TOPIC Econ
TOPIC Econ
TOPIC Econ
Course Methodology
❑ Lecture / Discussion
❑ Presentation of Relevant International Business and Trade Topics and Issues
❑ Online Group Presentation
❑ Online/Oral Examinations
❑ Submission of Reaction / Concept Papers
Evaluation Measures:
❑ Attendance, Assignments & Oral Recitation 10%
❑ Total Quizzes & Chapter Exams 30
❑ Group Report 15
❑ Midterm Examination 20
❑ Final Examination 25
Total 100%
❖ This course focuses on the core concepts and techniques for entering international marketplace.
Emphasis is on the effect of socio-cultural, demographic, economic, technological, and political-legal
factors in the foreign trade environment.
❖This course will also analyze the causes and consequences of international trade and investment and
will include discussions about why nations trade, what they trade, who gains (or not) from this trade and
other related characteristics of international business and trade.
❖The students will also study the motives for countries or organizations to restrict or regulate
international trade and evaluate the effects of such policies on economic welfare.
❖ Other topics covered will be the effects of trade on economic growth and wage inequality,
multinationals and foreign direct investment, international trade agreements and current trade policy
disputes.
❖ We will also spend some time discussing aspects of the current debate on "globalization" such as the
use of international labor standards, interactions between trade and environmental concerns
❖ The course also aims to introduce students to introductory level theories on international finance
flow and the determination of exchange rates in interconnected economies
Course Objective
At the end of the course, the student should be able to:
1) Explain the patterns or dynamics of world production, the basic characteristics of
international business and trade and the benefits that may be derived from such;
2) Analyze and compare the various instruments of modern trade policies and evaluate
their impact on domestic and international welfare;
3) Relate how international transactions affect international taxation, tariffs, duties and
non-tariff barriers and improve competitiveness in a truly globalized;
4) Explain the importance and impact of Globalization and Free Trade Areas (FTAs) to
International Business & Trade (ASEAN, EU, NAFTA, MERCUSOR)
What is economics?
- Economics is a social science that deals with the proper allocation of scare resources in order to
satisfy human needs and wants.
- It is the study of efficient use of scarce resources for producing goods and services, and
distributing them among people.
- Resources are scare and human wants are unlimited.
- Need appropriate choice or allocate resources properly.
- Economics helps us make rational choice.
- Hence, it is a science with scarce means and unlimited ends.
- It helps us to entangle many economic issues emanating from scarcity.
- Principles of microeconomics
1. The law of supply and demand
2. Market and individual behaviors
3. The consumer
4. The producer
2. Macroeconomics
- Macroeconomics is a branch of economics that deals with the performance, structure, behavior,
and decision-making of an economy as a whole. This also includes regional, national, and global
economies, the study of the national economy and its major components.
- Examines economy-wide phenomena such as changes in unemployment, national income, rate
of growth, gross domestic/national product, investments, inflation, and price levels of goods and
services, among others.
- Functions of a government
Negros Oriental’s primary source of power is the geothermal energy harnessed from the
geothermal fields in Palinpinon, Valencia, Negros Oriental. Providing power to neighboring
provinces like Negros Occidental, Panay Island and Cebu Island
In the Pipeline HYDRO Power Plant in Mabinay Wind Farm in Bais City
Good governance – adequate legal regimes, institutions, infrastructure and capacity are in place.
Transboundary cooperation – sovereign states discuss and coordinate their actions to meet the
varied and sometimes competing interests for mutual benefit.
Peace and political stability – the negative effects of conflicts are avoided, including reduced
water quality and/or quantity, compromised water infrastructure, human resources, related
governance, and social or political systems.
Financing – innovative sources of financing complement funding by the public sector, including
investments from the private sector and micro-financing schemes.
Drinking water and human well-being – populations have access to safe, sufficient and
affordable water to meet basic needs for drinking, sanitation and hygiene, to safeguard health
and well-being, and to fulfill basic human rights.
Ecosystems – ecosystems are preserved and can deliver their services, on which both nature and
people rely, including the provision of freshwater.
Water-related hazards and climate change – populations are resilient to water-related hazards
including floods, droughts and pollution.
Economic activities and development – adequate water supplies are available for food and
energy production, industry, transport and tourism.
Water utilities need to prepare and plan for all hazardous events that may impact their systems.
- By 2050, 70% of population in urban areas. Cities and their water utilities must take an active
role in watershed management, as a disruption in the supply of freshwater resources to cities
can have significant socio-economic, environmental and health consequences.
- Climate change – irregular patterns of water availability. Climate change will disrupt historical
weather patterns and add an additional layer of uncertainty to long-term planning for water
utilities and the populations they serve.
- Population growth – growing demand for resources. As global projections show a continued
increase in population and urbanization, that water utilities supplying cities will need to manage
increasing demand for the resource.
- Water users – competition for water resources. Increased competition for limited water
resources between different users means water utilities need to put in place measures to ensure
continued provision of safe and secure water supply.
Transport Infrastructure
- • Roads
- • Railways
- • Seaport
- • Airport
• While it’s possible that not all four major transport modes are present in every province
• This is for the flow of goods and humans into every growth area or center in a country or economy
• Constitutes an important infrastructure system linking areas of production with markets, and
connecting the rural areas with urban centers
• Crucial infrastructure in economic development and competitiveness but receive the least attention in
- Interstate 80, seen here in Berkeley, California is a freeway with many lanes and heavy traffic
(source: wikipedia)
- Turri Road, a five mile loop through rolling hills and cattle country in Los Osos, California
- Highway-bridge combination between mainland Florida and the vacation hotspot the Florida
keys (7-mile bridge)
- -A feeling of driving across the ocean for miles and miles Increased tourism revenue and influx
of tourists
- North Yungas Road 80 km long in La Paz, Bolivia a.k.a. ‘’The Death Road”
• It is essential in poverty reduction as it enables and improves the access to basic services and
development opportunities
- NOCCI in partnership with The Asia Foundation and Australian Aid (AusAid) successfully
implemented and completed the CR+ID (Coordinating Roads & Infrastructure Development)
Project resulting in P4.5Billion of approved roads and infra projects in March, 2017 by both the
Provincial Development Council of Negros Oriental and the Negros Island Regional Development
Council.
- There are 2 runways at Ninoy Aquino International Airport, namely Runway 06/24 (60M width
and 3,737M length) and Runway 13/31. (45M width and 2,258M length)
- Port of Manila Covering an area of some 137.5 hectares, Manila is the leading port in the
Philippines, and one of the oldest, busiest and most important ports in the entire southeast
Asian region, having been a vital trade link between the Far East and the rest of the world for
over 1,000 years
Philippines Ports
Human Resources
- the labor force of the country. Also enhances the competitiveness of the economy with the
availability of quality manpower
✓ Human resources means the size of population of a country along-with its efficiency,
educational qualities, productivity, organizational abilities and foresightedness.
✓ It encompass all that is needed for labor to produce goods and services.
✓ These elements include the expertise, knowledge, training, skills, experience, and other
characteristic needed to create economic value.
✓ Therefore, human resources is a direct contributor to producing goods and services in all
types of economies
❖ The Filipino workforce is one of the most compelling advantages the Philippines has over any other
Asian country, Filipinos are rated to be skilled to highly skilled, productive, highly trainable and multi-
skilled workforce.
❖ With higher education priority, the literacy rate in the country is 97.95% - among the highest in the
ASEAN Region. English is taught in all schools, making the Philippines the world's third largest English-
speaking country for quite some time.
❖ Every year, there are some 618,000 graduates enriching the professional pool.
2. Increase in Production
3. Increase in Demand
• Total Higher Education Institutions of 2,396; 1,729 are private and 667 are state-run colleges and
universities
• World’s Leading Location for Call Centers outslugging the BPO Leader INDIA (voice category)
• 1.3M direct jobs and 4.1M indirect jobs with a total estimated revenue of US$ 26.3-B in 2019
• With 1,182 call center operators in the country; 788 of which are PEZA registered
Objectives of GATT
1. To provide equal opportunities to all countries in international market for trading
2. To increase the effective demand for real income growth and goods
3. To minimize tariffs on trade ensuring mutual benefit
4. To provide proper solution to the disputes related to international trade
5. To ensure a better living standards as a whole
- Today, the understanding of international trade and the factors influencing global trade is much
better understood.
- The context of global markets have been guided by the understanding and theories developed
by economists based on Natural resources available in various countries which give them the
comparative advantage, Economies of Scale of large scale production, technology in terms of e
commerce as well as product life cycle changes in tune with advancement of technology as well
as the financial market structures.
Timeline of international business and trade
Barter System
– the old method of exchange of goods and or services with our neighbors such as the Chinese,
Malays and Indians (from India). Products from the Philippines exchanged were rice, coconuts,, palm
oil, sugar, fibers, straws, cane, dyewoods, lumber, snails, beeswax, medicinal plants, tortoise shell,
pearls and mother of pearl shells etc… while the Chinese brough in cotton, linen, silk, porcelain, iron,
household utensils and other crude manufactured wares
- Records show that Chinese merchants came to the Philippines to trade porcelain, silk and
metalware in exchange for gold, pearls, beeswax and medical plants, which the Philippines is
naturally rich in.
- The Spanish Colonization introduced the Philippines to the world with the Tobacco Monopoly in
1782 and the Galleon Trade through the Manila-Acapulco Trade
- ✓ In 1565, the Spaniards marked their first settlement in Cebu when they sought to acquire a
share in the lucrative spice trade.
- ✓ When the King of Spain abolished the Royal Company of the Philippines, it opened the port
Manila to global trade
- . ✓ This welcomed business from all corners of the world, dubbing the Philippines as the center
for commerce in the East.
- The Spanish Colonization introduced the Philippines to the world by the Tobacco Monopoly in
1782 and the Galleon Trade through the Manila-Acapulco Trade
- The Spanish Colonization introduced the Philippines to the world by the Tobacco Monopoly in
1782 and the Galleon Trade through the Manila-Acapulco Trade
- The Spanish Colonization introduced the Philippines to the world by the Tobacco Monopoly in
1782 and the Galleon Trade through the Manila-Acapulco Trade
- The Spanish Colonization introduced the Philippines to the world by the Tobacco Monopoly in
1782 and the Galleon Trade through the Manila-Acapulco Trade
1. Japan
2. Siam (Thailand)
3. Cambodia
4. Burma (Myanmar)
5. Sumatra – Indonesia
6. Java – Indonesia
Economic development – established programs and economic reforms to improve the country’s
economic landscape
1. Export / trade / investment development program
creation of economic zones in CALABARZON – cavite, laguna, Batangas regional zone,
baguio, cebu/mactan, Iloilo, Cagayan de oro, davao
2. Massive infrastructure projects to support investments and trade in the country such as:
a. Airports – all over the country CIA
b. Seaports
c. Train
d. Bridges
e. Roads, highways and expressways
f. Power and water infrastructure
g. Transportation and communications
- To make the Philippines attractive to FDIs
Established Hospitals and Medical Institutions to make Manila as the Health Capital of Asia
➢ Provincial and Municipal Hospitals as well as Rural Health Centers across the country
Established and constructed various convention and conference centers to make Manila as the
Convention Capital of Asia / Hub of Culture and the Arts in Asia
➢ Nayong Pilipino
➢ Museo Pambata
Establishment of a Stable Energy to fuel the country’s bid for Industrialization and Urbanization
➢ Bataan Nuclear Power Plant – 700 Megawatts
➢ Construction of one of the biggest and most modern Airport Terminal in Asia, the Manila
International Airport in 1979
➢ Other national and domestic airports in the country, Davao, Baguio, Cagayan de Oro, Iloilo, Bacolod,
Leyte, Ilocos Norte, Dumaguete etc…
➢ The first Metro Rail Transit in Southeast Asia, earlier established that Singapore, the Manila Light
Transit System
➢ Expansion of the Manila South Harbor Port, the biggest in Asia then to improve cargo traffic to and
from the Philippines
➢ Leasing of the Subic Naval Base and Clark Air Base to the Americans
– in January 1, 1995 and participated in the WTO review to improve its purpose, objectives and other
changes in December 5, 2005.
Any business that crosses the national borders of a country. It includes importing and exporting;
the international movements of goods, services, employees, technology, licensing, and
franchising of intellectual property (trademarks, patents, copyrights etc…)
International business also includes investment in financial and fixed or immovable assets in
foreign countries.
Contract manufacturing or assembly of products for local sale or for exports to other countries,
the establishment of foreign warehousing and distribution systems, and import of goods from
one foreign country to a second foreign country for local sale is part of international business
and trade.
✓ Apart from individual firms, governments and international agencies may also get involved in
international business transactions.
✓ Companies and countries may exchanged different types of PHYSICAL and INTELLECTUAL Assets
- natural resources
- capital, technology,
✓ These are all vital ingredients to improve the productive capacity of an economy to be globally
competitive
APPLE Inc.
Toyota, inspired by the new mass-production methods in Europe and the USA have grown to
become one of the world’s largest and best-known automobile manufacturing businesses.
We employ more than 360,000 people and make vehicles in factories on every continent.
Our cars and trucks are sold in more than 170 countries and territories.
Toyota and Japanese space agency, JAXA, are working together on a hydrogen-powered rover to
help humanity explore the surface of the moon, and some day Mars too.
Global -54 top 25 brands and models 2018
Brands
The factors of production
Import versus export
3. Global Services Promote the growth of global services that supports import and export
transactions, such as:
❖ Banking services
❖ Insurances
❖ Import and Export Consulting
❖ Trademark and Patents
❖ Transportation
❖ Warehousing
❖ Distribution and Marketing
❖ Manpower support services
4. Portfolio Investment
❖ Portfolio investments are financial investments made in foreign countries. The investor
purchases equity in the expectation of financial return on the investment
❖ Portfolio investments can span a wide range of asset classes such as stocks, government
bonds, corporate bonds, Treasury bills, real estate investment trusts (REITs), exchange-traded
funds (ETFs), mutual funds and certificate of deposit
- International trade has a rich history starting with Barter System and being
replaced by Mercantilism in the 16th and 17th Centuries.
- The 18th Century saw the shift towards liberalism. It was in this period
that Adam Smith, the father of Economics wrote the famous book ‘The Wealth of
Nations’ in 1776 where in he defined the importance of specialization in
production and brought International trade under the said scope. Led the
growth of Industrial Revolution.
- In the beginning of the 19th century saw the move towards trade
professionalism, which petered down by end of the century. In the early start
of the century, countries in the west came up with extensive move towards
economic liberty where in quantitative restrictions were done away with and
customs duties were reduced across countries.
- Establishing business anywhere and finding employment was easy and one can
say that trade was really free between countries around this period.
- The 1st and 2nd World Wars changed the entire course of the world trade and
countries built walls around themselves with wartime controls. Post world war
- as many as five years went into dismantling of the wartime measures and
getting back trade to normalcy.
- However, due to economic shocks and recessions that led to fluctuations and
depreciation of currencies after the 2nd World War, government were pressured
to adopt protective mechanism by raising custom duties and or trade tariffs to
achieve economic growth.
Objectives of GATT
1. To provide equal opportunities to all countries in international market for
trading
2. To increase the effective demand for real income growth and goods
3. To minimize tariffs on trade ensuring mutual benefit
4. To provide proper solution to the disputes related to international trade
5. 5. To ensure a better living standards as a whole
- The context of global markets have been guided by the understanding and
theories developed by economists based on Natural resources available in
various countries which give them the comparative advantage, Economies of
Scale of large scale production, technology in terms of e commerce as well as
product life cycle changes in tune with advancement of technology as well as
the financial market structures.
Barter System – the old method of exchange of goods and or services with our
neighbors such as the Chinese, Malays and Indians (from India). Products from
the Philippines exchanged were rice, coconuts,, palm oil, sugar, fibers,
straws, cane, dyewoods, lumber, snails, beeswax, medicinal plants, tortoise
shell, pearls and mother of pearl shells etc… while the Chinese brough in
cotton, linen, silk, porcelain, iron, household utensils and other crude
manufactured wares
-The Spanish Colonization introduced the Philippines to the world with the
Tobacco Monopoly in 1782 and the Galleon Trade through the Manila-Acapulco
Trade
- In 1565, the Spaniards marked their first settlement in Cebu when they
sought to acquire a share in the lucrative spice trade.
- When the King of Spain abolished the Royal Company of the Philippines, it
opened the port Manila to global trade.
- This welcomed business from all corners of the world, dubbing the
Philippines as the center for commerce in the East.
1. Japan
2. Siam (Thailand)
3. Cambodia
4. Burma (Myanmar)
5. Sumatra – Indonesia
6. Java – Indonesia
7. Other neighboring island countries
8. Countries in Europe and Africa through the Manila-Acapulco Trade
- The American Colonization (circa 1898 – 1946) opened the ports of Manila
and Cebu promoting Free Trading for more goods to be transported to the United
States of America
- The Payne-Aldrich Act in 1909 paved the way for free entry of US goods to
the Philippines and local goods to the US, no taxes and tariffs.
- The American Colonization (circa 1898 – 1946) opened the ports of Manila
and Cebu promoting Free Trading for more goods to be transported to the United
States of America
- The Bell Trade Act of 1946 – giving the Americans the right to conduct
business and avail of our natural resources… e.g. ”The USA-Philippine Sugar
Quota”
- The Philippine Commonwealth and The Republic (1934 - 1946) Under the
Tydings-McDuffie Law giving the Philippines its Independence in July 4, 1946
with Manuel Roxas as President of the new republic
- Import, Export and Foreign Exchange Control – to give rise to the new
country and expand its international trade and relation to countries in Asia,
Americas, Europe, Africa, Middle East and the rest of the world
- The New Republic (1960 - Present) Under the presidency of Diosdado Macapagal
in 1961-1965 and Ferdinand E. Marcos from 1965 – 1986.
- The Golden Era of Philippine Trade and Economy – major economic agenda and
projects under the KBL or the New Society Movement….focusing on Agricultural
Development, Manufacturing and Economic Development, Infrastructure
Development (airports, seaports, roads, expressways, train, bridges), Health
and Wellness, Education and Knowledge, Rural & Urban Development
3. Heterogeneous Markets
❖ A cross-border business is very different from one that involves a single
country
❖ Differences in climate, language, culture, preferences, customs and habits,
likes and dislikes etc…
❖ Behavior of international clients over local/domestic are way different…
❖ Socio-economic environment differs greatly among different nations
4. Integration of Economies
❖ Trade arrangement between nations in a region that includes reduction or
elimination of trade barriers, and coordination of monetary and fiscal
policies
❖ 7 Stages of Economic Integration
1. Preferential Trading Area
2. Free Trade Area
3. Customs Union
4. Common Market
5. Economic Union
6. Economic and Monetary Union
7. Complete Economic Union
6. Keen Competition
❖ International business increases competition in domestic markets and
introduces new opportunities to foreign markets
❖ Global competition however encourages innovation, creativity and efficient
use of resources for greater productivity
❖ However, there is unequal competition between developed and developing
countries
*** globalisation