INTERNATIONAL BUSINESS [IB] Birat Shrestha BBIS, August 2019 LACM, KU
4. DOMESTIC AND INTERNATIONAL TRADE
Trade and Trading Activities
REASONS OF INTERNATIONAL TRADE • Global competition in factors of production • Liberalization by host government • Advances in technology
Sales in Foreign Countries – International Trade • Import • Export – Foreign Investment • Portfolio Investment • Foreign Direct Investment [FDI]
Trading and Business Activities • Tertiary Sector Business Activities: • Service oriented products (retailing, health service, education, hotels, banking, insurance, transport, tourism) • Secondary Sector Business Activities : • Processing products from natural resources to make final products. (computer, automobiles, baking breads, brewing, cloths) • Primary Sector Business Activities: • Extracting natural resources (oil extracting, farming)
Changes in Business Activities • Industrialization – It is the growth of secondary sector business activities in developing countries. It is measured in terms of employment or output levels in proportion of the whole economy • De- industrialization – It is the growth of tertiary sector business activities
International Trade: Volume, Direction, Patterns and Trends Volume In 1990, volume of international trade in goods and services surpassed $4 trillion and exceeded $11 trillion in 2000 Of the $11 trillion in international trade in goods and services in 2004, exports of merchandise were $8.9 trillion, about 4.5 times from 24 years earlier In 2004, worldwide trade in services were at more than $2.1 trillion and has been growing faster than trade in merchandise since 1980 There is a rapid expansion of world exports volume since 1980 creating international export sales opportunities and competition for domestic industries Direction More than half of the exports from developing nations do go to developed countries, but this proportion has been declining over the past 35 years, from 72 percent in 1970 to 53 percent in 2004 Over 70 percent of exports from developed economies go to other industrialized nations, not to developing countries The largest exporters and importers of merchandise are generally the developed countries, although emerging economies are also represented among the largest 20
International Trade: Volume, Direction, Patterns and Trends Patterns and Trends Membership of WTO is increasing creating multilateral trading There is the increasing regionalization of trade through the development of expanded regional trade agreements like ASEAN, NAFTA, EU American and EU countries exporters have major inroads in developing country markets, which in turn are selling more to the US and EU, due to their ability to export manufactured goods Expanding economic and trade performances of growing markets and developing economies – BRICS, Mexico, Hong Kong, Malaysia, S.
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