Chapter 1 Introduction to International trade
Questions & Answers (terms) ? ?
International trade (the fair and deliberate exchange of goods and/or services across national boundaries）
Trade in goods (the purchase and sale of visible goods:coffee, chemicals, airplanes, textiles, tobacco)&Trade in services (the purchase and sale of invisible goods: transportation, insurance, tourism, hotel accommodations, commerce)
Self-sufficient (someone who does his own hunting, finds his own shelter, and provides for his own needs)
Barter (the trade of goods without any exchange of money)
Balance of trade (a nation’s relationship of exports to imports). A favorable balance of trade, or trade surplus, occurs when the value of the country’s exports exceeds that of its imports;An unfavorable balance of trade, or trade deficit, occurs when the value of the country’s imports exceeds that of its exports.
Balance of payments [the difference between money coning into a country (from exports) and money going out of the country (for import) plus money flows coming into or leaving a country from other factors such as tourism, foreign aid. BOP=EM-IM+MF]. A favorable balance of payments means more money is flowing into a country than flowing out;An unfavorable balance of payments is when more money is flowing out of a country than coming in.
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Dumping(the practic of selling products in foreign country at lower prices than those charged in the producing country). Companies use this tactic to reduce surplus products in foreign markets or to gain a foothold in a new market by offering products for lower prices than domestic competitors do.
The foundation of international trade and economic activities：In today’s complex economic world, neither individuals nor nations are self-sufficient. Nations have utilized different economic resources; people have developed different skills. Questions & Answers (text) ?
What are major reasons of the exchange of goods between nations? ? First, no nation has all of the commodities that it needs.
? Second, a country often does not have enough of a particular item to meet its needs. ? Third, one nation can sell some items at a lower cost than other countries. ? Finally, foreign trade takes place because of innovation or style (fashion). Why is FDI now more important than trade?
? First, FDI enables host country to build a new manufacturing plant and to pay
workers to build it.
? Second, once the plant is operative, it provides both jobs and taxes for host country. ? Third, FDI acts as a catalyst (催化剂) in economic growth for host country. Why inflows into Sub-Saharan Africa have increased?
Tourism is the world's largest industry and every year it pumps billions of dollars into some of the poorest countries in the world. It creates jobs, reduces poverty, builds new roads, airports, hotels and hospitals.
What are major obstacles to Chinese foreign trade?
? Firstly, China should deal with pressure from international markets that are
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gradually becoming saturated（饱和）.
Secondly, the cost of Chinese exports is increasing, partly because of the higher cost of labor and environmental protection.
Thirdly, increasing international trade protection has caused China to stumble into（陷入） difficult territory.
Finally, the trade imbalance between China and other countries is getting worse.
Chapter 2 Basic Theory of International Trade
Questions & Answers (terms) ? ?
Opportunity Cost机会成本：有一得必有一失(the amount of another goods or service that might otherwise have been produced)
Absolute Advantage两者相权取成本低、效率高者[A commodity will be produced in the country where it costs least in terms of resources (capital, land, and labor).] Comparative Advantage两利相权取其重，两劣相权取其轻only one of the goods would work \
What the Theory of C-A Shows if we want to maximize total output in the world then: ? first, fully employ all resources worldwide;
? second, allocate those resources within countries to each country's comparative
advantage industries;
? third, allow the countries to trade freely .
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Specialization (there were some things he was more capable of doing and it would benefit him to concentrate his efforts on the production of those goods in which he was particularly proficient)
What are the major benefits of exporting?
Why export? Your general objectives will probably be: ? To increase profitability
? To utilise production capacity to the full
? The small domestic market may not big enough for growth
? You may be manufacturing a specialised product and find there are not enough customers in Sweden
? You may be looking for the increased security your company can achieve by spreading its risks over a variety of markets
? You may want to ensure that your product is kept up to date by exposure to competition in international markets
? It provides scope to develop a company's strengths and abilities. Selling in an
international environment will sharpen your innovative edge and open up opportunities that might never come your way if you limit yourself to the home market. Michael Porter’s Diamond Model Michael Porter of the Harvard Business School introduced a new competitiveness theory, the so-called diamond model. He argues that national prosperity is not inherited, but created by choices; in other words, national wealth is not set by factor endowments, but created by strategic choices. He introduced a concept of “clusters”, or groups of interconnected firms, suppliers,related industries, and institutions that arise in particular locations.
1. Firm strategy, Structure and Rivalry
The world is dominated by dynamic conditions, and it is direct competition that impels firms
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to work for increases in productivity and innovation. 2. Demand Conditions
The more demanding the customers in an economy, the greater the pressure facing firms to constantly to improve their competitiveness via innovative products, through high quality, etc. 3. Related Supporting Industries
Upstream or downstream industries facilitates the exchange of information and promotes a continuous exchange of ideas and innovations. 4. Factor Conditions
Contrary to conventional wisdoms, Porter argues that the “key” factors of production (or specialized factors) are created, not inherited. Specialized factors are skilled labor, capital and infrastructure. “Non-key” factors or general use factors, such as unskilled labor and raw
materials, can be obtained by any company and, hence, do not generate sustained competitive advantage. However, specialized factors involve heavy, sustained investment. They are more difficult to duplicate. This leads to a competitive advantage, because if other firms cannot easily duplicate these factors, they are valuable.
The role of government in Porter’ Diamond Model is “acting as a catalyst and challenger; it is to encourage—or even push—companies to raise their aspirations and move to higher levels of competitive performance…”.They must encourage companies to raise their performance, stimulate early demand for advanced products, focus on specialized factors creation and to stimulate local rivalry by limiting direct cooperation and enforce anti-trust（反托拉斯，反垄断）regulations.
Chapter 5 International Trade Terms
Role of International Trade Terms
? Standing for specific obligations of the buyer and the seller.
? Name the exact point at which the ownership of the merchandise is transferred from the
seller to the buyer.
? Define the responsibilities and expenses of both the seller and the buyer.
? Define the nature of the contract, such as FOB contract or CIF contract, to determine
expenses and risks as well as their rights and obligations accordingly.
? The use of the trade terms greatly simplifies the contract negotiations, and thus saves time
and cost.
The price of commodity（refers to the unit price, which is made up of a name of currency, a unit price, a measuring unit, a trade term, and a name of destination or shipping place .For example,US$ 800 per M/T CIF London）
国际贸易合同的主要条款有: 合同对象(标的)：commodities or services 合同总值: total value or quantities 交货条件: trade terms 包装: packaging 装运期: shipment 装运口岸和目的地: departure port or destination 保险: insurance 支付条款: payment Procedures of Marine Insurance ? ? ? ? ? ?
To apply for marine insurance;
To determine the insurance value of the goods to be insured; To determine the insurance average and coverage; To determine insurance premium; To sign an insurance policy To lodge an insurance claim.