WORLD TRADING SYSTEM:
WHAT DO WE KNOW AND
DON’T KNOW?
TAKING STOCK OF KNOWLEDGE
Meaning of Trade
COUNTER TRADE
 Denotes a whole range of barter-like agreements
 Primarily used when a firm exports to a country
whose currency is not freely convertible
 Developing countries
 Importing country may lack the foreign exchange
reserves required
 8 to 10% of world trade in form of countertrade
 Example: Venezuelan government’s contract with
Caterpillar.
15-4
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Goods vs. Services
GOODS AND SERVICES
 Goods are things you can buy that you can touch. Can you buy
apples? Can you touch apples? Then the apples are goods.
Can you touch and buy jump ropes, swing sets, bats and
balls, caps, pans, or pencils? These items are all called goods.
GOODS AND SERVICES
 From time to time we also buy things that cannot be touched.
For example, we buy haircuts when we go to the barber shop
or the salon. We buy repairs and cleaning for our teeth when
we go to the dentist. In both cases, we are buying a SERVICE.
It is something done for us.
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Traded vs. Non-Traded
Products / Services
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Local and Global Trade
(economic vs. political vs. cultural
borders)
FLOWS ACROSS ECONOMIC BORDERS
Barriers
Country
A
Country
B
Country
C
Barriers
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Trade with System vs. Trade without System
THE EFFECT OF TRADE WITHOUT SYSTEM
January
December
1929
$3.0bn
February
1930
1931
November
March
1932
1933
$0.9bn
October
April
September
May
August
June
July
Trade figures: per month
WORLD TRADING SYSTEM
Focus on
the flows of goods and services across
countries (beyond national economic
border),
rules and regulations governing the flow,
and
impacts of strengthening the flows on
economic, social, and environmental
aspects of developing countries
FLOW OF GOODS AND SERVICES
Value chain
• Who is involved?
• How do they benefit?
Cotton
apparel
• How do they manage
the production?
• What are the
impacts?
• Is there any standard
set?
• Is there any taxes
charged?
• How is it shipped
overseas?
shirt
FLOWS ACROSS ECONOMIC BORDERS
Barriers
Country
A
Country
B
Country
C
Barriers
RULES AND REGULATIONS
Multilateral
Regional
Bilateral
IMPACTS OF LIBERALIZATION TO
DEVELOPING COUNTRIES
Before liberalization
in terms of
economic, social,
and environment
apparel
apparel
Cotton
Cotton
shirt
After liberalization in
terms of economic,
social, and environment
shirt
WORLD TRADING SYSTEM
Barriers, Rules,
Regulations
Impacts of
Liberalization
Value Chain
Country A
Impacts of
Liberalization
Value Chain
Country B
TRADE DEVELOPMENT POLICY
Trade and development Policies
Import Substitution
Export led Growth
Sustainable and Inclusive
FUTURE TREND