INTERNATIONAL TRADE
MANAGEMENT
LECTURE NOTES
, CONTENTS
CHAPTER TITLE PAGE No.
I International Marketing 5
II Basis of International Trade and 16
Monetary Systems
III Incoterms 2000 49
IV Consumer Behaviour and Role of Marketing 59
V Foreign Trade Policy and its Impact on 75
Foreign Trade
, CHAPTER - I
INTERNATIONAL MARKETING
OBJECTIVE
International trade facilitates specialisation on large scale. International division of labour and
international trade enable every country to specialise and to export those goods that it can produce
cheaper in exchange for those others can provide at a lower cost. This is one of the basic factors
which promote economic well being and pave way for increasing national income. Alfred Marshal,
the great classical economist has pointed out that the causes which determine the economic progress
of nations belong to the study of international trade. In short, foreign trade enables nations to improve
economic welfare.
International trade, however, is not quite free. The gains of international trade are hampered
by various tariff and non- tariff barriers.
Trade deficits constitute a serious problem for a number of countries. Trade deficits and
consequent adverse balance of payments position indicate the need for boosting exports. A developing
economy warrants large imports of capital goods, technology, raw materials, consumables etc., in
order to implement the development plans effectively. As imports are necessarily financed by exports,
the capacity to import is linked to export performance. Export marketing is characterised by intense
competition and growing protectionism.
A. INTERNATIONAL TRADE
A General Introduction
The last four or five decades have witnessed a tremendous expansion in world trade.
International trade has been growing at a rate much higher than the growth rate of world output.
International institutions such as IMF and World Bank, which used to be described by the Communist
countries as organs of Capitalist imperialism, have now been acknowledged by all as vital sources of
assistance for economic rejuvenation of the erstwhile communist nations, besides other capitalist
governments.
Economists have propounded various theories explaining the factors which account for trade
between nations. The theory of the classical economist David Ricardo is that International Trade is
due to the differences in the comparative costs of production between the countries. According to
Haberler, it is due to the differences in the opportunity costs of production of commodities between
nations. Irving Kravis has pointed out that International Trade arises as a result of the availability and
non-availability factors i.e. a nation would import those commodities which are not readily available
in the domestic market and export those which are available in greater quantities after satisfying the
domestic demand.
5
, The principal objectives of India's export policy are:
(i) To accelerate the country's transition to a global oriented vibrant economy to derive maximum
benefits from global market opportunities.
(ii) To stimulate economic growth by providing access to essential raw materials, components,
consumables and capital goods required for augmenting export production.
(iii) To enhance the technological strength and efficiency in all spheres of activity for the attainment
of internationally accepted standards of quality; and
(iv) To provide good quality products at reasonable prices.
B. BASIC DEFINITIONS
1. Exports
The term "export" has been defined in the Foreign Trade ( Development and Regulation)
Act 1992, as " taking out of India any goods by land, sea or air".
The Customs Act 1962, states that "export with its grammatical variations and cognate
expressions means taking out of India to a place outside India".
While dealing with the term "Exports", the following expressions also assume significance
especially in the context of technological advancement in modern world in order to meet the
sophisticated and diversified needs of the export sector.
(a) Project Exports: Exports of engineering goods on deferred payment terms and execution
of turnkey projects and civil constructions abroad;
(b) Services Exports: Consultancy and Technical services such as preparation of feasibility
reports of projects, drawings and designs, technology transfer, operation, maintenance and
supervision of manufacturing units;
(c) Software exports where the exports are not physical and tangible;
(d) Re-export of goods imported into India from abroad;
(e) Deemed Exports: Where the transactions do not involve the goods leaving the country
but indirectly save foreign exchange through import substitution, earn foreign exchange by
supplying the goods/ services to foreign organisations operating in India or specified
organisations or units in India. For details, refer to chapter VI.
(f) Counter Trade
This refers to a variety of unconventional trade practices linking exchange of goods, directly
or indirectly, in an attempt to dispense with currency transactions. Counter trade includes
barter (direct exchange of goods of equal value with no money or third party involvement)
buy back agreements by which the supplier of plants, equipments or technology agrees to
6
MANAGEMENT
LECTURE NOTES
, CONTENTS
CHAPTER TITLE PAGE No.
I International Marketing 5
II Basis of International Trade and 16
Monetary Systems
III Incoterms 2000 49
IV Consumer Behaviour and Role of Marketing 59
V Foreign Trade Policy and its Impact on 75
Foreign Trade
, CHAPTER - I
INTERNATIONAL MARKETING
OBJECTIVE
International trade facilitates specialisation on large scale. International division of labour and
international trade enable every country to specialise and to export those goods that it can produce
cheaper in exchange for those others can provide at a lower cost. This is one of the basic factors
which promote economic well being and pave way for increasing national income. Alfred Marshal,
the great classical economist has pointed out that the causes which determine the economic progress
of nations belong to the study of international trade. In short, foreign trade enables nations to improve
economic welfare.
International trade, however, is not quite free. The gains of international trade are hampered
by various tariff and non- tariff barriers.
Trade deficits constitute a serious problem for a number of countries. Trade deficits and
consequent adverse balance of payments position indicate the need for boosting exports. A developing
economy warrants large imports of capital goods, technology, raw materials, consumables etc., in
order to implement the development plans effectively. As imports are necessarily financed by exports,
the capacity to import is linked to export performance. Export marketing is characterised by intense
competition and growing protectionism.
A. INTERNATIONAL TRADE
A General Introduction
The last four or five decades have witnessed a tremendous expansion in world trade.
International trade has been growing at a rate much higher than the growth rate of world output.
International institutions such as IMF and World Bank, which used to be described by the Communist
countries as organs of Capitalist imperialism, have now been acknowledged by all as vital sources of
assistance for economic rejuvenation of the erstwhile communist nations, besides other capitalist
governments.
Economists have propounded various theories explaining the factors which account for trade
between nations. The theory of the classical economist David Ricardo is that International Trade is
due to the differences in the comparative costs of production between the countries. According to
Haberler, it is due to the differences in the opportunity costs of production of commodities between
nations. Irving Kravis has pointed out that International Trade arises as a result of the availability and
non-availability factors i.e. a nation would import those commodities which are not readily available
in the domestic market and export those which are available in greater quantities after satisfying the
domestic demand.
5
, The principal objectives of India's export policy are:
(i) To accelerate the country's transition to a global oriented vibrant economy to derive maximum
benefits from global market opportunities.
(ii) To stimulate economic growth by providing access to essential raw materials, components,
consumables and capital goods required for augmenting export production.
(iii) To enhance the technological strength and efficiency in all spheres of activity for the attainment
of internationally accepted standards of quality; and
(iv) To provide good quality products at reasonable prices.
B. BASIC DEFINITIONS
1. Exports
The term "export" has been defined in the Foreign Trade ( Development and Regulation)
Act 1992, as " taking out of India any goods by land, sea or air".
The Customs Act 1962, states that "export with its grammatical variations and cognate
expressions means taking out of India to a place outside India".
While dealing with the term "Exports", the following expressions also assume significance
especially in the context of technological advancement in modern world in order to meet the
sophisticated and diversified needs of the export sector.
(a) Project Exports: Exports of engineering goods on deferred payment terms and execution
of turnkey projects and civil constructions abroad;
(b) Services Exports: Consultancy and Technical services such as preparation of feasibility
reports of projects, drawings and designs, technology transfer, operation, maintenance and
supervision of manufacturing units;
(c) Software exports where the exports are not physical and tangible;
(d) Re-export of goods imported into India from abroad;
(e) Deemed Exports: Where the transactions do not involve the goods leaving the country
but indirectly save foreign exchange through import substitution, earn foreign exchange by
supplying the goods/ services to foreign organisations operating in India or specified
organisations or units in India. For details, refer to chapter VI.
(f) Counter Trade
This refers to a variety of unconventional trade practices linking exchange of goods, directly
or indirectly, in an attempt to dispense with currency transactions. Counter trade includes
barter (direct exchange of goods of equal value with no money or third party involvement)
buy back agreements by which the supplier of plants, equipments or technology agrees to
6
