INTERNATIONAL

BUSINESS AND TRADE

POLICIES
 INTRODUCTION TO
INTERNATIONAL BUSINESS AND
TRADE POLICIES
• International Business and Trade Policy refers to unfavorable/favorable
or unsupportive/supportive trade instruments to importers. It is imposed
on foreign countries that selling goods and services to the home or
domestic country.
• The objective of International Business Policy is to protect the local or
domestic industry which are affected by imported goods (also to restrict
importing countries). Hence, domestic goods will appear cheaper than
imported goods. Therefore, demand on domestic goods will increase.
• Another, it is also a set of practices, laws, regulations and agreements
that govern international trade practices or, imports and exports to
foreign countries. Thus, it aims also to strengthen the domestic economy.
• For example, Philippine trade policy aims to create the proper
• Trade policies can be aimed at a number of issues related to importing
and exporting, such as foreign retaliation, jobs, or tariffs; or they may
focus on protecting intellectual property, setting standards that promote
collaboration and reduce trade barriers, or establishing trade agreements
and trade laws.

• For example, in the U.S., the Export Trading Company Act (ETCA)
enables U.S. firms to work together to reduce export costs, increase
exporting efficiency, and better compete in the global market, among
other initiatives. It provides antitrust protection and other benefits to
U.S. firms that collaborate on exporting activities. As a result, these
firms get the advantage of, for example, reduced shipping costs, better
negotiating power, and the ability to fill larger export orders. Trade
policies can be aimed at a number of issues related to importing and
exporting, such as foreign retaliation, jobs, or tariffs; or they may focus
on protecting intellectual property, setting standards that promote
 INTERNATIONAL BUSINESS AND
TRADE POLICIES
• TRADE AGREEMENTS – refers to two or more countries agree to the
terms of trade, which can include the amount of tariffs and quotas, among
other terms. It exists when two or more countries agree on terms that help
them trade with each other.
• For example, Philippines – European Free Trade Association Free Trade
Agreement The Philippines and EFTA members – Iceland, Liechtenstein,
Norway, and Switzerland – signed a free trade agreement in 2016 which
entered into force in 2018. The Philippines-EFTA covers trade in goods,
trade in services, investment, competition, intellectual property,
government procurement, and trade and sustainable development.
INTERNATIONAL BUSINESS AND
TRADE POLICIES
 INTERNATIONAL BUSINESS AND
TRADE POLICIES
• There are two categories of International Business and Trade Policies available to governments:
• Tariff Barriers
• Non-Tariff Barriers

• TARIFF BARRIERS – it is a government tax divide on a product as it enters or leave a

country. A tariff increase price of an important product directly.
• NON-TARIFF BARRIERS – limits the availability of an imported product which it
increase price indirectly.

• QOUTA - is a limit on the amount of a certain type of good that may be

imported into the country.
 TRADE POLICIES
• refers to the regulations and agreements that control imports and exports
to foreign countries.
• defines standards, goals, rules and regulations that pertain to trade
relations between countries.
• These policies are specific to each country and are formulated by its
public Officials. A country's trade policy includes taxes imposed on
import and export, inspection regulations, and tariffs and quotas.
• Laws related to the exchange of goods or services involved in
international trade including taxes, subsidies, and import/export
regulations.
 WHY TRADE POLICIES ARE
IMPORTANT?
• the purpose of providing a • Effect of a Tariff:

nation with commodities it •  Prices - rise in the importing country and

falls in the exporting country.
lacks in exchange for those •  Consumers - loss in the importing
that it produces in abundance; country and gain in the exporting country.
such transactions, functioning •  Producers – gain in the importing
with other economic policies, country and loss in the exporting country.
•  Government – gains revenue through
tend to improve a nation's tariff.
standard of living.
• Effect of a Tariff: • Export Tariffs
•  Prices - rise in the importing country
and falls in the exporting country.
•  Consumers - loss in the importing •  Levied on exports of a
country and gain in the exporting
country. product from a country
•  Producers – gain in the importing •  Less common than import
country and loss in the exporting country.
tariffs
•  Government – gains revenue through
tariff.
• Import Quotas • Effects of an Import Quota
•  A direct restriction on the quantity of •  Raises the domestic price
some good that may be imported
•  Restrictions are enforced through
of the imported good
import licenses •  Have the same effects of a
•  Import quotas are issued either to an tariff
individual or firm in the importing
country or given •  Revenue for government
• directly to the government of exporting under quota system is the
countries. import license fee collected
 COMPARE AND CONTRAST-
CHINA AND PHILIPPINES TRADE
POLICY
• Similarly, the Philippines and China are • Among the difference that seems to be innate
depending on global economic integration. to each country's socioeconomic and even
It works alongside with each countries cultural perspectives is their inability to let
existing trade policies. go of its symbiotic relationship - China being
a global economic superpower.
• Both countries are trade partners - the
Philippines being the frequent consumer • Generally, each country takes advantage of
and China as supplier. each other's unique trading practices
benefiting one with the other. Whether or
• At present, all U.S. meat establishments not, the Philippines and China are far
that are regulated and inspected by the different in terms of trade policies, it can
USDA Food Safety and Inspection Service never be denied that their trade relationship
(FSIS) are eligible to export meat and is rooted since early times - making them as
poultry to the Philippines. historical business partners.
 TRADE BLOCKS
• Trading blocks are groups of countries who
form trade agreements between themselves. • Free trade areas –
Trading blocks can include.
• A trading bloc is another potential barrier to
elimination of tariffs between
international trade. A trading bloc is a group economies in the trading
of countries that work together to provide
special deals for trading. This promotes trade
block
between specific countries within the bloc. • Customs union – free trade
• The European Union (EU) is an example of a
trading bloc. All of the countries within the
area + a common external
EU can trade freely with each other, which tariff with non-members
means that no tariffs are put in place. This
makes goods and services cheaper, which is • Economic union/Single
good for both businesses that export and
businesses that import within the EU.
market – Customs union +
However, the EU also charges tariffs on common rules and
many goods and services imported from
DIFFERENT TYPES OF TRADE
BLOCK
EXAMPLES OF TRADE BLOCKS
 ADVANTAGE AND
DISADVANTAGES OF TRADE
BLOCKS
Advantages Disadvantages
Importing and exporting to countries
Promotes free trade, which means
outside the trading bloc can be
trading without tariffs
expensive
Countries can often only be part of one
There is often free movement of
trading bloc, which means they cannot
labour, eg people, across trading blocs
enter others
Creates good trading relationships
with other countries in the trading bloc
 INTERNATIONAL FINANCE AND
FOREIGN EXCHANGE
• What is international finance? • What is Foreign Exchange?
• Foreign exchange, or forex, is the
• International finance (also referred to as international conversion of one country's currency into
monetary economics or international
macroeconomics) is the branch of financial
another. In a free economy, a country's
economics broadly concerned with monetary and currency is valued according to the laws of
macroeconomic interrelations between two or more supply and demand. In other words, a
countries focusing on areas such as foreign direct currency's value can be pegged to another
investment and currency exchange rates. International country's currency, such as the U.S. dollar,
finance examines the dynamics of the global financial
system, international monetary systems, balance of or even to a basket of currencies.
payments, exchange rates, foreign direct investment, • Foreign exchange is the trading of different
and how these topics relate to international trade.
national currencies or units of account. It is
• International finance deals with the economic important because the exchange rate, the
interactions between multiple countries, rather than
narrowly focusing on individual markets. price of one currency in terms of
another, helps to determine a nation's
 EXAMPLES OF INTERNATIONAL
FINANCE AND FOREIGN
EXCHANGE
• 1. A good example of inter- • 2. IFC supports the Philippines’
national finance would be, sustainable development by helping
attract international investors to sectors
suppose ABC Company sending such as infrastructure and public utilities,
financial assets from its U.S. head financial institutions, and agribusinesses.
office to branch in India. This We provide loans and equity investments
funds transfer is between the same to private sector companies, including
ownership; however it did get small and medium enterprises with
cross nations boundaries. This is a growth potential, and mobilize financing
from other sources. We advise firms and
best example to understand the the government on how to enhance
type of international finance. businesses’ competitiveness.
 EXAMPLES OF INTERNATIONAL
FINANCE AND FOREIGN
• How Do Exchange Rates Impact International
EXCHANGE
• These are simple examples. Multinational companies profit and
Business? incur expenses from international operations and trade in
complex and layered ways. Supply chain and logistics,
• Consider someone making a foreign investment in
manufacturing, customer service, sales, taxes and legal fees are a
Mexico. If the value of the U.S. dollar decreases
few of the many areas that involve cost and revenue. Fluctuations
compared to the Mexican peso, the value of that
in exchange rates can directly impact the relative value of
foreign investment will increase (and vice versa).
expense or income in all areas of international business
Thus, investors in foreign markets must keep a close
operations.
eye on fluctuations in exchange rates.
• Given all of this, international business leaders constantly
• The same holds true for the financial operations and
monitor exchange rates and consider the many factors that
investments of multinational companies on a much
influence currency fluctuation. Whether internationally sourcing
larger, more complex scale. For example, if a U.S.
materials, contracting out production or expanding to new
company sells a product in an international market at
markets, management must assess and mitigate the risk involved
a set price and USD increases in value, that set sale
in doing business in fluid markets.
price in foreign currency is worth less in USD. This
decrease lowers the profit margin for sales in that • Fluctuations in exchange rates have wide-reaching impacts on
market. international firms. Therefore, understanding exchange rate
determinants and the financial risk inherent to fluctuating
• Similarly, a U.S. company might contract with a
international markets is essential for global business
factory in Mexico to manufacture a product at a set
management.
cost in MXN. If the value of the Mexican peso
 REFERENCES
•https://www.trade.gov/country-commercial-guides/china-import-requirements-and-documentation#:~:tex
t=Necessary%20documents%20vary%20by%20product,applicable)%
2C%20import%20license%20(where
• https://www.trade.gov/country-commercial-guides/philippines-trade-barriers
• https://www.trade.gov/country-commercial-guides/philippines-trade-agreements
• https://www.efta.int/free-trade/Free-Trade-Agreement/Philippines
•https://www.thebalance.com/what-is-trade-policy-5217002#:~:text=Trade%20policy%20refers%20to%2
0a,to%20strengthen%20the%20domestic%20economy
.
• https://www.bbc.co.uk/bitesize/guides/zh3847h/revision/5#:~:
text=A%20trading%20bloc%20is%20another,example%20of%20a%20trading%20bloc
• https://www.economicshelp.org/blog/glossary/trading-blocks-pros-and-cons/
•https://online.ewu.edu/degrees/business/mba/international-business/exchange-rates-influence-internation
al-business
/