we export to
other countries some of the goods they desire.
In this way, interdependence benefits nation.
THE BARANGAY ECONOMY
 The barangay was an outgrowth of the
extended family system of the Malayo-
Indonesian immigrants who came to the
Philippines at different stages of our history.
 It was headed by traditional leaders.
 Barangay is a self sufficient economic unit

living on substinence agriculture. The need


of the barangay is very limited, production
for a surplus is unnecessary.
 Production, therefore, during the barangay

era as dictated more by tradition and, in the


case of some sultanates, by command.
EVOLUTION OF MARKET ECONOMY

 One of the most self-sufficient communities in


our midst is the Mangyan tribe in Mindoro. It is
also one of the most backward.
 One of the most economically dependent

countries in the world is Japan. She cannot


survive without trading with other countries.
 Most of Europe had gone through the feudalistic

era of the Middle ages. There too, they had


communities of families, bound together by
common assent, carrying out their economic
activities according to tradition, according to
intricate sets of rights and obligations.
THE MANORIAL SYSTEM
 Economic and social system of medieval
Europe under which peasants land tenure and
production were regulated, and local justice
and taxation were administered.
 The manorial society as an economically was u

underdeveloped one.
 Production of goods was limited. Hours of

work was long and hard. Technology was


primitive and backward. Division of labor was
unknown.
 The European communities during the feudal

era were practically a hand-to-mouth


existence.
THE BREAK-UP OF SELF-SUFFICIENCY
 Feudal Europe’s self-sufficient society was
broken as a result of the increasing contacts
of Europeans with the Near East through the
various Crusades organized to reconquer the
Holy Land from the Turks. The Europeans
were gradually enticed by the exotic goods
the Crusaders brought back.
 They become more productive, they utilized

better tools, and depended more on the


division of labor.
 With the surplus goods they accumulated,

they began to trade with other nations.


IS THERE A “WORLD ECONOMY”
 With the growing interdependence of
nations, a “world economy” started to
exist.
 Through time, this interdependence

has become more and more


pronounced.
 It exists because no country today is

self-sufficient and all must participate


in international trade.
TRADE AS A “PRIMARY
INSTRUMENT OF DEVELOPMENT”
 Trade is called a “primary instrument of
development” because this has been its proven role
throughout history.
 Trade became even more important for several

reasons:
The speed at which science and technology
developed the means to create wealth.
The growing investment necessary to transfer
and use the cumbersome technology of industrial
age.
The social impact of trade in bringing traditional
cultures contact in new ideas, technologies, and
goods.
WHAT IS WRONG WITH WORLD
TRADE TODAY
 World trade has grown spectacularly in
the post-war period, but it has now
slowed down considerably.
 Its main growth in the last four

decades has been in the manufactured


of goods of developed countries.
 Between 1960-1971, for instance,

trade in manufactures tripled, while


commodity trade less than doubled.
DIVERSIFICATION
A major element in the growth of world trade
has been growing diversification in the
nature of the goods traded.
 Developing countries have not participated

in this diversification.
DEVELOPING COUNTRIES’ SHARE OF
THE WORLD’S INDUSTRY
 Developing countries share of the world’s
industry is so low that the entire
industrial production of developing
countries is less than that the Federal
Republic of Germany.

 Toincrease the developing countries’


share of the world industry, they need to
lower the barriers that keep their
manufactured goods out of rich countries.
MERCANTILISM
 Mercantilism is a political- economic
movement originating in the period 1500-
1750 whose paramount goal of national
policy is to make the nation rich and
powerful the means of which consisted
mainly in the protection of domestic
industry and the
regulation of trade.
TRADE
 A basic economic concept that involves
multiple parties participating in the
voluntary negotiation and then the
exchange of ones goods and services
for desired goods
and services that
someone else
possesses.
INTERNATIONAL TRADE
 Theprocess of exchanging goods
and services between countries. It
involves the buying and selling of
imports and exports.
THEORY OF ABSOLUTE
ADVANTAGE
A country has an absolute advantage
over another if it can produce, with a
given amount of capital and labor, a
larger output than its rival.
 In other words to produce more of a

good or service than competitors,


using the same amount of resources.
THEORY OF COMPARATIVE
COST (ADVANTAGE)
 Nations should specialize in the
production of goods in which they
have comparative advantage and
import those products of which it
has the least advantage.
TRADE PRACTICES AND POLICIES
 Philippine exports have been the main dollar
earner of the country. In recent years, it has
contributed about fifty percent of total dollar
receipts of the country.

 We cannot use our Philippine peso to buy


foreign goods. We need dollars to import
goods or to buy goods from foreign
countries.
EXPORT
 Goods or merchandise that we sell
to other countries to earn dollars.
These dollars that we earn will later
be used to buy goods we need from
abroad.
OTHER SOURCES OF DOLLARS
 Dollars from gold
◦ We have several gold mines in the country. With the attractive
prices of gold in the world market, income from the sales of
gold has also helped in our balance of payments problem

 Dollars from invisibles


There are non-commodity items like foreign government
expenditures, transportation and insurance, travel, foreign
investments and foreign loans, and other services that have
accounted for.
IMPORTS
 The dollars we earn through exports
and other sources are used mainly
to import goods and services we
need. Most of our imports are
composed of industrial and
manufactured items.
BALANCE OF PAYMENTS
Our balance of payments is considered

favorable if dollar inflows or receipts


exceed outflows or payments

Current transactions refer to imports

and exports of goods and services.


BALANCE OF TRADE
 The balance of trade is called  favorable if 
exports exceed  imports.

 The balance of trade is called  unfavorable 
if imports exceed  exports.
SOME OF OUR TRADE
PROBLEMS
 Overdependence on few
primary products

 Overdependence on few
export markets
SPECIFIC STRATEGIES TO PURSUE
 Increase revenue by improving tax collection efficiency and
expanding tax base.
 Rationalize expenditure by prioritizing projects for funding and

reengineering government structure.


 Improve debt management by tapping concessional loans and

etc.
 Pursue an honest-to-goodness privatization program
 Improve the environment for investments
 Power sector reform with the aim of reducing the mounting

losses of NPC and encouraging new investments in the sector to


develop new generation capacity to supply the anticipated
increase in power requirement of the growing economy.

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