...The effect of trade Balance of payment = CA (current account) + CI (capital account) (trade) (investment) (Export/import) (Cash inflow/cash outflow) Trade is buying and selling Investment is invest When you export > than import = Surplus When you import > than export = Deficit Cash inflow > Cash outflow = Surplus Cash outflow >Cash in flow = Deficit * Exports balance the trade account * Attainment of economies of scale is a benefit of exporting * Imports expose firms to new competition * US has had a trade deficit since 1975 * Singapore on the contrary has a trade surplus over a long period of time * Imports expose firm or company to new competition * Imports may compete with local production which in turn may result in job losses * Export may deprive the local market and may force up the price The effect of international investment * Foreign Direct Investment (FDI) is a substitute for trade activities * Investment targets are diversifying, for example, China and Brazil (BRICS) * China is a magnet for FDI, attracting more FDI inflows than the whole of Africa combined * The most important new development FDI in this century is outflow of FDI from China ($1b in 2000 to $68b in 2010) 3B Following methods * ‘Voluntary’ import restraints * Tariffs * Non-tariff barriers * Many actions are contrary to what we know is good for the world and its citizens Increase tax All this is becoz they want...
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...Theories of international trade and investment Classical Theories (Why do nations trade?) Mercantilism and Neomercantilism: Mercantilism - A belief popular in the 16th century that national prosperity results from maximizing exports and minimizing imports Neomercantilism - The idea that the nation should run a trade surplus - Supporters includes: Labor unions (who want to protect domestic jobs) Farmers (who want to keep crop prices high) Some manufacturers (that rely on exports) Free trade - The absence of restrictions to the flow of goods and services among nations Leads to: - More and better choices for consumers and firms - Lower prices of goods for consumers and firms - Higher profits and better worker wages (because imported input goods are usually cheaper) - Higher living standards for consumers (because their costs are lower) - Greater prosperity in poor countries Absolute advantage principle - A country should produce only those products in which it has absolute advantage or can produce using fewer resources than another country - i.e. France could employ more of its resources to produce cloth Germany could employ more of its resources to produce wheat Labor cost in days of production for one ton: One ton of: France 30 40 Germany 100 20 Comparative Advantage Principle - Country, location specfic - The foundation concept of international trade that answers of how nations can achieve and sustain economic success...
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...Alimatou TRAORE Concept Application essay #1 International Trade- IBS390 Summer 2015 International Trade and Foreign Direct Investment Introduction 1. International Trade, what is it? 2. FDI : Definition and different types 3. Impacts of FDI( Foreign Direct Investment) on International Trade 4. Costs and Benefits of FDI( Foreign Direct Investment) Conclusion Introduction The world economy has developed over the past few decades in a great manner, regarding investment in particular and the way multinationals enterprises are now investing in the developing world to increase their production, assets, and interconnected market networks. Individuals everywhere in the world turn out to be closer than ever before. Goods and services available in one nation A will be instantly promoted in another country B or C. Universal exchange and communication became more basic. This current situation is called Globalization. Globalization is at the same time the primary cause and effect of the incredible growth of International Trade over the past decades. Thanks to International Trade, consumers around the world enjoy a wider range of products than they would if they only had access to domestically made products. 1. International Trade, what is it? International trade simply refers to the movement of goods and services across borders. This activity gives rise to a greater competition and more competitive pricing in the market. However let’s not...
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...recent years China has been seen as a major competition in the international economic market. It has been replacing many western states as the top trading and investment partner in many African states, and for decades it has been one of Africa’s best friends, helping in the decolonization process and building key infrastructure projects on the continent. China has been providing many African governments with cheap loans in exchange for securing their means of accumulating natural resources based on the principle of non-intervention and respect for sovereignty, which gives no strings attached. For more than a decade, diplomatic relations between China and South Africa have been marked a great growing relationship between both states. From a period of no official ties to limited interaction between the South African and Chinese Governments, the relationship has subsequently developed to become one of the closest between African and Asian states. Growing economic engagement, which underpins the warm ties between the two states, has put South Africa amongst China’s top three trading partners on the continent. Moreover, China is an emerging market economy; with a fast track of being the next economic rising superpower in the world and its current relations between it and Africa continue to grow fast with foreign direct investment increasing thirty-fold between 2003 and 2011, from US$491m to US$14.7 billion. In 2012, China pledged US$20 billion of loans to Africa over three years for infrastructure...
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...Trade openness, Foreign Direct Investment in Southeast Asia 1 Introduction Over the last three decades, foreign direct investment (FDI) inflows have provided strong impetus for economic development across countries. FDI serves as an important source of supply funds for domestic investment thus, promoting capital formation in the host country (Omisakin et al.2009). DI inflows can assist an economy by giving opportunities orameliorating the level of service sector (i.e telecommunications, banking and finance, transport), wholesale and retail trade, business and legal services. During this period there have been different strands in the empirical and theoretical literature aimed at investigating the relationship between FDI inflows and their determinants in developed and developing markets. According to UNCTAD (2009), many developing countries, including the leastdeveloped ones, have attracted only small amounts of FDI inflows despite their efforts towards economic liberalization in an increasingly globalizing world. Moreover, FDI inflows are highly concentrated in a small number of countries. The demand-side of FDI theory argues that investment will go primarily to countries large enough to support the scale economies needed for production (Trevino and Mixon2004). For Grosse and Trevino (1996) this explanation helps to understand why most FDI is directed to developed rather than to developing countries, given that most investment historically has been marketseeking. Developing...
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...ATPC African Trade Policy Centre Work in Progress No. 77 ATPC Economic Commission for Africa The Impact of Chinese Investment and Trade on Nigeria Economic Growth 2009 Djeri-wake Nabine Abstract This paper examines the impact of Chinese foreign direct investment and bilateral trade with Nigeria economic growth. The study use an augmented aggregate production function (APF) growth model, three methods are performed to test the hypothesis that there is no causal relationship between foreign direct investment, exports, imports and economic growth. The statistical methods used are: the Ordinary Least Squares Method (OLS) and the Granger causality test. Using time-series and panel data from 1990 to 2007, The estimated both short and long-run analysis for Nigeria-China relationship shows that in short term the bilateral trade doesn’t contribute to Nigeria economic growth but the long term relationship can enhance Nigeria economic growth; it should then be the policy priority for Nigeria to make sure that FDI inflows from China and its trade relationship with China exert the reinforcing and beneficial effects on GDP and exports through active acquisition of advanced technology and open trade regime. A - CEA EC E ATPC is a project of the Economic Commission for Africa with financial support of the Canadian International Development Agency (CIDA) Material from this publication may be freely quoted or reprinted. Acknowledgement is requested...
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...Roberto Del Toro Mrs. Fortier Macro Economics 8 December 2009 Chapter 13, Week of November 30, Chinese overinvestment could strain trade 1. According to the article, the increase in investment will ultimately lead to lower prices for Chinese goods because of overcapacity. Explain in terms of the aggregate demand and aggregate supply model what would have to happen for this scenario to take place? Well first the aggregate supply is the total of all planned production for the economy. The most important word in that definition is the word, planned. It is stated in the article that the only planned productions happening are the “Industries including steel, cement, and plastics which are still blindly expanding” (Article). Now the aggregate demand is the total of all planned expenditures in the entire economy. The only industries that are planned for China are the industries of steel, cement, and plastics. The only way this scenario takes place is if those main industries stop expanding. If that happen the result would be the crowding out effect which would result in the rise of interest rates. The crowding out effect looks like thisNow if that does happen China needs to be planning ahead with the Ricardian Equivalence Theorem. This is the proposition that an increase in the government budget deficit has no effect on aggregate demand. Joerg Wuttke said “existing overcapacity could force producers to slash prices to export surplus goods, possibly fueling demands abroad...
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...Fallon o Government is committed to helping SMEs grow which is why we are saving companies around £1bn through removing unnecessary red tape, cutting corporation tax, and estabilishing a business bank to diversify the choice of lending to SMEs • The Barometer – 500 Manufacturing SMEs o 56% increased sales in the last 6 months. http://www.mas.businessgrowthservice.greatbusiness.gov.uk/news/mas-barometer-reveals-quality-cost-and-delivery-are-prime-drivers-to-move-production/ • Wages a rising dramatically in low-cost manufacturing bases • Price of logistics continues to escalate • Reshore UK o ReshoreUK Initiative o Run by the UK Trade and Investment (UKTI) and MAS to help manufacturers take advantage of the business opportunities created by reshoring. o SME manufacturers to ensure they are ready to take advantage of reshoring and new investment by providing them with strategic and technical advice, visibility of new supply opportunities and then signposting them to potential funding support to enhance capability to make it...
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...minds evolve more civilized, it also has undergone many evolutionary postures. Formerly it was practiced as close ended mutual fund in which combined investment had limits. Simply in those funds a restricted number of investors were allowed to play. As a result they used to have limited profit. While following the same pattern some innovative thoughts were put together along with the basic ingredients of the recipe of mutual funds to make it more reproductive. The consequences resulted in the body of open ended mutual funds. These open ended funds are still hailing the demanding curse of present age. Using the mutual fund scheme was more beneficial for the investors and was less fruitful for the manager or the body managing and investing the funds. Therefore to make more money from limited funds a newer system was stemmed into the fabric of trade. That system was to engage poor into this business by investing money in the form of blocks. This trick helped the managing body to withdraw more money out of the flow in the form of commission. On the contrary it involved less investment share which was easy to contribute by an average investors. Hence it had the characteristics of close ended mutual fund accompanied by replication of index. This system was easy to manipulate and friendly to the traders. In a nut shell the trade of funds took place in exchange of securities. It was a simple game that could be played without time limit. It had small shares than mutual funds...
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...In mid-1997, Joe Ricketts, Chairman and CEO of Ameritrade Holding Corporation, wanted to improve his company’s competitive position in deep-discount brokerage1 by taking advantage of emerging economies of scale. The success of the strategy required Ameritrade grow its customer base. The growth would require substantial investments in technology to improve service and capacity, and in advertising, to increase customer awareness. The strategy would require large expenditures relative to Ameritrade’s existing capital. In order to evaluate whether the strategy would generate sufficient future cash flows to merit the investment, Ricketts needed an estimate of the project’s risk. Company Background Formed in 1971, Ameritrade has been a pioneer in the deep-discount brokerage sector. Not only did Ameritrade help create the deep discount market, but it also was the first to offer many new services that changed the way individual investors managed their portfolios. Ameritrade, for example, was the first to offer automated touch-tone phone trading (1988), online internet trading2 (1994), a personal digital assistant to access trades (1995), and online program investing for individual investors (1996). The average return on equity during 1975 to 1996 was 40%, as all years, except two, posted a positive return. Recent returns on equity were much higher, with each of the most recent five years having larger returns than the 40% average. In March 1997, Ameritrade (NASDAQ: AMTD) raised $22...
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...TW) had 8% growth rates from 1970-1997 due to high saving/investment rates, strong education, stable macro environment, and few downturns => Success of East Asia as a whole due to the aforementioned factors as well as limited price distortions, agricultural development, foreign tech, directed credit, selective industrial promotion, and export push policies => Key weaknesses prior to the 1997 crisis were a lack of increase in output efficiency, poor banking regulations and poor legal frameworks Asian Crisis of 1997 => 1) western investors loaned money to east Asian banks (believing growth would continue and that the IMF would bailout if needed) 2) money was funneled into projects with cheap credit and no collateral 3) projects didn’t have good returns and currency speculators started to sell east Asian currencies 4) triggered drop in baht value leading to overall concern => TH, ID, KR, MY, and lesser extent PH were hammered by the crisis => SG and HK survived due to high reserves and strong economic fundamentals => other countries escaped either because their currencies were not convertible or because they weren’t exposes to foreign portfolio flows => ‘sudden stop’ due to 1) liquidity crisis (bank run) and panic-selling and 2) vulnerabilities due to risky relationship lending, expected bailouts, and pegged exchange rates => post-crisis risk aversion reduced corporate loans, investment, and growth => Country vulnerabilities to...
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...Over time, high-risk investments tend to earn higher returns than do low-risk investments. When managers invest corporate funds, or when individuals decide how to allocate their money between different types of investments, they must weigh the trade-off between risk and return. The purpose of the next four chapters is to explore that trade-off in depth. We begin in Chapters 4 and 5 by describing two of the most common types of investments available in the market—bonds and stocks. The bond market is vast, and it plays an extremely important role in the economy. Federal, state, and local governments issue bonds to finance all kinds of public works projects and to cover budget deficits. Corporations sell bonds to raise funds to meet daily operating needs and to pay for major investments. Chapter 4 describes the basic bond features and explains how investors value bonds. Chapter 5 examines the stock market. Valuing stocks is more complex than valuing bonds because stocks do not promise fixed payment streams as do bonds. Therefore, Chapter 5 discusses methods that investors and analysts use to estimate stock values. The chapter also provides a brief explanation of how firms work with investment bank- ers to sell stock to the public and how investors can trade shares of stock with each other. With the essential features of bonds and stocks in hand, Chapter 6 explores the historical returns earned by different classes of investments. The data illustrate...
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...financial institution is an establishment that conducts financial transactions such as investments, loans and deposits. Almost everyone deals with financial institutions on a regular basis. Everything from depositing money to taking out loans and exchanging currencies must be done through financial institutions. Financial institutions has many categories like (commercial Banks- Investment Banks- Investment companies – Insurance companies) Types of Financial Institutions in Egypt: 1- Commercial banks like (CIB- QNB – AAIB-…. etc.) Commercial banks accept deposits and provide security and convenience to their customers. Part of the original purpose of banks was to offer customers safe keeping for their money. By keeping physical cash at home or in a wallet, there are risks of loss due to theft and accidents, not to mention the loss of possible income from interest. With banks, consumers no longer need to keep large amounts of currency on hand; transactions can be handled with checks, debit cards or credit cards, instead. Commercial banks also make loans that individuals and businesses use to buy goods or expand business operations, which in turn leads to more deposited funds that make their way to banks. If banks can lend money at a higher interest rate than they have to pay for funds and operating costs, they make money. 2- Investment banks like ( Rasmala -EFG Hermes –EIB -….etc.) Investment bank is a financial intermediary that performs a variety of services for businesses...
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...Grishchenko T. Saint-Petersburg 2012 Contents Contents 2 Economic inspection in South Africa 3 The New Growth Path and Industrial Policy Action Plan 8 Investment promotion and facilitation 12 South Africa’s investment landscape 16 Government management of incentives program 19 Catalogue of incentives 20 About PEST and SWOT 22 PEST analysis 23 SWOT Analysis: 26 Соnclusion 28 Sources 30 Economic inspection in South Africa Trade and investment policies are critical for addressing the development challenges of Africa and achieving sustainable economic growth for the region. EDIP's work is broadly divided into three streams: (1) Research on global economic governance in order to understand the broader impact on the region and identifying options for Africa in its participation in the international financial system. (2) Issues analysis to unpack key multilateral (World Trade Organisation), regional and bilateral trade negotiations. It also considers unilateral trade policy issues lying outside of the reciprocal trade negotiations arena as well as the implications of regional economic integration in Southern Africa and beyond. (3) Exploration of linkages between traditional trade policy debates and other sustainable development issues, such as climate change, investment, energy and food security. SAIIA (South African Institute of International Affairs) gratefully acknowledges the Swedish International...
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...Introduction The following investigative document presents an overview of the textile industries in two emerging countries: Guatemala and India. The document analyses, compares and contrast the differences in the institutional structures of both countries and offers specific details and analysis of the textile industries for local and international businesses. Guatemala Republic of Guatemala is located in Central America bordered by Mexico to the North, the Pacific Ocean to the southwest, and Belize to the North East Honduras and El Salvador to the southeast. The country is mountainous with small desert and sand dune patches, having many hills filled with people, except for the south coastal area and the vast northern lowlands of Petén department. Two mountain chains enter Guatemala from west to east, dividing the country into three major regions: the highlands, where the mountains are located; the Pacific coast, south of the mountains; and the Petén region, north of the mountains. All major cities are located in the highlands and Pacific coast regions; by comparison, Petén is sparsely populated. These three regions vary in climate, elevation, and landscape, providing dramatic contrasts between hot and humid tropical lowlands and colder and drier highland peaks. Volcán Tajumulco, at 4,220 meters, is the highest point in the Central American states. Demographics Guatemala is a country of youth; 70% of its population is less than thirty years old. The capital...
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