visible exports and imports
revenue and expenditure
earnings ,
comprises
shipping companies
carrying foreign cargo
should balance with ...
a favourable balance of payments
best suited to engage in
customs boundaries
import and export embargoes ()
to some extent
primary products
manufactured goods
to establish the products
sole agent
on behalf of the company -
sales office
a subsidiary
a joint venture ()
International trade is the exchange of goods and services between different countries. Depending on what a country produces and needs, it can export (sell goods to another country) and import (buy goods from another country). Since these are tangible goods that visibly leave and enter countries, they are sometimes called as visible exports and imports.
Exporting and importing of goods are the major sources of international revenue and expenditure for most countries.
Service exports and imports refer to international earnings other than those from goods sent to another country. Services are also referred to as invisibles. International business comprises many different types of services. Earnings from transportation and from foreign travel can be an important source of revenue for international airlines, shipping companies, reservations agencies, and hotels. In a national level, such countries as Greece and Norway depend heavily on revenue collected from carrying foreign cargo on their ships. The Bahamas earns much more from foreign tourism than it earns from exporting goods.
Over a period of time the total value of exports should balance with the total value of imports. When exports exceed imports we say that the country has a favourable balance of payments. When imports exceed exports the balance of payments is said to be unfavourable. Governments can control international trade. The most common measures are tariffs and quotas. These measures are protectionist as they raise the price of imported goods to protect domestically produced goods. International organizations such as the WTO (World Trade Organization) and EFTA (European Free Trade Association) regulate tariffs and reduce trade restrictions between member countries.
Economists have developed a theory for international trade which in its simple form suggests that each country should concentrate on the type of industry, product or service which it is geographically or otherwise best suited to engage in. If there were no tariffs, customs boundaries, import and export embargoes, trade would then flow freely throughout the world, with each country concentrating on the type of product it could most efficiently manufacture. To some extent this happens at the present time. In the case of primary products agriculture, mining, oil extracting countries have no option but to follow this simple rule. In the case of manufactured goods, through long tradition, usually based on historical factors, certain countries have become famous for particular products.
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Companies can choose from various methods to establish their products in a foreign market. One option is to start by working with local experts such as sole agents or multi-distributors, who have a special knowledge of the market and sell on behalf of the company. This often leads to the company opening a local branch or sales office. Another option is to sell, or give permission to use patents and licences for their products. Companies may wish to start by manufacturing in the export market, in which case they can either set up a local subsidiary or a joint venture with a local partner.
