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Basics of International Business

College: Gulf College- Muscat- Sultanate of Oman

Code: BLB00005-5

Task:

1) Narrative of current international trade and economy.

2) Explanation of the two types of trade flow with examples.


Answer

Introduction: 

It is important to assess the fact that international trade has been shifting its base to the firm-level in establishing heterogeneous firms that help in adding value to the international trade flows. Not every country dose export or import goods and those organization that do not export are considered to be regenerative and productive that those of domestic organizations. Researchers have initiated study and survey in the understanding of export and productivity. Trade flow refers to the flow of various materials, things, outputs, products that is imported or exported by a country with distinct components and direction. Trade flow helps in assessing the several structure of trade through which a country trades nationally and internationally. For example, if a country is trading, the n the diversification of country’s important and export is observed and examined while outlining its value and supply chains. The paper focuses on the study of het internal trading and its components. Furthermore, it focuses on the understanding of the different kinds of trade flow and country performance in relation to the 5-year net export figure and help in providing justification in the sustenance of net export. 


Trade flow: 

Flow of trade ensures free and predictable transfer of product and services across border and boundaries. Trade flow determines the stocks, currencies, goods, finance between nations engaged within the trading chain. Flow of trade ensure free flow of information from the clients and take immediate steps in curbing trade barrier issues and restrictions that disrupts the flow of trade (Johnson, 2013). There are several types of trade flow that involves intra-industry trade, intra-firm trade, inter-firm trade and inter industry trade. Both the developing and developed countries are engaged in the business of trading that enables free flow of trade globally. Their annual growth has increased with the span of time resulting in gross development.  For example, China has examined considerable rise in its supply and distribution of national products.  Besides, there has been increasing export in the Eastern Europe and Asia that facilitated growth in the world trade. GDP reflection witnesses the share of world trade is expanding and might double over the forty years with an increase in seventy percent of output. BRIC or brazil, Russia, India, China has huge share in the export field that have been rising from 29011 from six percent to 12,4 percent (Kanemoto et al. 2014)


World merchandise trade: 

World trade organizations or WTO provides essential data regarding the export and import of the goods and products facilitated by countries or an individual country. The WTO updates the annual data of trade towards the end of every year. Besides, quarterly data are updated so that the trade flow of the country is assessed and examined. With the countries involved in the internal trade system, trade reflects an important share of gross domestic product or GDP (Chapman et al. 2016). Trading has been a major aspect that has given its way to country’s rise in contemporary times. Besides, the world trade determines the realties hip between nations who are engaged within the trading system and ensure that the flow of trade is free and smooth facilitating economic and social growth. The countries who are involved in the world merchandise trade are Brazil, China, Japan, Russia, USA, India, and others. As examined there has been an increasing growth in the world trade where the countries involved within the trading system have become interrelated deriving befits and advantages over time (Bernard, Grazzi and Tomasi, 2015). The table below provides an insight to the free flow of trade and its growth rate over time since 1870-2007.  The table reflects the growth in world merchandise trade that is segmented in five periods. The table provides the annual change in percentage. 




1870-1900

1900-13

1913-50

1950-73

1973-2007

GDP

2.9

2.5

.0

5.1

3.01

Export   trading

3.8

4.3

0.6

8.2

5.1


India’s International trading system: 

India in the International trading system India has been exporting and importing several product and services that has given ways to its annual growth and development. India is a developing company that has been globally acclaimed for its share in the export market and trading with its well structured distribution and supply chain. The foreign trade accounted that India’s gross domestic products has its share of 48.8 percent in 2015. In relation to India’s’ trading history, the country has been following inter-industry trade flow that ensured trading between the industries of the different countries. After the independence, India has initiated it calm in the Commonwealth of Nations. It has been able to tie up with different nations like Soviet Union and chain in creating close knit trading system fostering free flow of trade. The table gives the detail of the India’s foreign trade:


Year

Export

Import

Trade Deficit

1999

36.3

50.2

-13.9

2000

43.1

60.8

-17.7

2001

42.5

54.5

-12.0

2002

44.5

53.8

-9.3

2003

48.3

61.6

-13.3

2004

57.24

74.15

-16.91

2005

69.18

89.33

-20.15

2006

76.23

113.1

-36.87

2007

112.0

187.9

-75.9

2008

176.4

305.5

-129.1

2009

168.2

274.3

-106.1

2010

201.1

327.0

-125.9

2011

299.4

461.4

-162.0

2012

298.4

500.4

-202.0

2013

313.2

467.5

-154.3

2014

318.2

462.9

-144.7

2015]

310.3

447.9

-137.6










India is witnessed to have exporting nearly 7000 and above goods and services to more than hundred and fifty countries. Further it imports aproxiamtely 60000, goods from hundred and sixty countries. Thereby, India’s share in the world trade is growing with time, giving way to n increase in the national income. India is observed to export $ 18.2 billion and has been importing $462.9 billion as estimated in the year of 2014 (Shahbaz et al. 2013)

Figure 2: India’s gross domestic product evaluation since 2012-2015

(Source- Gervais, 2015)


The table reflects the goods and commodities that have been exported by India in the year 2014:



Rank

Goods and   services

HS Code

Value   (according to US dollar)

Share in   percentage

1

Petroleum

27

61.2

19.2

2

Gems and metals

71

41.2

13

3

Cars and automobile

87

14.5

4.6

4

Automobile machines, engines and others

85

13.6

4.3

5

Organic chemicals

29

12.1

3.8

6

Pharmaceuticals

30

11.7

3.7

7

Cereals

10

10.1

3.2

8

Iron and steel

72

9.1

2.9

9

Clothing 

58

9.1

2.9

10

Electronics and appliances

85

9.1

2.8


The table reflects the goods and commodities that have been imported by India in the year 2014:

Rank

Goods and   services

HS Code

Value   (according to US dollar)

Share in   percentage

1

Oil

27

177.5

38.3

2

Gems, precious metals, coins

71

60

13

3

Electronics

85

32

6.9

4

Machines, engines, pumps

85

31.2

6.7

5

Organic chemicals

29

18.3

4

6

Plastics

39

11.8

2.6

7

Iron and steel

72

11.4

2.5

8

Animal/vegetable fats and oils

15

10.7

2.3

9

Ores, slag and ash

26

7.4

1.6

10

Medical and technical equipment

90

7.1

1.5


It is observed that there import structure is less profitable than that of the export trading. The two major goods that have been traded by India are mineral fuels and gold according to the estimated year of 2010-2014 that is of worth 181.383 billion of US dollar. According to the year of 2012, India has been importing refined petroleum and precious stones that is worth 62billion dollar as analyzed from the spreadsheet. Beside, the international monetary fund world, the GDP of India accounts to 2,495 billion that has given way to 3 percent of profit (Dür, Baccini and Elsig, 2014).  


Figure 1: India’s gross domestic product change since 2007-2014

(Source- Neary, 2016)

From the study of India’s international trade, the composition of India’s trade has undergone several challenges and changes due to global factors specially globalization and liberalization.  However, the exports of Indian trade have been constantly increasing but in a decreasing arte. Besides, the imports are increasing as witnessed with increasing rate. It has been observed that there has been a marked increase in the trade deficit of India from 2004-05, 2009-10, and 2013-14 (Chen and Chen, 2013).  With the constant changes, India’s export has been encompassing goods, petroleum, chemicals, gems and others. However, India has been performing remarkably in exporting specialized items to foreign countries resulting in national economic growth and has achieved a global position in being an exporting country of non primary and primary goods and products. It has been utilizing and exploring the GATS in attaining the possibility of becoming the largest exporter of commodities in the global trading system. In being a developing country it has gained success over having maximum share in the export of commodities according to the world trade organization in recent years (Neary, 2016)


Measures in relation to sustaining a positive net export and abating a negative net export:

It is important for countries involved in the international trading system that needs to ensure that they are being able to sustain positive net export and abate the negative net export for annual profit and growth in trading system (Dür, Baccini and Elsig, 2014). In relation to India’s share in the export it can be said that the country has potential and profitable export. However, in order to facilitate long-term benefits and profit within the international market, the country needs to make potential efforts in prioritizing its venture. Beside, in order to abate the negative net export, the country needs to plan and process its trading system.  It is essential to arrange the export pal in accordance to the extension of the business plan. Besides, the country need to determine the agents, distributors and assess their individual responsibility; assess and examine the change and challenges; determine the political and social factors, predict economic fluctuations, facilitate overseas intermediaries and customers. Above all, in maintaining profitable net export, the country needs to assess the import costs, entry research, market entry, cost of staying of the commodities of the exported items (Foley and Manova, 2015)


In determining the positive market structure, the market analysis needs to be made of the countries who are importing the commodities and services. Every country has their own strength, weakness, trade-offs, trading structure, market positioning. All these factors need to be assessed by the country exporting and accordingly fix its prices of commodities so that they are being able to again possible profits. Besides, the major factors of assessment being the understanding of the import county’s sales tax, environmental and legal systems, quality standard of market and certification of trade.  Examination of all these factors will help in abating the negative net exports and facilitate positive net export. 


Figure 3: Positive net export in percentage

(Source- Manova, 2013)


Conclusion: 

From the above study, it is observed that India has been able to perform consistently in developing sit annual economic growth and has-been able to reform its export and imports system.  The government of India has developed certain trading practices within the economic and political economy that ensure successive growth. Indian economist has been adopting theories in relation to the development of trade. With the help of foreign trading and marketing analysis India will be able to again higher success in becoming the largest exporter of the world.  The countries need to develop correlations among the countries involved in the internal merchandise trade in addressing the economic growth and emphasize towards long term trends and benefits. 

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