Also important to consider are the difference in shipping costs from different ports, as it will change the “landed cost” of the item, and the retail price and profit margin. Although the international business differs from the domestic business due to the reasons below • Countries are different in a range of ways: cultures, political systems, economic systems, legal systems and levels of economic development. • The range of problems confronted in an international business is wider and the problems nmore complex than those in a domestic business. The managers of an international business must decide where in the world to site production activities so as to minimize costs and maximize value added. They must decide whether it is ethical to adhere to the lower labor and environmental standards found in many less-developed nations.
* Second, because different nations are ruled by different governments, which are inclined to look after their different national interests, International Trade inevitably involves government trade policies. These trade policies typically promote exports from a nation while restricting imports to the nation. Another important consideration that arises in study of International Trade is the law of
International Trader Speech ECO/ 372 June 18, 2014 International Trader Speech Understanding the effect of international trade to the GDP (Gross Domestic Product) can be confusing and may cause an unjustified version of imports. For instance, the addition of categories of spending to get the GDP, and the subtraction of imports in the calculation; that is to say the addition is GDP (Gross Domestic Product) = C (Consumption) + I (Investment spending) + G (Government Spending) + X (Exports) – M (Imports). It is easy to jump in conclusion that Imports is negative and exports is positive because it is add to GDP. This is not the case and here is why, Imports are subtracted because C, I, G and X spending all have imports elements, which creates income for the trading partners as the exports generate income to the country home. By subtracting Imports at the end make it easier than subtracting each imports form C, I, G and X individually.
First, countries trade because they are different from each other. The differences may lead to comparative advantage for each nation in different products. Nations can be better off when each nation specializes in and export the products in which they have a comparative advantage. Second, countries trade to achieve scale economies in production. That is, if each country produces only a limited range of goods, it can produce each of these goods at a larger scale and hence more efficiently than if it tried to produce everything.
While this situation may not impact the average consumer, companies that engage in foreign transactions with international companies could face losses, and gains, due to changes in the foreign currency exchange rate. US companies that do business with foreign companies have to be careful to not incur losses when making purchases or sales due to fluctuating foreign currency exchange rates. A company may make use of derivatives to minimize transaction exposure losses when engaging in business with foreign companies and currencies. The use of a derivative by a company who is trying to insulate itself against this type of loss is called hedging. Although hedging has its supporters and detractors, as well as its advantages and disadvantages, it is a common practice in our global business world today.
First of all, an advantage of having a common currency might be that could provide a favorable condition for trading. At this time, each Asian country has its own currency, which makes economic trade become complicated when one company wants to sell its product overseas. This affects product pricing; the currency of each country needs to be converted in order to create a same cost for the item, which may cost different prices in different countries in the same product. For example, a coke cost $VND 5,000 in Vietnam, $Baht 7.14 in Thailand, or $Yen 22.12 in Japan; these are the same amount but different currency. The company has to set up a department to decide the price of one product in each country.
Economic globalization refers to the interdependences of the world economies. Yet, it is a very controversial process. On one hand, economic globalization plays beneficial part in the development of investment and trade in the world. The World Bank or the IMF is the result of economic globalization, or the WTO and G-7 is also results of economic globalization. The benefit of this globalization is including the elimination of laws or barriers in the monetary flow, and the reduction of tariff and taxes.
Protectionism is based on world trade; countries will protect its markets from foreign companies diluting the home countries markets with unwanted goods by inducing tariffs, quotas, and nontariff barriers. These barriers can contain legal, exchange and psychological barriers. There are only a few logic and valid arguments for countries to establish more barriers increasing protectionism and unemployment is not one of them. There are many alternatives to maintain employment and reduce unemployment in home countries. Countries experiencing periods of economic growth need to capitalize on the opportunity for as long as that time lasts so new jobs can be created.
Argument against trade protection Argument against trade protection, in another word calls it as argument for trade restriction which support for the free trade. Free trade occur when government do not attempt to restrict what its citizen can buy from another country or what they can sell to another country. With the free trade, each nation can specialization in production which they have comparative advantage than other country, and trade with other country exchange the production which they cannot produces in home nation or other country have comparative advantages in those production than us. Over the long run, each nation can more efficiency in production which spending lower prices to produce higher levels of output; Get more income, revenue and profit as increase the market place, and increase in the consumption or demand (consumer can buy their like or product at the lower price). A country can be a capital (or labor)-abundant nations and labor (or capital)-scarce nations which consider their comparative advantage in technologies, input productivity, and wages of labor.
The seller of such goods and services is referred to an "exporter" who is based in the country of export. In International Trade, exports refer to selling goods and services produced in home country to other markets. The process by, which international trade is handled is known as the international trade management. Even if the international trade manifests favorable trends, there is competition to handle in the international trade market. Managing international trade policies, restructuring them according to the need of the hour, implementing the various trades polices, abiding by the norms governing international trade, all are taken into account when one speaks of international trade management.