Brief Concepts and Definition The Barriers Traditional Trade Theories Modern Theories of International Trade Government Intervention & Protectionism Trade Barriers

2.  International Trade
the exchange or transaction of capital, goods and
services across borders from one country to
another.
Theories:-
- Mercantilism
- The Absolute Advantage
- The Comparative Advantage
- The Factor Proportions
- The National Competitive Advantage
- Dependency Theory
- New Trade Theory
- International Trade Theory

3. Trade barriers are generally classified as;
 import policies reflected in tariffs and other import charges,
quotas, Import licensing, customs practices,
 standards, testing, labeling, and various types of certification
 direct procurement by government,
 subsidies for local exporters,
 lack of copyright protection,
 restrictions on franchising, licensing, technology transfer,
 restrictions on foreign direct investment, etc

4. • Tariffs
• Non-tariff barriers to trade
• Import licenses
• Export licenses
• Import quotas
• Subsidies
• Voluntary Export Restraints
• Local content requirements
• Embargo
• Currency devaluation[2]
• Trade restriction

5. •Nations accumulate financial wealth through
exports and discouraging imports. This was
accomplished through trade surpluses,
government intervention and colonization.
Mercantilism
• the ability of a nation to produce a product
more efficiently than any other nation using the
same amount or fewer resources. The trade
should not be banned or restricted by tariffs
but allowed to flow freely according to the
demand of the market.
The Absolute
Advantage Theory
• the country may not be able to produce the
good more efficiently than any other country
but can produce the good more efficiently
than any other good within its own country
The Comparative
Advantage Theory

6. • countries import goods where resources to
make them are in short supply and export
goods where the resources are abundant.
The Factor
Proportions Theory
• competitiveness in a certain industry
depends on the ability of that nation to
innovate and upgrade that industry
The National
Competitive
Advantage Theory
• poor countries exported primary commodities to the
rich countries, then manufactured products out of
those commodities and sold them back to the poorer
countries. The "Value Added" by manufacturing a
usable product always cost more than the primary
products used to create those products.
Dependency
Theory

7. A revised version of old theories.
1. Resources and Trade (The Eli Heckscher and Bertil
Ohlin Model)
 why countries trade goods and services with each
other, the emphasize being on the difference of
resources between two countries.
 comparative advantage is actually influenced by the
interaction between the resources countries

8. 2. Specific Factors and Income Distribution (Paul
Samuelson - Ronald Jones Model)
Why trade has an important influence upon the
income distribution:
 a) resources can’t be transferred immediately and
without costs from one industry to another.
 b) industries use different factors and a change in
the production mix a country offers will reduce the
demand for some of the production factors whereas
for others it will increase it.
 A country having capital abundance and less land
tends to produce more manufactured products than
food products

9.  3. The Standard Model of Trade (Paul Krugman –
Maurice Obsfeld Model)
The existence of the relative global supply curve resulting from
the production possibilities and the relative global demand
curve resulting from the different preferences for a certain
good.
 4. The Competitive Advantage (Michael Porter’s Model)
The chain value
Four stages- Michael Porter
 Development based on factors
 Development based on investments
 Development based on innovation
 Development based on prosperity
Determinants
 The capacity of internal factors
 The specific of the domestic market
 The links between the industries
 Domestic competition environment

10.  Government intervene:
in trade and investment to achieve political,
social, or economic objectives
impose trade and investment barriers that benefit
interest groups, such as domestic firms,
industries, and labor unions
alters the competitive landscape, by hindering or
helping the ability of firms to compete
internationally.
an important dimension of country risk.

11.  Protectionism — national
economic policies that restrict free
trade. Usually intended to raise
revenue or protect domestic
industries from foreign competition.
 Tariffs, non tariff trade barriers,
quota and investment barriers

12.  The Bush administration imposed
tariffs on imports of foreign steel to
protect U.S. steel manufacturers from
foreign competition, aiming to give
the U.S. steel industry time to
restructure and revive itself.

13.  Government-imposed restraint on the
flow of international goods or services.
 To make imported goods or services less
competitive than locally produced goods
and services.
 Common barrier to trade;
Tariffs
Subsidy
Embargo

14. Trade barriers in Malaysia;
 patents, trade marks,
copyrights, industrial design
& import regulations