IBDC Trade International Review

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Contents

IBDC Trade International Review

Development banks in Asia and the Middle East are making hundreds of millions of dollars available …

‘Challenging year ahead’ for UK exporters despite funding boost

The British government’s decision to more than double the permanent funding of UK Export Finance (UKEF) …

ICC lands funding from ADB and Singapore govt for Digital Trade Standards Initiative

The International Chamber of Commerce (ICC) has formalised the Digital Trade Standards Initiative (DSI) as an …

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UK Export Finance extends cover to major market.

Europe / 08-04-20

Glencore uses digital signing to refinance jumb.

Global / 08-04-20

Beacon appoints new head of supply chain finance

On the Move / 08-04-20

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‘Big oil’ gets North Sea shake-up

Europe / 14-01-20 / by Maddy White

Nord Stream 2 spells pain for Ukraine

Europe / 14-01-20 / by Maddy White

How tech can transform Côte d’Ivoire’s cocoa chain

Africa / 14-01-20 / by GTR

From the editor

Insurance’s digitalisation journey

Global / 09-12-19 / by Eleanor Wragg

Shaping the future

Sponsored / 08-12-19 / by GTR

Multimedia

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Privacy Policy

Our privacy commitments

This Privacy Policy outlines the information we may collect about you in relation to your use of our websites, events, related publications and services (“personal data”) and how we may use that personal data. It also outlines the methods by which we and our service providers may (subject to necessary consents) monitor your online behaviour to deliver customised advertisements, marketing materials and other tailored services. This Privacy Policy also tells you how you can verify the accuracy of your personal data and how you can request that we delete or update it.

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This Privacy Policy applies to all websites operated by Exporta Publishing & Events Ltd (as indicated on the relevant website).

This privacy statement does not cover the activities of third parties, and you should consult those third-party sites’ privacy policies for information on how your data is used by them.

Any questions regarding this Policy and our privacy practices should be sent by e-mail to [email protected] or by writing to Data Protection Officer at, Exporta Publishing & Events Ltd, 4 Hillgate Place, London, SW12 9ER, United Kingdom. Alternatively, you can telephone our London headquarters at +44 (0) 20 8673 9666.

Who are we?

Established in 2002 and with offices in London and Singapore, Exporta Publishing & Events Ltd is the world’s leading trade and trade finance media company, offering information, news, events and services for companies and individuals involved in global trade.

Our principal business activities are:

  • Business-to-Business financial publishing. We provide a range of products and services focused on international commodities, export, supply chain and trade finance markets including magazines, newsletters, electronic information and data
  • Organisers of seminars, conferences, training courses and exhibitions for the finance industry

Exporta Publishing & Events Ltd is a company registered in the United Kingdom with company number 4407327 | VAT Registration: 799 1585 59

Data Protection Policy

This Data Protection Policy explains when and why we collect personal information about people who visit our website, how we use it, the conditions under which we may disclose it to others and how we keep it secure.

Why do we collect information from you?

Our primary goal in collecting personal data from you is to give you an enjoyable customised experience whilst allowing us to provide services and features that will meet your needs.
We collect certain personal data from you, which you give to us when using our Site and/or registering or subscribing for our products and services. However, we also give you the option to access our Sites’ home pages without subscribing or registering or disclosing your personal data.

We also collect certain personal data from other group companies to whom you have given information through their websites (including, by way of example, Exporta Publishing & Events Ltd and subsidiaries, in accordance with the purposes listed below). Should we discover that any such personal data has been delivered to any of the Sites, we will remove that information as soon as possible.

Why this policy exists

This Data Protection Policy ensures Exporta Publishing & Events Ltd:

  • Complies with data protection law and follow good practice
  • Protects the rights of staff, customers and partners
  • Is open about how it stores and processes individuals’ data
  • pretexts itself from the risk of a data breach

We may change this Policy from time to time so please check this page occasionally to ensure that you’re happy with any changes. By using our website, you’re agreeing to be bound by this Policy.

Data protection law

The Data Protection Act 1998 described how organisations – including Exporta Publishing & Events Ltd – must collect, handle and store personal information. These rules apply regardless of whether data is stored electronically, on paper or on other materials. To comply with the law, personal information collected must be stored safely, not disclosed unlawfully and used fairly.

The Data Protection Act is underpinned by eight important principles. These say that personal data must:

  • Be processed fairly and lawfully
  • Be obtained only for specific, lawful purposes
  • Be adequate, relevant and not excessive
  • Be accurate and kept up to date
  • Not be held for any longer than necessary
  • Processed in accordance with the rights of data subjects
  • Be protected in appropriate ways
  • Not be transferred outside the European Economic Area (EEA), unless that country of territory also ensures an adequate level of protection

How do we collect information from you?

We obtain information about you when you use our website, for example, when you contact us about products and services, when you register for an event, register to receive eNewsletters, subscribe or register for a trial to our GTR magazine/website.

Types of Personal Data Held and its Use

1. Customer Services and Administration

On some Sites, Exporta Publishing & Events Ltd collects personal data such as your name, job title, department, company, e-mail, phone, work and/or home address, in order to register you for access to certain content, subscriptions and events. In addition, we may also store information including IP address and page analytics, including information regarding what pages are accessed, by whom and when.

This information is used to administer and deliver to you the products and/or services you have requested, to operate our Sites efficiently and improve our service to you, and to retain records of our business transactions and communications. By using the Sites and submitting personal information through the registration process you are agreeing that we may collect, hold, process and use your information (including personal information) for the purpose of providing you with the Site services and developing our business, which shall include (without limitation) the purposes described in the below paragraphs.

2. Monitoring use of our Sites

Where, as part of our Site services, we enable you to post information or materials on our Site, we may access and monitor any information which you upload or input, including in any password-protected sections. Subject to any necessary consents, we also monitor and/or record the different Sites you visit and actions taken on those Sites, e.g. content viewed or searched for. If you are a registered user (e.g. a subscriber or taking a trial), when you log on, this places a cookie on your machine. This enables your access to content and services that

are not publicly available. Once you are logged on, the actions you take – for example, viewing an article – will be recorded (subject to any necessary consents). We may use technology or a service provider to do this for us. This information may be used for one or more of the following purposes:

  • to fulfil our obligations to you;
  • to improve the efficiency, quality and design of our Sites and services;
  • to see which articles, features and services are most read and used
  • to track compliance with our terms and conditions of use, e.g. to ensure that you are acting within the scope of your user licence;
  • for marketing purposes (subject to your rights to opt-in and opt-out of receiving certain marketing communications) – see paragraph 3 below;
  • for advertising purposes, although the information used for these purposes does not identify you personally. Please see paragraph 5 below for more details;
  • to protect or comply with our legal rights and obligations; and
  • to enable our journalists to contact and interact with you online in connection with any content you may post to our Sites.

Please see paragraph 5 below for more information on cookies and similar technologies and a link to a page where you can turn them on or off.

3. Marketing

Some of your personal data collected under paragraphs 1 and 2 above may be used by us to contact you by e-mail, telephone and/or post for sending information or promotional material on our products and/or services and/or those of our other group companies. We give you the opportunity to opt-out of receiving marketing communications. Further detail can be found on the applicable Site and in the footer of each marketing communication sent by us, our group companies or service providers. See also “Consents and opt-outs” section below. We will not share your information with third parties for marketing purposes.

4. Profiling

We may analyse your personal information to create a profile of your interests and preferences so that we can contact you with information relevant to you.

5. Cookies and similar technologies

All our Sites use cookies and similar technical tools to collect information about your access to the Site and the services we provide.

When you enter some sites, your computer will be issued with a cookie. Cookies are text files that identify your computer to servers. Cookies in themselves do not identify the individual user, just the computer used.

Many sites do this whenever a user visits their site in order to track traffic flows, recording those areas of the site that have been visited by the computer in question, and for how long.

Users have the opportunity to set their computers to accept all cookies, to notify them when a cookie is issued, or not to receive cookies at any time. Selecting not to receive means that certain personalised services Exporta Publishing & Events Ltd offers cannot then be provided to that user.

Why do we use cookies?

  1. Log In – Where we provide log in mechanisms for site users a cookie is created at login and for the duration of the session. Each cookie contains a unique reference number only (no personal information) which is used to confirm you are authorised.
  2. Analytics – To allow us to keep track of traffic to our website we use cookies. The cookies simply tell us if you have previously visited our website so we can get more accurate figures for New vs Returning visitors.

Find and control your cookies

All of the major browser providers offer advice on setting up and using the privacy and security functions for their products. If you require technical advice or support for a specific browser/version please contact the provider or visit their website for further details: www.microsoft.com / www.mozilla.com / www.apple.com
/ www.opera.com / www.aol.com / www.netscape.com
/ www.flock.com / www.google.com

We may use cookies to:

  • remember that you have used the Site before; this means we can identify the number of unique visitors we receive to different parts of the Site. This allows us to make sure we have enough capacity for the number of users that we get and make sure that the Site runs fast enough
  • remember your login session so you can move from one page to another within the Site;
  • store your preferences or your user name and password so that you do not need to input these details every time you visit the Site;
  • customise elements of the layout and/or content of the pages of Site for you;
  • record activity on our Sites so that we understand how you use our Sites enabling us to better tailor our content, services and marketing to your needs;
  • collect statistical information about how you use the Site so that we can improve the Site; and
  • gather information about the pages on the Site that you visit, and other information about other websites that you visit, so as to place you in a “market segment”. This information is only collected by reference to the IP address that you are using, but does include information about the county and city you are in, together with the name of your internet service provider.

Most web browsers automatically accept cookies but, if you prefer, you can change your browser to prevent that, or to notify you each time a cookie is set. You can also learn more about cookies in general by visiting www.allaboutcookies.org which includes additional useful information on cookies and how to block cookies using different types of browser. Please note however, that by blocking, deleting or turning off cookies used on the Site you may not be able to take full advantage of the Site.

6. E-mail tracking

E-mail tracking is a method for monitoring the e-mail delivery to those subscribers who have opted-in to receive marketing e-mails from GTR, including GTR Africa, GTR Asia, GTR Americas, GTR Europe, GTR Mena, GTR eNews, Third party e-mails and GTR Ventures.

Why do we track e-mails?

So that we can better understand our users’ needs, we track responses, subscription behaviour and engagement to our e-mails – for example, to see which links are the most popular in newsletters. They enable us to understand the consumers journey through metrics including open rate, click-through rate, bounces and unsubscribes. Any other purposes for which Exporta Publishing & Events Ltd wishes to use your personal data will be notified to you and your personal data will not be used for any such purpose without obtaining your prior consent.

How do you track GTR eNewsletters?

To do this, we use pixel GIFs, also known as “pixel tags” – these are small image files that are placed within the body of our e-mail messages. When that image is downloaded from our web servers, the e-mail is recorded as being opened. By using some form of digitally time-stamped record to reveal the exact time and date that an e-mail was received or opened, as well the IP address of the recipient.

7. Consents and opt-outs

You can give your consent to opt-out of all or any particular uses of your data as indicated above by:

  • Indicating at the point on the relevant Site where personal data is collected
  • Informing us by e-mail, post or phone
  • Updating your preferences on the applicable Site or eNewsletter (unsubscribe and preference options are available in the footer of each eNewsletter)

To turn cookies and similar technologies on and off, see the information in paragraph 5 above. Any questions regarding consents and opt-outs should be sent by e-mail to [email protected] or by writing to Data Protection Officer at, Exporta Publishing & Events Ltd, 4 Hillgate Place, London, SW12 9ER, United Kingdom. Alternatively, you can telephone our London headquarters at +44 (0) 20 8673 9666.

8. Disclosures

Information collected at one Site may be shared between Exporta Publishing & Events Ltd and other group companies for the purposes listed above.

We may transfer, sell or assign any of the information described in this policy to third parties as a result of a sale, merger, consolidation, change of control, transfer of assets or reorganisation of our business.

9. Public forums, message boards and blogs

Some of our Sites may have a message board, blogs or other facilities for user generated content available and users can participate in these facilities. Any information that is disclosed in these areas becomes public information and you should always be careful when deciding to disclose your personal information.

10. Data outside the EEA

Services on the Internet are accessible globally so collection and transmission of personal data is not always limited to one country. Exporta Publishing & Events Ltd may transfer your personal data, for the above-listed purposes to other third parties, which may be located outside the European Economic Area and/or with a different level of personal data protection. However, when conducting transfers, we take all necessary steps to ensure that your data is treated reasonably, securely and in accordance with this Privacy Statement.

Who has access to your information?

Confidentiality and Security of Your Personal Data

We are committed to keeping the data you provide us secure and will take reasonable precautions to protect your personal data from loss, misuse or alteration.

However, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our Site; any transmission is at your own risk. Once we have received your information, we will use strict procedures and security features described above to try to prevent unauthorised access.

We have implemented information security policies, rules and technical measures to protect the personal data that we have under our control from:

  • unauthorised access
  • improper use or disclosure
  • unauthorised modification
  • unlawful destruction or accidental loss

All our employees, contractors and data processors (i.e. those who process your personal data on our behalf, for the purposes listed above), who have access to, and are associated with the processing of your personal data, are obliged to keep the information confidential and not use it for any other purpose than to carry out the services they are performing for us.

Responsibilities

Everyone who works for or with Exporta Publishing & Events Ltd has some responsibility for ensuring data is collected, stored and handled appropriately. Each team handling personal data must ensure that it is handled and processed in line with this policy and data protection principles. However, the following people have key areas of responsibility. The board of directors is ultimately responsible for ensuring that Exporta Publishing & Events Ltd meets its legal obligations.

Name of Data Controller

The Data Controller is Exporta Publishing & Events Ltd. Exporta Publishing & Events Ltd is subject to the UK Data Protection Act 1998 and is registered in the UK with the Information Commissioner`s Office.

How to access, update and erase your personal information

If you wish to know whether we are keeping personal data about you, or if you have an enquiry about our privacy policy or your personal data held by us, in relation to any of the Sites, you can contact the Data Protection Officer via:

  • By writing to this address: Data Protection Officer, Exporta Publishing & Events Ltd, 4 Hillgate Place, London, SW12 9ER, UK
  • Telephone: +44 (0) 20 8673 9666
  • E-mail: [email protected]

Upon request, we will provide you with a readable copy of the personal data which we keep about you. We may require proof of your identity and may charge a small fee (not exceeding the statutory maximum fee that can be charged) to cover administration and postage.

Exporta Publishing & Events Ltd allows you to challenge the data that we hold about you and, where appropriate in accordance with applicable laws, you may have your personal information:

  • erased
  • rectified or amended
  • completed

Disclosing data for other reasons

In certain circumstances, the Data Protection Act allows personal data to be disclosed to law enforcement agencies without the consent of the data subject. Under these circumstances, Exporta Publishing & Events Ltd, will disclose requested data. However, the Data Controller will ensure the request is legitimate, seeking assistance from the board and from the company’s legal advisors where necessary.

Changes to this Privacy Statement

We will occasionally update this Privacy Statement to reflect new legislation or industry practice, group company changes and customer feedback. We encourage you to review this Privacy Statement periodically to be informed of how we are protecting your personal data.

Providing information

Exporta Publishing & Events Ltd aims to ensure that individuals are aware that their data is being processed, and that they understand.

  • How the data is being used
  • How to exercise their rights

To this end, the company has a privacy statement, setting out how data relating to individuals is used by the company. This is available on request and available on the company’s website.

Review of this policy

We keep this Policy under regular review. This Privacy Statement was last updated in April 2020.

e*Trade

This company is not yet accredited. See reviews below to learn more or submit your own review.

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e*Trade Reviews

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This past Friday they changed the way they calculate collateral, for purposes of securing my Line of Credit from a 70% LTV, to a percentage of your Max line of credit. So if they give you a $30,000 LOC, and you use it, and the value of your collateral drops due to market changes to the point that your max line if credit would be only $20,000, you now have to come up with the $10,000 difference, or they sell your stock at the depressed price to cover it.

My best advice. learn from my mistake and “DO NOT” deal with these people. I’ve written the SEC and they referred me to the Bureau of Consumer Financial Protect (BCFP), and the Federal Banking Commission. Both of those and my congressman will be hearing from me in the next day or so. My LTV with them is only 44% and they are threatening to sell $3600 worth of my stock at a depressed value brought on by a national emergency. I’m sure they’ve got buddies out there just dining to buy it up at that rate. Of course they tell you to give them a call but you sit on hold for hours listening to their stupid music.

I moved a substantial dollar amount (millions) over to E Trade, in part, since I was promised terrific transition support. I realize it is hectic times but I was abandoned. The worst part is I found out the DC Office Manager had neither authority nor capability to help resolve problems other than giving you an 800 number which now takes 4-5 to get thru on. Office Manager is a sales position only, Just realize you be on your own on trying to figure out the different trading platforms.

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I held an account with them for several years but I was not using it because of a sudden loss of job that turned into a longer time downturn in my financial situation. I tried to access it today (March 2020) and was informed it is closed. I find this strange as I was not sent any notice of intent. It was just done. I suspect this may have happened because there were bought out by a big bank. I will not blame them as I was not active but it was causing them no harm to leave it open.

So. I had a little stock account I like to play with, then E*Trade arbitrarily decided I need to prove who I am. Yep no kidding, had the account for years. They would not allow me to trade until I sent them copies of my license or some such. No matter I could answer any personal question, had account numbers, etc., nope, “Sorry you cannot trade until you prove who you are.” Of course I could lose money without a problem. So, I sent a copy of my passport with a request to close the account. never heard from them again. Cannot reach them as I work overseas and it is very difficult. Sigh, Thank goodness I only had a tiny bit invested in such a crappy service. STAY AWAY, their Customer Service will not help you.

E-Trade took action against my account by calling in my short position after hours when the banks were closed. This cost me thousands of dollars. I received a margin call after banking hours, directing me to either sell shares to cover or add additional funds to cover. Because it was after banking hours, I had no ability to deploy either of those options. I could not sell other shares to cover because the market was closed. I could not transfer funds to cover because the banks were closed. So they simply sold my shares in Tesla at an extreme loss. This practice is unfair and should be illegal. Tomorrow, as soon as I can during business hours, I will sell off my remaining positions in E-Trade and I will never do business with them again. What a terribly expensive lesson. Stay away from E-Trade.

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I guess this company hangs on to even 180 bucks to gain interest. 10 phone calls and constant broken promises that my money will be sent and they don’t. They just lie and new excuses every time. Do NOT use this company EVER! So-called supervisors tell you your funds will be transferred and available that day and it never happens. I’m still trying to get my little 180 bucks back with new lies and excuses why they haven’t sent it. 10 phone calls in literally a month and I haven’t seen one penny.

I don’t know how they stay in business? Good luck to you if you have 1000 or five figures to retrieve and get from them – I doubt you’ll ever see it. Not to offend the reader of this, but you are stupid if you ever use this company – you might as well flush your money down the toilet because you’ll never see your money again I don’t think. Good luck. I would give them negative stars if I could on this scale because they are one of the worst so-called companies I have ever dealt with in my 55 years of life.

e*Trade representative intentionally lied to me, and by which, I lost more than 10,000 dollars. To clarify that fact: I have the records: Date of occurrence, time of occurrence, and name of rep. So, I contacted e*Trade with a specific request. I was then assured that it would be honored. My request was clear and to the point. If some of my shares of TSLA go down below a specific point, I hold a preference to sell AAPL shares. (Then, TSLA shares value held a loss of more than 10,000 dollars). Selling AAPL would equal the value needed, and only cost me 1500 max in losses.

I made the request over the phone, on a specific time, and specific day. I have the time on record. The person to whom I spoke with, assured me, that my request was being written on my account, and that my request would be honored if such an event occurred. (If stocks took a downturn, my preference of stocks to sell would be honored). On a specific date and time, the value of TSLA shares where low. I made the request, again, to sell my AAPL shares as a preference. The value of AAPL shares were more than sufficient to cover the value as requested by e*Trade.

Then, a day before the 2Q results of TSLA where released, e*Trade sold, against my preference and request, my TSLA shares. I then took a loss of more than 10,000 dollars. Problematic thought, is the faulty misleading and arguably lied to character of e*Trade professional employees. I came to discover through evidence findings and otherwise, that staff of e*Trade profit from selling specific stocks that the most to lose. (They hold no honor or respect to investors).

After I attempted to communicate the concern and outrage with a supervisor, he in turn said to me, quote “there is no record on file that you made a request, or preference”. And more “there was no preference of stocks”. It means, that as an investor, my requests were never followed through, nor honored. I hold, and have, the date, time, and name to whom I spoke with, and what my request mentions. I made that statement clear to the Supervisor. In turn, he said, “there is nothing we can do,” and “you should join a different brokerage group”. I lost more than 10,000 dollars, and they take me for a fool. Beware of e*Trade’s misconduct, and its negligence towards new investors. They will mislead, misinform, and seek to profit out of investors own profit or loss. Once they’ve made a profit, or once their mistake is presented, they’ll simply request that you move on.

The Investor’s Guide to Global Trade

If you can walk into a supermarket and find South American bananas, Brazilian coffee and a bottle of South African wine, you’re experiencing the effects of international trade.

International trade allows countries to expand their markets for both goods and services that otherwise may not have been available domestically. As a result of international trade, the market contains greater competition, and therefore more competitive prices, which brings a cheaper product home to the consumer.

Key Takeaways

  • International trade is the exchange of goods and services between countries.
  • Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries, or which would be more expensive domestically.
  • The importance of international trade was recognized early on by political economists like Adam Smith and David Ricardo.
  • Still, some argue that international trade actually can be bad for smaller nations, putting them at a greater disadvantage on the world stage.

How International Trade Works

International trade gives rise to a world economy, in which supply and demand, and therefore prices, both affect and are affected by global events. Political change in Asia, for example, could result in an increase in the cost of labor, thereby increasing the manufacturing costs for an American sneaker company based in Malaysia, which would then result in an increase in the price charged at your local mall. A decrease in the cost of labor, on the other hand, would likely result in you having to pay less for your new shoes.

A product that is sold to the global market is called an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country’s current account in the balance of payments.

Comparative Advantage: Increased Efficiency of Trading Globally

Global trade allows wealthy countries to use their resources—whether labor, technology or capital—more efficiently. Because countries are endowed with different assets and natural resources (land, labor, capital, and technology), some countries may produce the same good more efficiently and therefore sell it more cheaply than other countries. If a country cannot efficiently produce an item, it can obtain the it by trading with another country that can. This is known as specialization in international trade.

Let’s take a simple example. Country A and Country B both produce cotton sweaters and wine. Country A produces ten sweaters and six bottles of wine a year while Country B produces six sweaters and ten bottles of wine a year. Both can produce a total of 16 units. Country A, however, takes three hours to produce the ten sweaters and two hours to produce the six bottles of wine (total of five hours). Country B, on the other hand, takes one hour to produce ten sweaters and three hours to produce six bottles of wine (a total of four hours).

But these two countries realize that they could produce more by focusing on those products with which they have a comparative advantage. Country A then begins to produce only wine, and Country B produces only cotton sweaters. Each country can now create a specialized output of 20 units per year and trade equal proportions of both products. As such, each country now has access to 20 units of both products.

We can see then that for both countries, the opportunity cost of producing both products is greater than the cost of specializing. More specifically, for each country, the opportunity cost of producing 16 units of both sweaters and wine is 20 units of both products (after trading). Specialization reduces their opportunity cost and therefore maximizes their efficiency in acquiring the goods they need. With the greater supply, the price of each product would decrease, thus giving an advantage to the end consumer as well.

Note that, in the example above, Country B could produce both wine and cotton more efficiently than Country A (less time). This is called an absolute advantage, and Country B may have it because of a higher level of technology.

Important

According to the international trade theory, even if a country has an absolute advantage over another, it can still benefit from specialization.

Origins of Comparative Advantage

The law of comparative advantage is popularly attributed to English political economist David Ricardo. It’s discussed in his book “On the Principles of Political Economy and Taxation” published in 1817, although it has been suggested that Ricardo’s mentor, James Mill, likely originated the analysis.

David Ricardo famously showed how England and Portugal both benefit by specializing and trading according to their comparative advantages. In this case, Portugal was able to make wine at a low cost, while England was able to cheaply manufacture cloth. Ricardo predicted that each country would eventually recognize these facts and stop attempting to make the product that was more costly to generate.

Indeed, as time went on, England stopped producing wine, and Portugal stopped manufacturing cloth. Both countries saw that it was to their advantage to stop their efforts at producing these items at home and, instead, to trade with each other.

Some scholars have recently argued that Ricardo did not actually come up with comparative advantage. Instead, the idea may have been inserted by his editor, the political economist and moral philosopher James Mill.

A contemporary example is China’s comparative advantage with the United States in the form of cheap labor. Chinese workers produce simple consumer goods at a much lower opportunity cost. The United States’ comparative advantage is in specialized, capital-intensive labor. American workers produce sophisticated goods or investment opportunities at lower opportunity costs. Specializing and trading along these lines benefits each.

The theory of comparative advantage helps to explain why protectionism has been traditionally unsuccessful. If a country removes itself from an international trade agreement, or if a government imposes tariffs, it may produce an immediate local benefit in the form of new jobs and industry. However, this is often not a long-term solution to a trade problem. Eventually, that country will grow to be at a disadvantage relative to its neighbors: countries that were already better able to produce these items at a lower opportunity cost.

Criticisms of Comparative Advantage

Why doesn’t the world have open trading between countries? When there is free trade, why do some countries remain poor at the expense of others? There are many reasons, but the most influential is something that economists call rent-seeking. Rent-seeking occurs when one group organizes and lobbies the government to protect its interests.

Say, for example, the producers of American shoes understand and agree with the free-trade argument—but they also know that their narrow interests would be negatively impacted by cheaper foreign shoes. Even if laborers would be most productive by switching from making shoes to making computers, nobody in the shoe industry wants to lose his or her job or see profits decrease in the short run.

This desire could lead the shoemakers to lobby for special tax breaks for their products and/or extra duties (or even outright bans) on foreign footwear. Appeals to save American jobs and preserve a time-honored American craft abound—even though, in the long run, American laborers would be made relatively less productive and American consumers relatively poorer by such protectionist tactics.

Other Possible Benefits of Trading Globally

International trade not only results in increased efficiency but also allows countries to participate in a global economy, encouraging the opportunity for foreign direct investment (FDI), which is the amount of money that individuals invest into foreign companies and assets. In theory, economies can therefore grow more efficiently and can more easily become competitive economic participants.

For the receiving government, FDI is a means by which foreign currency and expertise can enter the country. It raises employment levels, and theoretically, leads to a growth in gross domestic product. For the investor, FDI offers company expansion and growth, which means higher revenues.

Free Trade Vs. Protectionism

As with all theories, there are opposing views. International trade has two contrasting views regarding the level of control placed on trade: free trade and protectionism. Free trade is the simpler of the two theories: a laissez-faire approach, with no restrictions on trade. The main idea is that supply and demand factors, operating on a global scale, will ensure that production happens efficiently. Therefore, nothing needs to be done to protect or promote trade and growth, because market forces will do so automatically.

In contrast, protectionism holds that regulation of international trade is important to ensure that markets function properly. Advocates of this theory believe that market inefficiencies may hamper the benefits of international trade, and they aim to guide the market accordingly. Protectionism exists in many different forms, but the most common are tariffs, subsidies, and quotas. These strategies attempt to correct any inefficiency in the international market.

As it opens up the opportunity for specialization, and therefore more efficient use of resources, international trade has the potential to maximize a country’s capacity to produce and acquire goods. Opponents of global free trade have argued, however, that international trade still allows for inefficiencies that leave developing nations compromised. What is certain is that the global economy is in a state of continual change, and, as it develops, so too must its participants.

International Trade – Types, Importance, Advantages And Disadvantages

International trade refers to the exchange of goods and services between the countries. In simple words, it means the export and import of goods and services. Export means selling goods and services out of the country, while import means goods and services flowing into the country.

International trade supports the world economy, where prices or demand and supply are affected by global events. For instance, the US changing visa policies for the software employees will impact the Indian software firms. Or, an increase in the cost of labor in exporting country like China could mean you end paying more for the Chinese goods in the US.

Table of Contents

Types of International Trade

There are three types of international trade: Export Trade, Import Trade and Entrepot Trade. Export and import trade we have already covered above. Entrepot Trade is a combination of export and import trade and is also known as Re-export. It means importing goods from one country and exporting it to another country after adding some value to it.

For instance, India imports gold from China makes jewelry from it and then exports it to other countries.

What’s the need for an International trade?

Countries go for trade internationally, when there are not enough resources or capacity to meet the domestic demand. So, by importing the needed goods, a country can use their domestic resources to produce what they are good at. Then, the country can export the surplus in the international market. Primarily, a nation imports goods and services for the following reasons:

Price

If foreign companies can produce or offer goods and services more cheaply, then it may be beneficial to go for foreign trade.

Quality

If the companies abroad can offer good and services of superior quality. For instance, Scotch Whiskey from Scotland is considered to be superior. Scotland exports around 37 bottles of Scotch per second.

Availability

If it is impossible to produce that product domestically, like a special variety of fruit or a mineral. For instance, Japan has no natural reserves of oil, and thus, it imports all its oil.

Demand

If a demand for a product or services is more in a country than what it can domestically produce, then it goes for import.

Advantages of International Trade

Comparative Advantage

It allows countries to specialize in producing only those goods and services, which it is good at.

Economies of Scale

If a country wants to sell its goods in the international market, it will have to produce more than what is needed to meet the domestic demand. So, producing higher volume leads to economies of scale, meaning the cost of producing each item is reduced.

Competition

Selling goods and services in the foreign market also boosts the competition in that market. In a way, it is good for local suppliers and consumers as well. Suppliers will have to ensure that their prices and quality is competitive enough to meet the foreign competition.

Transfer of Technology

International trade often leads to the transfer of technology from a developed nation to the developing nation. Govt. in the developing nation often lay terms for foreign companies that involve developing local manufacturing capacities.

More job creation

Increase in international trade also creates job opportunities in both countries. That’s a major reason why big trading nations like the US, Japa, and South Korea have lower unemployment rates.

Disadvantages of International Trade

Over-dependence

Countries or companies involved in the foreign trade are vulnerable to global events. An unfavorable event may impact the demand of the product, and could even lead to job losses. For instance, the recent US-China trade war is adversely affecting the Chinese export industry.

Unfair to new companies

New companies or start-ups who don’t have much resources and experience may find it difficult to compete against the big foreign firms.

A threat to National Security

If a country is over dependant on the imports for strategic industries, then exporters may force it to take a decision that may not be in the national interest.

Pressure on natural resources

A country only has limited natural resources. But, if it opens its doors to the foreign companies, it could drain those natural resources much quicker.

Even though international trade has its own advantage and disadvantages, the advantages far outweigh the disadvantages. Nowadays, international trade has become a necessity, but a country must maintain a proper balance between imports and exports to ensure that the economy stays on the growth track.

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