International business

The international business is the whole of the necessary marketing activities to produce, dispatch and sell goods and services on the international scene, starting from the production until consumption; term which includes the trade, the import and the export of goods and the services, the grant of licenses in other countries and the overseas investments. In fact, this last makes it possible a country to consume more than it does not produce, in particular by its own resources, or to widen its outlets in order to run out its production.

This type of trade exists since centuries (cf Silk route), but he makes recent great strides because of Mondialisation, of which he is a major component. The Théorie of the international business is the branch of the economy which seeks to provide a framework of explanation to the international business.

In addition there exists a right operations of international business , formalized in particular by the Incoterms of the international Chamber of commerce.

Evolution of the international business

These two last decades, the international commercial exchanges multiplied, more particularly for the developed Pays, and for the Nouveaux industrialized countries, supporting the growth of the latter. The the least advanced Pays did not know such a rise of the international commercial exchanges. The volume of the world commerce east 14 times higher than what it was in 1950.

Theory of the international business

Current characteristics of the international business

Classification

The regional agreements are various types, reflecting each distinct economic level of integration. One thus distinguishes six great types of regional economic organizations:

the preferential zone of exchange which raises the obstacles to the interregional trade for certain products. It is for example the case of ASEAN (1967) or of the relationship between the countries of the ACP STATE (Africa, the Caribbean and the Pacific) and the EEC since the years 1960 (for banana for example, source of conflict within OMC).
the free exchange zone which is marked by a removal of the tariff obstacles. It is for example the case of ALENA since 1994
the customs union which combines free movement of the goods and the adoption of a common external tariff, i.e. customs taxes identical to each Member State with respect to third countries.
the Common Market marked by freedom of movement of the goods, services and factors of production (capital and labor), removed from the tariff and nontariff obstacles (standards, quotas…)
the economic union which aims to the harmonization of the economic policies and the adoption of a single currency. It is the stage aimed by the Traité of Maastricht (1993).

This classification is that proposed in 1961 by Bela Balassa in The theory off economic integration . One can add the political union to it . The Germany of the 19th century reached this stage in 1870, that is to say 46 years after the creation of a customs union between various German States, the Zollverein.

Indicators

Exports of goods and services expressed as a percentage of GDP;
Annual variation of the worldwide production compared to the annual variation of the quantum of exports;
Total volume of the imports and exports (international exchanges) world.
Rate of opening of the economies (exports + imports divided by the GDP)

Impacts

Since the years 1990 the intra-regional trade progressed have center of ALENA, passing from 42 to 54% total exports of the Member States, within the Mercosur this figure passed from 9 to 20% over the same period, while to Europe the share of the intra-Community trade hardly progressed in spite of an increasing integration, remaining however with the elevated level of 65%.

Impacts difficult to encircle

Before the coming into effect of ALENA in 1994, Paul Krugman ( universalization is not guilty ) wondered about the consequences of this agreement whereas certain American politicians envisaged the disappearance of hundreds of million employment. According to him, the range of such agreements is limited. Indeed the international customs duties are today about 3 or 4%, which means weak impact of their disappearance. In the precise case of ALENA, the integration of the Mexico in a zone of Free trade with the the United States and the Canada will have especially like effect to give again confidence with the financial investors in this country in prey with economic difficulties: a consequence of the irrational behaviors of the financial actors having only little to see with the international business.

In 1950, Jacob To fortify ( The Custom Union Resulting ) tried to envisage the consequences of the constitution of economic unions regional. They have according to him a double impact on the international business:

They are initially destroying certain commercial flows, considering the partners of the same economic union tend to reduce their imports coming from third countries. It was for example the case of the Great Britain with respect to the the Commonwealth following its entry in the European Union. The community preference (one of the clauses of the CAP for example) supplanting the “imperial preference consequently”. More recently the entry of the countries of Eastern Europe in the European Union risk to harm the textile imports coming from the the Maghreb.
They are of another with dimensions creative of flow. They allow a collaboration, and thus an increased specialization of the various Member States which increases the international business. They allow a better agreement and an increased knowledge of the business partners who brings confidence and facilitated in the exchanges (it is for example easier to organize an exchange with the Germans than with the Chinese). Finally the development of certain protected sectors can finally appear advantageous for certain foreign economies. The common agricultural policy, although having slowed down the American agricultural imports, however increased the orders with the latter of farm equipment.

Finally it is difficult to conclude as for the advantageous side or not from the constitution from regional economic spaces for the growth from volumes from international exchanges.

Dangers with respect to the multilateralism

It is finally to note that the constitution of regional economic spaces reduced the number of negotiators at the meetings of OMC (the European Union for example is represented as a member of the organization), which can facilitate the agreements. By allowing the development of the economies within a protected framework, regionalism can be a stage preliminary to the multilateralism, making it possible certain countries to take insurance. Thus Mike Moore, former president of OMC, declared that regionalism could be used to supplement and promote the multilateralism, but which it was not to in no case to replace it. But the risk is great according to him to see the economies being closed again on restricted zones of trade privileged, encouraging in return the other economies to make in the same way, negative spiral which could lead to a contraction of the world exchanges and world GDP. The other danger is a focusing of the regional economic units on their competitiveness vis-a-vis the other great economies. The term of “economic War” or the systematic research of “competitiveness” is the symptoms of a return of the dogmas mercantilists, of what Paul Krugman calls the “pop theory of the international business”. This mentality which associates the international business with a competition where there would be gaining and of the losers appears regularly in the political discourses related to the constitution of zone of economic cooperation: “it is necessary to make Europe to make the weight! ” some say. On the long run, the diffusion of this kind of ideas could harm free trade and thus the international business.

Trade, a factor of peace?

August 1st

See too

Internal bonds

External bonds

international Economy
Course of international business on line by Steven Mr. Suranovic

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