Topic 6 Trade Theory, Practices and Financing in Crises for MNCs

National competitive advantage nation s

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Unformatted text preview: "  Companies first to market create barriers to entry # First-mover advantage "  Government may help by assisting home companies # Strategic trade New trade theory emphasizes productivity rather than a nation s resources, It is in line with the theory of comparative advantage but at odds with factor proportions theory. National Competitive Advantage Nation s competitiveness in an industry depends on the industry s capacity to innovate and upgrade, which in turn depends on four main determinants (plus government and chance) Factor conditions (natural and acquired) Demand conditions (C, I, G) Related and supporting industries (cluster) Firm strategy, structure, and rivalry (competition) 2 Reality in Trade: Protectionism: Economic Effects of Tariffs on Market The Instruments of Trade Policy Tariffs Subsidies Local Content Voluntary Requirements Antidumping Exports Duties Restraints Administrative Import Policies Quotas Trade financing practices: Economists do not support protectionism! !  A tariff reduces the quantity of imports and moves the domestic market closer to its equilibrium without trade. !  With a tariff, total surplus in the market decreases by an amount referred to as a deadweight loss. (D + F) Export/Import Financing Issue of TRUST •  Pre-trade financing •  Letters of Credit (L/C) –  Bank financing –  Bank guarantee on behalf of importer to exporter assuring payment when exporter presents specified documents –  Supplier financing –  R&D and market development financing •  Drafts (BOE, Bill of Exchange) –  A document issued by an exporter, telling the importer or its bank to pay a specified amount of money at a specified time. •  Post-trade financing –  L/C, negotiations with trade documents •  Bill of Lading (B/L) –  Issued to exporter, by carrier or transporting c...
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This document was uploaded on 12/10/2013.

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