Technological University of the Philippines

Taguig Campus
A.Y. 2017 – 2018

PRESENTED BY GROUP 3:
FERRER, JOMARI
FRANCISCO, BEA MARIE
ISIDRO, MAYBELYN
LIBRES, HUELA
LORICA, SHIELA MAY L.
MANTALA, JERIXON
MANZO, ROSE ANN
 International Economy
International Trade
Reasons for Trade
Trade Policies
Law of Absolute Advantage
Law of Comparative Advantage
International Economic Organizations
 International economy is a field concerned with
economic interactions of countries and effect of
international issues on the world economic activity.

 International economics studies how independent

economies of the world interact with one another
in the process of allocating scarce resources to
satisfy human needs and wants.

 In short, international economics describes

production, trade, and investment between
countries.
 International Economics, therefore,
attempts to:
1. Show benefits of international economic
policy to the nation within itself and with
others.
2. Identify the areas of conflict of interest
among nations.
3. Point out ways for their mutual resolution.
 FOREIGN EXCHANGE
 Foreign exchange is a foreign currency needed to
carry out international transactions.

EXCHANGE RATE
 It is the price of one currency measured in terms of
another currency.

• FLEXIBLE EXCHANGE RATE • FIXED EXCHANGE RATE

Exchange rates are Government officials
determined by forces of usually have little direct
demand & supply role in foreign exchange.
GLOBALIZATION
 Globalization can be defined as an integration of
economics all over the world.

 It involves an exchange of technological,

economic, and political factors across nations due
to advancement in communication,
transportation, and infrastructure systems.

 The consequences of globalization can be

negative or positive.
 GLOBALIZATION
ADVANTAGES
 Increase in employment opportunities
 Standardization of international economic laws and
policies
 Reduction in trade barriers, such as tariffs and quotas
 Lower prices for the consumers
 There is now a worldwide market for companies and
consumers who have access to products of different
countries.
 There is more influx of information between two countries
MULTI-NATIONAL COMPANIES
Organizations that own and control
overseas companies or service
facilities in one or more countries
other than the home country.
GLOBALIZATION
DISADVANTAGES
 The general complaint about globalization is
that it has made the rich richer while making
the non-rich poorer.
 Globalization is supposed to be about free
trade where all barriers are eliminated but
there are still many barriers
 The biggest problem for developed countries is
that jobs are lost and transferred to lower cost
countries.
 Thereare two broad sub-fields
within international economics:

1. International Finance
2. International Trade
 INTERNATIONAL FINANCE
 International
finance applies macroeconomic models to
help understand the international economy.
Its focus is on the interrelationships between
aggregate economic variables such as GDP,
unemployment rates, inflation rates, trade
balances, exchange rates, interest rates,
etc.
 The exchange of goods and services
between nations.
 International trade enables the nation
to specialize in those goods it can
produce cheaply and efficiently.
 Trade also enables a country to
consume more than it would be able
to produce if it depended only on its
own resources.
Historicand Cultural Ties
Difference in Geography and
Customs
Difference in Technology and
Material Culture
Presence of Foreign Investors
Government Policies
 IMPORTS are goods and services
that we buy from abroad.
 EXPORTS are goods and services
that we sell abroad.
 The purpose of exports is to earn
dollars that we used for imports.
  Exports and Imports are divided into two
groups:
1. Visible items – are commodities actually
exported and imported. They cannot be
moved without being seen.
2. Invisible Items – consists of services which
are not readily seen.
• These include expenditures of tourists and
remittances if immigrants, interests and
dividends and maturities, freight charges,
and government transactions.
 When country exports more than its
imports, there is a positive balance of
trade known as trade surplus (credit).
On the other hand, when a country
imports more than its exports, it is
known as trade deficits (debit)
 Overdependence on few products
 Overdependence on few markets

1. Travel of Filipinos abroad

2. Government spending abroad
3. Government Investments
1. Encourage tourism and sell our
services abroad.
2. Allow foreign investments here in the
country.
3. Allow foreign governments to spend
substantial amounts in our country.
4. Resort to foreign loans.
 TARIFFS
 A tariff is a tax on imports.
 It can be either specific or ad valorem
 World Price – is the price determined by
the world supply & world demand for a
product.
 IMPORT QUOTAS
 It is a legal limit on the quantity of a
particular commodity that can be
imported.
 Quotas often target exports from
certain countries.
 IMPORT QUOTAS
Example:
A quota may limit automobile
imports from Japan or she imports from
Brazil.
----To have an impact on the market, ot to be
effective, a quota must restrict imports to less
than the amount imported with free trade.
Export subsidies
Acountry may provide export
subsidies to encourage firms to
export, or low interest loans to
foreign buyers to promote large
capital goods.
Domestic Content Requirements
 Some countries impose domestic
content requirements specifying that a
certain percentage of a final good’s
value must be produced domestically.

EXAMPLE: Purity laws in Germany bar

importing many non-German beers
 Absolute advantage refers to a
country’s ability to produce a certain
good more efficiently than another
country.

 Countries that are blessed with an

abundance of farmland, fresh water
and oil reserves have an absolute
advantage in agriculture, gasoline
and petrochemicals.
Example:
Let’s say you're a wonderful fry cook
and a talented heart surgeon. Your
neighbour is a pretty good fry cook
and (since he is near-sighted and has
a severe hand tremor) an absolute
butcher as a surgeon.
Why it matters today?
Choosing a career is one of the most
important choices you'll make in your entire
life. If don't want to make the wrong choice,
you'd better think about comparative
advantage—both your own as an individual
and your country's in the international
market.
 According to the Law of Comparative
Advantage, each country should
specialize in producing the good with
the lower opportunity cost.

 Comparative advantage is what you do

best while also giving up the least.
Example:
If you’re a great plumber and a
great babysitter, your comparative
advantage is plumbing. That's
because you’ll make more money as
a plumber. You can hire an hour of
babysitting services for less than you
would make doing an hour of
plumbing.
 Totalworld production must
equal total world consumption.
 Remember that Comparative
Advantage, not Absolute
Advantage, is the source of
gains from trade.
 WTO provides the legal and institutional
foundation for the multi-lateral system.
 It offers the platform on which trade relations
among member countries can evolve through
collective debate.
 It has a special responsibility of providing
technical support to the member countries that
are least developed.
Association of Southeast Asian
Nations (ASEAN)
 To accelerate the economic growth, social
progress and cultural development in the region.
 To maintain close and beneficial cooperation
with existing international and regional
organizations.
 To collaborate more effectively for greater
utilization of their agriculture and industries,
expansion of their trade, improvement of their
transportation and communications facilities and
raising of the living standards of their peoples.
Association of Southeast Asian
Nations (ASEAN) Members
Myanmar Laos
Thailand Malaysia
Cambodia Vietnam
Singapore Philippines
Indonesia Brunei Darussalam
 Organization of the Petroleum
Exporting Countries (OPEC)
OPEC is an oil cartel whose mission is
to coordinate the policies of the oil-
producing countries.
The goal is to secure a steady
income to the member states and to
secure supply of oil to the consumers.
 International Monetary
Fund (IMF)

International Monetary Fund/IMF

IMF is an international organization that
establishes balance of payments.
 The World Bank is an international organization
that helps emerging market
countries reduce poverty.
 The World Bank provides low-interest
loans, interest-free credit and grants. It focuses
on improving education, health and
infrastructure.
 “Bridge the economic divide between poor and
rich countries."
Thank You!