Sanita, Shaira Mica, V. TOPIC 3

Sanita, Shaira Mica, V.
BSA 3-B
TOPIC 3
Foreign investments and Foreign trade
1. What is the significance of foreign investment?

 Foreign investment can be an additional source of income for every
country that wants to play in the international market or trading. It
denotes investing in domestic companies and assets of another
country by a foreign investor. Also, foreign investment can affect the
economic growth of a country as it helps in increasing its revenue or
external capital. Through this, a country can boost its different
sectors that can provide advantages to them in the future. For
example, investing in foreign resources can provide employment
opportunities by boosting the manufacturing sectors that result in
more job opportunities.
 To summarize, Foreign Investment can be:
 An additional income
 Boosts international trade
 Lower labor cost but increase in efficiency
 Can boost employment and economy
 Diversification
2. Historically what are the two forms of foreign investment and their types?
 Foreign Direct Investments- are defined as physical investment or
purchases by a company from a foreign company
 Horizontal- this is where funds are invested abroad but within
the same industry. Like for example, a local company invests
in foreign company that have similar goods or services with
them
 Vertical- where an investment is made within the supply chain

but not in the same industry. Like for example, a company may
invest in foreign to supply the resources that they need.
 Conglomerate- investment is made in a completely different
industry or when a company industry is not linked to the
investors
 Foreign Indirect Investments- investment or buying of equity

instruments and also debt instruments such as:
 Stocks
 Stakes
 Positions
 Bonds
 Other financial assets
3. What are the factors influencing foreign investment?

 Wage Rates
 Tax Rates
 Transport and Infrastructure
 Size of local market/economy/potential growth
 Commodities
 Political stability/property rights
 Exchange Rate
 Clustering Effects
 Access to free trades area
4. What are the factors that deter inflow of foreign capital?

 Poor Infrastructure that may hinder the delivery of purchased goods
like machineries
 Bureaucracy and corruption
 State level obstacles
 Legal delays
TOPIC 4
International Trade Policies
1. What are the different international trade policies? Characteristics?
Different International Trade Policies

 Import Trade- purchase of goods of a country from another country
 Export Trade- Sale of goods of a country to another country
 Entrepot Trade- importing goods from a country to be re-exported to
another country
Characteristics of International Trade Policies
 Separation of Buyers and Producers
 Involves payment of Foreign Currency
 Restrictions have impact to import and exports
 Need for middlemen
 Higher risk for trade because of boarder and distance
 Law of Comparative Cost
 Governmental Control
2. What are commercial agreements?

 use plain language, however they additionally incorporate
guarantees and standard language that has ordinarily been looked
into by a legal advisor ahead of time. They are regularly standard
structures that can be utilized on a continuous premise with
different suppliers or providers.
 Commercial agreements can be in writing or in verbal and in formal
or informal manner. This agreements can cover all aspect of
business like hiring of employees, wages and etc.
3. Steps in ratification of treaties

a. Multilateral Agreements
 business settlement between at least three countries. It takes into
account the entirety of the nations that sign, called signatories, to
be on an equivalent battleground. This arrangement implies that
no signatories can give better or more regrettable economic
accords to one country than it does another.
b. Multilateral trade negotiations

 These are treaties among three or more countries. An agreement
of reducing tariffs that will make imports and exports of goods
faster and easier.
4. Trade Policy Instruments and its types

 Tariffs- are tax levied on imports and exports
 Specific Tariffs- fixed charge for each unit of imported goods
 Ad Valorem Tariffs- it is the value proportionate to the value of
imported goods
 Subsidy- is the amount paid by the government to the local producer

to help them for competitive production against imports and to gain
export markets
 Cash
 Grants
 Low-interest loans
 Tax breaks
 Government equity participation in domestic firms
 Import Quota- direct restriction on the number of goods that is

allowed to be imported in a country
 Absolute quota- limitation of the amount of goods that may
enter during a specific period.
 Tariff-rate quota- Permits a predefined amount of imported
products to be entered at a diminished pace of obligation
during the standard time frame, with amounts entered in
abundance of as far as possible subject to a higher obligation
rate.
 Voluntary Export Restraint- quota on trade imposed by exporting

country.
 Local Content Requirement- imposed by governments that requires
companies to use local goods or services to operate in an economy.
 Administrative Trade Policies- rules and regulations imposed by

government for them to control the imports into the country
 Antidumping Duties- made to protect domestic producers against
foreign firms that dumps their excess products in different foreign
markets

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Sanita, Shaira Mica, V.

1. What is the significance of foreign investment?

 Vertical- where an investment is made within the supply chain

 Foreign Indirect Investments- investment or buying of equity

3. What are the factors influencing foreign investment?

4. What are the factors that deter inflow of foreign capital?

1. What are the different international trade policies? Characteristics?

Different International Trade Policies

2. What are commercial agreements?

3. Steps in ratification of treaties

b. Multilateral trade negotiations

4. Trade Policy Instruments and its types

 Subsidy- is the amount paid by the government to the local producer

 Import Quota- direct restriction on the number of goods that is

 Voluntary Export Restraint- quota on trade imposed by exporting

 Administrative Trade Policies- rules and regulations imposed by

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