International Business and Trade

Companies involved in international marketing have to deal with taxes, duties, or tariffs on goods bought from or sold in other country markets. Being aware of multilateral and bilateral trade agreements between your country and other nations is essential since those agreements help level the playing field among countries by reducing tariffs or making it easier for businesses to import and export. Bilateral agreements are trade pacts made between two countries. Three or more nations take part in multilateral agreements, which makes them harder to negotiate. A country can be part of a multilateral trade agreement while also participating in bilateral trade agreements with many other countries. The World Trade Organization (WTO) is an important organization involved in ensuring the efficient flow of trade. The WTO works with countries to negotiate the terms of a trade agreement, and once an agreement is established, it helps enforce the agreement. Global financial institutions like the International Monetary Fund (IMF) and the World Bank also facilitate international trade. The IMF has 189 member countries and works to foster global monetary cooperation among its members. The World Bank provides loans and grants for capital projects to the governments of poorer countries. Read this chapter, which discusses the evolution of international trade.

Summary

It's easy to think that trade is just about business interests in each country. But global trade is much more. There's a convergence and, at times, a conflict of the interests of the different stakeholders - from businesses to governments to local citizens. In recent years, advancements in technology, a renewed enthusiasm for entrepreneurship, and a global sentiment that favors free trade have further connected people, businesses, and markets - all flatteners that are helping expand global trade and investment. An essential part of international business is understanding the history of international trade and what motivates countries to encourage or discourage trade within their borders. In this chapter we'll look at the evolution of international trade theory to our modern time. We'll explore the political and legal factors impacting international trade. This chapter will provide an introduction to the concept and role of foreign direct investment, which can take many forms of incentives, regulations, and policies. Companies react to these business incentives and regulations as they evaluate with which countries to do business and in which to invest. Governments often encourage foreign investment in their own country or in another country by providing loans and incentives to businesses in their home country as well as businesses in the recipient country in order to pave the way for investment and trade in the country. The opening case study in the next section shows how and why China is investing in the continent of Africa.

A country's balance of payments is a record of its economic transactions with the rest of the world; this record shows whether a country has a trade surplus (value of exports exceeds value of imports) or a trade deficit (value of imports exceeds value of exports). Trade figures can be further divided into merchandise trade and services trade accounts; a country can run a surplus in both accounts, a deficit in both accounts, or a combination of the two. The U.S. merchandise trade deficit was $819 billion in 2007. However, the U.S.enjoys an annual service trade surplus. Overall, however, the United Statesis a debtor; Japanenjoys an overall trade surplus and serves as a creditor nation.

Foreign exchange provides a means for settling accounts across borders. The dynamics of international finance can have a significant impact on a nation's economy as well as the fortunes of individual companies. Currencies can be subject to devaluation or revaluation as a result of actions taken by a country's central banker. Currency trading by international speculators can also lead to devaluation. When a country's economy is strong or when demand for its goods is high, its currency tends to appreciate in value. When currency values fluctuate, global firms face various types of economic exposure. Firms can manage exchange rate exposure by hedging.

Source: Babu John Mariadoss, https://opentext.wsu.edu/cpim/chapter/chapter-2-international-business-and-trade/
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