1、Chapter 1 OverviewAfter learning this unit,you will be able to:After learning this unit,you will be able to:define what is meant by international trade define what is meant by international trade explain the reasons for engaging in international explain the reasons for engaging in international trad
2、etrade identify the benefits of international trade identify the benefits of international trade understand various means of trade restriction understand various means of trade restrictionChapter 1 Overview Reasons for International TradeReasons for International Trade 1.Resources reasons2.Economic
3、reasonsAbsolute advantageComparative advantage3.Other reasons1.Resource reasonsThe uneven distribution of resources around the world is one of the basic reasons why nations began and continue to trade with each other.1)Favorable climatic conditions and terrainClimatic conditions and terrain are very
4、 important for agricultural produces.The difference in these factors enables some countries to grow certain plants and leaves other countries with the only choice to import the produces they consume.For example,Colombia and Brazil have the ideal climate for growing coffee beans but other countries d
5、ont.Then Colombia and Brazil have the opportunity to export coffee beans and coffee to countries worldwide.Another example is that the US Great Plains states have the ideal climate and terrain for raising wheat.This has made the US a big wheat exporter.2)Natural resourcesSome countries are the major
6、 suppliers of certain natural resources because the distribution of natural resources around the world is somewhat haphazard.The Middle East West Europe and Japan need is imported from the Middle East the US oil military consumption in Europe and Asia is largely purchased from that area.3)Skilled wo
7、rkersUS,Japan,and western European countries have skilled workers who are able to manufacture sophisticated equipment and machinery such as jet aircrafts and computers,etc.Other countries,since they dont have well-trained engineers and workers,must import the equipment from these countries.4)Capital
8、 resourcesDeveloping countries need to modernize their industries and economies with advanced machinery,equipment and plant that they are not yet able to manufacture because of the lack of capital.This has given rise to the need for developing international trade.5)Favorable geographic location and
9、transport costsThere are many examples that countries have developed close economic relationships chiefly because they are geographically close to each other.Sino-Japanese trade relationship is to some degree determined by geographic proximity and low transport cost.6)Insufficient productionSome cou
10、ntries cannot produce enough items they need.UK does not have a large enough agricultural population.only 5%of its population is engaged in agriculture and they mainly grow fruits and flowers.UK then has to import 60%of its total agricultural consumption.2.Economic reasonsIn addition to getting the
11、products they need,countries also want to gain economically by trading with each other.It is made possible by varied prices for the same commodity around the world,reflecting the differences in the cost of production.1)Absolute advantageAdam Smiths-each country could produce one or more commodities
12、at a lower real cost than its trading partners.It then follows that each country will benefit from specialization in those commodities in which it has an“absolute advantage”,exporting them and importing other commodities which it produces at a higher real cost than does another country.Absolute-cost
13、 ExampleFrom the example,We can see clearly that Scotland should specialize in the production of cloth on which it has a cost advantage.Days of Labor Required to ProduceCountryCloth(1 bolt)Wine(1 barrel)Scotland30120Portugal100202)Comparative advantageDavid Ricardo-absolute cost advantages are not a
14、 necessary condition for two nations to gain from trade with each other.Instead,trade will benefit both nations provided only that their relative cost,that is,the ratios of their real costs,are different for two or more commodities.In short,trade depends on differences in comparative cost,and one na
15、tion can profitably trade with another even though its real costs are higher(or lower)in every commodity.Comparative-cost ExampleClearly the United States benefits from specializing in cars,which it produces more cheaply than Brazil,and trading with Brazil for some of the computers it produces more
16、cheaply.productU.S.Brazil100 cars2 41,000 computers343)Other reasonsAll in all,in todays complex economic world,neither individuals nor nations are self-sufficient.Nations have utilized different economic resources;people have developed different skills.This is the foundation of international trade
17、and economic activities.International Trade PolicyInternational Trade Policy G Gains from Free Tradeains from Free TradeGains from Inter-industry specializationGains from Inter-industry specializationEconomies of ScaleEconomies of ScaleIf countries can specialize in certain goods they can benefit fr
18、om economies of scale and lower average costs,this is especially true in industries with high fixed costs or that require high levels of investment.The benefits of economies of scale will ultimately lead to lower prices for consumers.G Gains from Free Tradeains from Free TradeGains from Inter-indust
19、ry specializationGains from Inter-industry specializationIncreased CompetitionIncreased CompetitionWith more trade domestic firms will face more competition from abroad therefore there will be more incentives to cut costs and increase efficiency.It may prevent domestic monopolies from charging too h
20、igh prices.G Gains from Free Tradeains from Free TradeGains from Inter-industry specializationGains from Inter-industry specializationTrade is an engine of growthTrade is an engine of growthWorld trade has increased by an average of 7%since the 1945,causing this to be one of the big contributors to
21、economic growth.G Gains from Free Tradeains from Free TradeGains from Intra-industry specializationGains from Intra-industry specializationIntra-industry specialization tends to occur in industries characterized by the existence of imperfect competition.In most cases,intra-industry specialization in
22、volved countries exchanging different varieties of the same good.Reasons for TradeReasons for Trade RestrictionRestrictionl infant industry argument-maintains that a new industry needs to be protected until the labor force is trained,the production techniques are mastered and the operation becomes l
23、arge enough to enjoy the economies of scale and to be able to compete in the market.Reasons for TradeReasons for Trade RestrictionRestrictionUnfair competition.Foreign firms may receive subsidies or other government benefits.They may be dumping(selling goods abroad at below cost price to capture a m
24、arket).Balance of payments.Reducing imports improves the balance of trade.Cultural Identity This is not really an economic argument but more political and cultural.Many countries wish to protect their countries from what they see as an Americanization or commercialization of their countries.Reasons
25、for TradeReasons for Trade RestrictionRestrictionThe Senile industry argument.If industries are declining and inefficient they may require large investment to make them efficient again.Protection for these industries would act as an incentive to for firms to invest and reinvent themselves.However pr
26、otectionism could also be an excuse for protecting inefficient firms.Different MeansDifferent Means of of ProtectionProtection(1)Tariff barriersA tariff is a duty or fee levied on goods being imported into a country.It can be a revenue tariff,which is collected mainly for income purpose,or a protect
27、ion tariff,which is collected in order to protect the domestic market.(2)Non-tariff barriersQuotaThis is a quantitative restrictionquantitative restriction or upper limit in terms of physical quantity or value.The upper limit can be set on global(first come first served)basis or on country basis.An
28、absolute quota is one that cannot be exceeded and a tariff quota is one that requires low or no duties below the limit but high duties or penalty above the limit.Voluntary Export RestraintsVoluntary Export RestraintsVoluntary export restraints enable one country to force onto another country through
29、 bilateral agreement a low rate of increase in export volume.In many case,it is not really a“voluntary”measure taken on the part of the exporting country but rather than a measure to avoid harsher punitive actions taken by the importing country.Import licenseImport licenseAn import license is a perm
30、it for import,which can be independent or combined with quotas.Product standardProduct standardMany non-tariff trade barriers of ingenious new ones are constantly being developed to restrict trade.Some are technical standards,such as antipollution regulations that require automobiles to meet certain
31、 exhaust emission standards.Others may be ostensibly be introduced for reasons of health,safety,sanitary or national security but are actually intended to restrict trade.Government Procurement PolicyGovernment Procurement PolicyThis policy requires that a specified percentage of purchases by a gover
32、nment be made from domestic firms rather than foreign firms.It can be a non-tariff barrier to imports,if the purchasing processes are biased against foreign products,as they often are.In many countries the governments buy relatively few imported products and instead they buy mostly.Chapter 2 Trade T
33、ermsAfter learning this unit,you will be able to:After learning this unit,you will be able to:understand the nature and the role of trade terms understand the nature and the role of trade terms know the major rules governing the use of trade know the major rules governing the use of trade termsterms
34、 provide a brief explanation of thirteen terms under provide a brief explanation of thirteen terms under the the IncotermsIncoterms 20102010compare and contrast the use of FOB,CFR and CIFcompare and contrast the use of FOB,CFR and CIF list the determining factors when choosing list the determining f
35、actors when choosing IncotermsIncotermsChapter 2 Trade Terms Definition of International Terms Definition of International Terms FOB LONDON CIF JIUJIANGThe trade terms refer to using a brief English concept or abbreviation of English letters to indicate the formation of the unit price and determine
36、the responsibilities,expenses and risks borne by two parties as well as the time of the passing of the property in the goods.Definition of International Terms Definition of International TermsTrade terms are key elements of international contracts of sale,since they tell the parties what to do with
37、respect to:Delivery termscarriage of the goods from the seller to the buyer and division of costs and risks between the parties;Price termsstipulating what are included in the price the buyer paid to the seller,e.g.cost,freight,insurance,export and import clearance fees,etc;Delivery obligationswhat
38、documents should the seller provide,e.g.bill of lading insurance policy,etc.The Role of Trade TermsThe Role of Trade TermsThe objective of trade terms is to help the seller and the buyer to settle mentioned issues.Predefined trade terms have been developed in form of abbreviations which already allo
39、cate the obligations of seller and buyer so that the parties do not need to consume much time for discussing the conditions in each issue.THE MOST INFLUENTIAL TRADE CONVENTIONS1、Warsaw-Oxford Rules(W.O.Rules)1932 华沙牛津公约2、Revised American Foreign Trade Definitions 1941 1941美国对外贸易定义修订本 3、International
40、 Rules For the Interpretation of Trade Terms国际贸易术语解释通则 It has been amended and modernized in 1953,1967,1980,1990,2000 and 2010.20201 10 0年通则年通则 四组术语四组术语(共共1 11 1种种)Group EDepartureEXW-Ex works(named place)All modes of transport including multimodalGroup FMain Carriage UnpaidFCA-Free Carrier(named pl
41、ace)DittoFAS-Free Alongside Ship(named port of shipment)Sea and inland waterway transport onlyFOB-Free On Board(named port of shipment)DittoGroup CMain Carriage PaidCFRCost and Freight(named port of destination)DittoCIFCost,Insurance and Freight(named port of destination)DittoCPTCarriage Paid To(nam
42、ed place of destination)All modes of transport including multimodalCIPCarriage and Insurance Paid To(named place of destination)DittoGroup DArrivalDATDelivered at Terminal(named terminal at port or place of destination)DittoDAPDelivered at Place(named place of destination)DittoDDPDelivered Duty Paid
43、(named place of destination)DittoDifference between Difference between Incoterms 2000 and Incoterms 2010Incoterms 2000 and Incoterms 2010 A Brief Explanation of the Terms in A Brief Explanation of the Terms in Incoterms 2010Incoterms 2010A Brief Explanation of the Terms in A Brief Explanation of the
44、 Terms in Incoterms 2010Incoterms 2010 Explanations of Group EExplanations of Group EEXWEXW EX WORKS(named place of delivery)The term means that the seller delivers when he places the goods at the disposal of the buyer at the sellers premises or another named place(i.e.works,factory,warehouse,etc.)n
45、ot cleared for export and not loaded on any collecting vehicle.The Sellers only responsibility is to make the goods available at the Sellers premises.The Buyer bears full costs and risks of moving the goods from there to destination.So this term represents the minimum obligation for the seller.Under
46、 EXW term it is not guaranteed that the goods will be exported.It should not be used when the buyer cannot carry out the export formalities directly or indirectly.The buyer may keep the goods in the exporting country and re-sell to a third party.Explanations of Group FExplanations of Group FFCAFCA F
47、REE CARRIER(named place of delivery)“Free Carrier”means that the seller delivers the goods to the carrier or another person nominated by the buyer at the sellers premises or another named place.The parties are well advised to specify as clearly as possible the point within the named place of deliver
48、y,as the risk passes to the buyer at that point.If the parties intend to deliver the goods at the sellers premises,they should identify the address of those premises as the named place of delivery.If,on the other hand,the parties intend the goods to be delivered at another place,they must identify a
49、 different specific place of delivery.FCA requires the seller to clear the goods for export,where applicable.However,the seller has no obligation to clear the goods for import,pay any import duty or carry out any import customs formalities.FASFASFREE ALONGSIDE SHIP(named port of shipment)The term FA
50、S means that the seller delivers when the goods are placed alongside the vessel nominated by the buyer at the named port of shipment.The risk of loss of or damage to the goods passes when the goods are alongside the ship,and the buyer bears all costs from that moment onwards.The parties are well adv
