Category: Blog

 

With the aid of Globalization, the concept of international finance grew. It fundamentally addresses the issues of monetary interactions among world’s countries. These issues may include currencies exchange rates, global monetary systems, foreign direct investments(FDI) and other important issues involved in international financial management.

On another side, it avails perceiving & maintaining balance of all international organizations fundamentals though no mutual change between them, International finance is considered one of the most vital economical instruments of international trade growth & staving it off from continuous economic fluctuations.

in particular, when concept of lending & borrowing has extended between countries as it may formulate modern secure ways to funding trade which facilitate goods & services circulation among them.

“Banking transfers” is perceived as one of the funding channels that is adopted by states to invest among themselves. It depends on prepayments made by countries with a commitment to pay the balance within the predetermined time interval by the “documentary collection” which the exporter’s bank provides to guarantee the full payment of all financial receivables of the foreign countries.

International finance importance

 

As the international finance plays an effective role in the international trade & exchanging of goods & services, that importance relates to some reasons as follows: –

• International finance is a key indicator to find the exchange rates & identifying the relative values of currencies besides comparing inflation rates for reconciling & eliminating debt securities.
• International finance maintains monetary system equilibrium that ensures peace between nations; otherwise, they will work for their self-interests regardless of others’.
• International finance is constantly reviewing global markets; as the economic factors aid in identifying whether the investors’ money is secured with the foreign debt securities.
• International finance organizations as international monetary fund IMF & world bank are the intermediaries that manage the international financial conflicts.

The parties involved in international trade are:

• Commercial funding corporations
• Insurance companies

• Banks

• Export credit agencies and service providers.

Exporter & importer cycle

The international finance is the third party in the completion of transactions between importer & exporter as it to an extent eliminates the payment risk for both, It also secures the international trade from the risk of currency fluctuations & political instability, It may identify the International currency exchange rates under the broadened lending & borrowing concepts among countries.

Instruments of international finance in international trade consists of: –

1. Banks Issue credit lines to aid both, importer & exporter.
2. Banks use “insurance” for freight & delivery of goods, & so guarantee the exporter’s accounts receivables.
3. The importer bank offers a letter of credit to the exporter bank stating payment when certain documents are provided, as it ensures for the exporter that the importer will commit to payment. In case of acceptance on the conditions listed in the letter; both parties should commit with it to complete the selling process between them.

International finance fences international trade from risks

•  International finance is a cornerstone on which importers & exporters depend to ensure the payment of their accounts receivables & evading risks that may arise from both.
• Consequently, the letter of credit is considered a tool that secures both parties as it guarantees the importer payment to the exporter once the issuing bank receives the proof that the later shipped the goods – as “bill of lading” and the terms of the agreement have been met.
• In the same vein, the buyer’s bank assumes the responsibility of paying the seller. The buyer’s bank would have to ensure the buyer was financially viable enough to honor the transaction. Trade finance helps both importers and exporters build trust in dealing with each other and thus facilitating trade.
• In the business sector, Trade finance allows companies to increase their revenue through trade by the help from private or governmental trade finance agencies; which facilitates getting new business with the aid of the creative financial solutions that trade finance provides.
• And at the other end of the spectrum, the international finance is a supervisor for the companies that lags their payment or may follow up a major customer or supplier that losing him may have some extended consequences. Also, it may avoid companies’ financial risks by providing credit facilities & accounts receivables.

 

 

 

 

Trends of International trade serve as a linkage that overcomes those established borders by states among them. International trade accomplished its pursuit of making the world act as a small village to deliberate its industries, thereby countries trade its products & services between its peers in order to emphasize the competitive advantage principle which is the core foundation of international trade.

The expansion of the marketplace between states proliferates the traded products & its diversification as:-

• the machinery & technology, nuclear reactor & practical tools & bibliography accounted for fourth of traded goods by 32.5%.
• Cars & trucks contribute by 8.9%.
• Mineral fuels such as oil, gas, coal, and refined products accounted for 14.4% of the value of globally traded ratios.
• The plastic got 3.4%

The proportion of other industries received the following:-

• Iron & steel 2.7%
• Organic chemicals 2.6%.
• Pharmaceutical products 2.6%.
• Diamonds, pearls, and gems 1.9%.

 

The following figure shows the most important commodities dominating the international trade market.

From 2008 to today, world exports of merchandise trade increased by 20%, and exports of manufactured goods grew at an annual rate of 2.3%, Of course, the FIFA 2018 World Cup in Russia played a role in the growth of commercial services by 12%, and on the other hand, There have been leading countries in the past 10 years, and they have also ranked first among the best traders of goods and services: “China, India, Mexico, and Ireland.”

By the beginning of 2020, growth rates are expected to rise to 6% in low-income countries, as they have in the last few years, many low-income countries have risen to join the list of middle-income countries, and have also jumped in their income levels.

Trends in international trade toward progress :- 

Competition between States was created, motivated by leadership and control in the area of international trade, which has led to the selection of several fundamental trends, Which is working to grow trade significantly and rapidly, and maybe:-

1. Technology transfer:

They are the basis for the diffusion of commercial technology among countries of the world, including reporting relevant knowledge to the recipient to the recipient; It also includes the transfer of non-commercial technology, such as those found in international cooperation agreements between developed and developing countries. These agreements are directly related to agricultural development or infrastructure, as well as cooperation in education, employment, and transport.

2. Growth in emerging markets:

The growth of emerging markets has affected both (India, China, Brazil and other parts of Asia and South America in particular) On international trade in all ways, as emerging markets increased with the current volume and value of international trade, leading to the emergence of a whole new generation of innovative companies.

3. Cooperation between States:

Countries cooperate with each other in thousands of ways through international organizations, treaties and consultations, and this cooperation may encourage the globalization of business by removing restrictions on them, so States may cooperate to obtain:

• Get mutual benefits 
• Attack problems that cannot be solved alone, and work to solve them together.
• Address concerns that lie outside the territory of any person.

It allows States to acquire mutual benefits, for example, groups of countries have agreed to protect the property of foreign-owned enterprises and to reduce restrictions on the entry of foreign goods and services into their territory. In addition, countries cooperate on problems that they cannot solve on their own, such as coordinating national economic programs (including interest rates) so as to minimize global economic conditions.

Groups of States have also allowed foreign airlines to land and fly over their territory, and on the other hand, the two countries have established agreements on how to exploit commercial areas outside any of their territories. It includes outer space (such as the transmission of television programs), and landlocked areas of oceans and seas (such as mineral exploitation).

4. Freedom of movement across borders:

Each country restricts the movement of goods and services across its borders, thus impeding the movement of international trade. This allows companies to benefit better from international opportunities and makes producers more efficient by competing against foreign firms, thereby providing consumers with a wider range of goods and services at a lower price.

 

Definition of International Trade … The Engine of the Global Economy Between The Past and The Present

 

 The definition of international trade may be that it is a set of rules that are used to regulate exchange routes of products internationally, by relying on trade regions and regions, as well as being known as a way to exchange food, capital goods  such as ‘equipment, raw materials’, and services such as tourism and inter-state travel services,It contributes to the strengthening of an international economy that affects international supply, demand and prices, and international trade is the main driver of the global economy, which is worth about $80 trillion annually

In that article we demonstrates the definition of international trade to ease  your forward readings …

How Does International Trade Work

The work of international trade is carried out using a series of documents, which support the following aspects:

• Commercial Conglomerate And Bilateral Commercial Agreements 

In order to move goods between countries, trade agreements must be understood,So Commercial Conglomerate And Bilateral Commercial Agreements are clearly used in the EU , which shows that your goods are flowing easily and properly without any restrictions on them, If goods are of dual military use, they are passed through ‘export controls’ 

• Structured Codes

Used in identifying and coordinating goods by placing codes that distinguish goods in terms of resources used And to develop the most prominent information related to the manufacture of goods, such as the country of final origin, It is also subject to local taxes and proof of delivery, as well as determining the status of your shipment, especially if you need a special treatment.

• Agreements And Laws In International Trade

 Undoubtedly that world trade is subject to laws that determine its courses action starting with agreements on managements of goods  transportation to damage law, and these law may affect insurance and intellectual property in all countries of the world 

• Currency 

The Difference in the bank price of currencies affects the profit rate in the importing and exporting world. Therefore, international trade understands how to convert your foreign currency in time to achieve the desired profits. 

History Of International Trade

International trade history back to the barter system that was replaced by commercial goods in the 16th and 17th centuries, International trade emerged in its 18th-century form coinciding with the industrial revolution, which led to a dramatic increase in global production 

 It also witnessed the transition towards professionalism at the beginning of the 19th century. In 1913, the Movement of States helped achieve economic freedom, eliminate quantitative restrictions, reduce customs duties in all countries to develop them, as well as allow all currencies to be converted into gold, an international business at the time.

Until World War came to change the shape of international trade and made countries use their controls, After the end of the war, trade was restored to its natural form after nearly 5 years, In 1920, the economic recession changed the balance of international trade between countries, leading to the World Economic Conference in May 1927 organized by the League of Nations, which was attended by the most important industrialized nations and the multilateral trade agreement was established.

Despite all this, it stagnated again in the 1930s, disrupting the economy in all countries and rising import duties. Countries are gradually getting to know the fact that the old system needs to be changed, as well as constantly reviewing their international trade policies.

In modern times, international trade has become much better thanks to economists who have developed theories based on the natural resources available with different countries. This gives them a comparative advantage in both  Economies of large-scale production Technology in e-commerce, product age and cycle of changes consistent with technological progress.