Importing, Exporting, and International Trade

1. Importing, Exporting, and International Trade International Business Chapter 4

2. Independent Practice • Research the U.S. Customs and Border Protection Department • Examine and explain 2 regulations regarding importing • Examine and explain 2 regulations regarding exporting • Find and explain 3 Careers at the U.S. Customs Department

3. The Nature of International Trade • What is International Trade? • All business activities conducted between individuals, companies and governments from different countries • Business Activities: • Buying, selling, shipping, receiving, paperwork, credit, payments, servicing. • Importing And Exporting • Imports – goods and services people in one country buy from people in another country • Exports – goods and services people in one country sell to people in another country 4.1

4. The Nature of International Trade • Goods and Services • Goods • Tangible items, made, manufactured or grown • Services • A task provided by a business (you cannot touch) • Goods with Services • Often goods are sold with services • Buying an extended warranty on a product • Importing Process • Identify Need • Search for Supplies • Create and Finalize Purchase Agreement • Contract between the buyer and the seller • Receive Goods • Confirm the Purchase

5. The Nature of International Trade • Exporting Process • Assess Demand • Export Potential • Company Potential • Identify Customers and Make Contacts • Create and Finalize Purchase Agreement • Shipping Costs • FOB – Free (Freight) On board • CIF – Cost, Insurance, Freight – all included in quote to buyer • C&F – Cost & Freight – insurance is paid separately • Deliver Goods and Services • Complete the Transaction

6. The Nature of International Trade • Research • Generate a list of internationally available items • List suppliers of an item from list • Make a chart to fill in information about suppliers

7. International Trade Relationships • Understanding Trade Relationships • Why Companies Export • Opens them up to new markets • Why Companies Import • When the company has an unmet need or finds and opportunity in a product from another country • Why Countries Import • To fill needs • Why Countries Export • Economic growth and Political ties. 4.2

8. International Trade Relationships • Direct Exporting • A company that exports its own products • Benefits: • Control over negotiations, prices, distribution, and marketing programs • Can choose how and where products will be sold • Costs: • Primary cost is shipping • Often raises a products price

9. International Trade Relationships • Indirect Exporting • Requires less work than direct, hires another company in the importing country to handle items • 4 Types of Independent Exporters • Manufacturers Export Agent • Export Commission Agent • Export Merchants • International Firms • Benefits • Volume and Simplicity • Disadvantages • Company has less control over the export process

10. International Trade Relationships • Exporting and Risk • Time Risk • How long it takes to get your money back on an investment (The longer the riskier) • Economic Risk • Possibility of downturns in economic conditions can affect businesses locally, nationally, or globally • Product Risk • Some products are more risky than others • Country Risk • Investment could be lost due to political changes in a country • Importing and Risk • Dependency (biggest risk) – Relying too much on one trading partner

11. International Trade Relationships • The Role of Trade Balances • Balance of Trade – Difference between how much a country imports and exports • Trade Surplus (More exports than imports) • Trade Deficit (More imports than exports) • Increasing Exports • Governments give subsidies and promotions for products or companies • Decreasing Imports • Tariffs – Tax imposed on imported goods • Quotas – Limits # of items that can be sold in a country • Embargoes – Complete ban on imports or exports from a particular country • Boycotts – Do not buy goods from certain countries • Protectionism • System of imposing extra costs on imports to protect the interest of local businesses

12. International Trade Relationships • International Trade Agreements • Economic Integration • The practice of removing trade barriers and establishing cooperation to connect businesses and business people across national borders • Globalization • Having operations in a variety of nations • Investments are easier to make in new areas • Can share technological innovations • Everyone has access to more and better goods and services

13. International Trade Relationships • Trade Alliances • General Agreement on Tariffs and Trades (GATT) • Goal was to reduce tariffs between member organizations • World Trade Organization (WTO) • Most Favored Nations Status – Any favor or privilege given to one member must be granted to all members • National Treatment – Principle that once a product has cleared customs at a member nations border, that nation will treat it as a domestic good • Escape Clause – Allows a developing country to charge higher tariffs to develop new and growing companies • Dumping Policies – Protects against dumping • Dumping – the practice of selling goods in another country for less than the cost of manufacturing them or less than market price.

14. International Trade Relationships • European Union (EU) • More than 25 members, geographically close • Many use the “euro” as currency • Open trade with few tariffs or restrictions • NAFTA – North American Free Trade Agreement • Eliminates trade barriers between U.S., Canada and Mexico