2. OVERVIEW
Important terms
Reason of International trade
Export Documents
Process of International Trade
Protectionism
How Protectionism works
Free Trade Areas & Associations
Position of Canada in World’s Trade
3. IMPORTANT TERMS
Economy of Scale: Reduction in cost per unit resulting from
increased production, operational efficiencies
Factors of Production- Labour & Capital
Balance of Trade: Trade Surplus- Exports>Imports
Trade Deficit- Exports<Imports
Balance of Payment: Visible Trade + Factors of Production
Demurrage & Gurantee of payment- a charge
required as compensation for the delay of a ship or freight car or
other cargo beyond its scheduled time of departure
Quotas, Tariffs, Bans: Restrictions on imports as a measure
of protection for specific goods, or industries, or domestic producers,
or due to government policies
5. DATA EXCHANGE IN INTERNATIONAL TRADE
Arrival Notice
Instruction
Invoice, PO
Importer’s
Bank
Ocean Carrier
Customs House
Broker
LineofCredit
PerformaInvoice
Shipping
& funding detail
Vessel Booking Request
Cargo
Status
Shipping & Funding Detail
Exporter’s
Bank
Importer Exporter
Vessel Booking Confirmation
Bill of Lading
Rated Bill of Lading
Dock Receipt
Freight Forwarder
Purchase Order
LCConfirmation
Dockreceipt
Delivery Order
Vessel Manifest
Dock receipt
Release/Approval
Demurrage
guarantee&
payment
Inland
Carrier
Manifest
Pick-up &
Delivery
Order
Importer Notice
Converted Vessel
Manifest
Customs (Export)
Port
Customs
( Import )
OriginalB/L,InvoicePO
Inland
Carrier
Marine
Insurance
Company
Fund Transfer
Confirmed Line of Credit
Release/Hold
Notice
Purchase Exportation Importation
Import
Terminal
Operator
Proforma
Invoice
Export Declaration
Export Declaration
Bill of lading, Documentation
Import
Docs
Export
Terminal
Operator
6. MAIN EXPORT DOCUMENTS
Commercial Invoice: bill for the goods from the seller to the buyer
Bill of Lading (B/L): Document signed by a transportation company (carrier) to
show receipt of goods for transportation from and to the points indicated.
Insurance Certificate
Certificate of Origin
Quality and Weight Certificates
Export Licence
Letter of Credit - A letter on the part of a bank and at the request of one of the
bank’s customers, to pay a named beneficiary a specified amount of money (or to
deliver an item of value) if the beneficiary presents documents in accordance with
the terms and conditions specified in the letter of credit
Vessel's manifest - International carrier is obligated to make declarations of the
ship's crew and contents at both the port of departure and arrival. The vessel
manifest lists various details about each shipment by B/L number
7. LIST OF DOCUMENTS
Enquiry
Order
Payment order
Forwarding instructions
Forwarder's invoice
Goods receipt
Air waybill
Road consignment note
Rail consignment note
Cargo manifest
Bill of lading
Freight invoice
Export licence
Exchange control doc.
Certificate of origin
Dangerous goods
declaration
Import licence
Customs delivery note
Documentary credit
8. WHY INTERNATIONAL TRADE
Food Cars
USA 2 8
Japan 3 6
Principle of Absolute Cost Advantage
According to Adam Smith, both countries can gain from
international trade through specialization (USA
producing more food and Japan producing more cars):
Suppose the USA produces 1 car less, this frees up 8
labourers
Labour Per Unit
These 8 labourers can now produce 8/2 = 4 units of food
To keep the production level of cars constant, Japan
should make 1 car more. This requires 6 labourers
These 6 labourers could have made 6/3 = 2 units of
food
Conclusion: USA Japan change world prod.
production of cars: -1 +1 0
production of food: +4 -2 +2
9. PROTECTIONISM
Restriction of imports into a country by government measures
Reasons for Protectionism
Protects businesses from extra competition
Helps new businesses to develop before they face competition
Helps protect jobs
Prevents imports of harmful goods
Methods
Quotas: Limits on the quantity of a product that can be imported into a
country e.g. 100,000 cars
Regulations: Laws and safety guidelines (embargoes are considered
strong diplomatic measures to prohibit commerce and trade with a
particular country)
Teriffs or Import Duties: Taxes on imported goods. They raise the price to
customers and make them less attractive
10. HOW PROTECTIONISM WORKS
PY
QYO
S
D
P w
P t
F
A
G
a b c d
Pw-Price in international market
Pt-Price of imports after tax
①price increase
Q1 Q2Q3 Q4
Import before tax
②imports decrease after tax
e
B
C
H
③loss of consumer is a+b+c+d
④producer surplus e increased by a
⑤government tariff income is c
Benefit：a+b+d（producer）
+c（government）
Supply
Demand
P
r
i
c
e
Quantity
Sw
11. FREE TRADE AREAS & ASSOCIATIONS
Trade without any protectionism / trade barriers
between countries
Examples of free trade areas/organizations
North American Free Trade Agreement (NAFTA)
Free Trade Area of Americas (FTAA)
European Free Trade Association (EFTA)
European Union (EU)
Association of Southeast Asian Nations (Asean)
World Trade Organization (WTO/GATT before 1995)
Asia-Pacific Economic Corporation (APEC)
MERCOSER (Mercado Comun del Sur-Southern Common
Market)
13. CANADA IN INTERNATIONAL TRADE
0
50
100
150
200
250
US EU JAPAN UK
Exports in
billion
Imports in
billion
0
200
400
600
800
1000
1200
1400
China
Germany
US
Japan
Neitherlands
France
Italy
Belgium
RepofKorea
UK
HongKong
Canada
* All Data is in Billion $ (US)
Major Partners of Canada Top 13 Trading Countries
14. POSITION OF CANADA IN WORLD’S TRADE
0
200
400
600
800
1000
1200
1400
Billion $ (US)
15. WE HAVE DISCUSSED
Important terms in International Trade
Benefit of International trade
Documents used in International Trade
Process of International Trade
Protectionism & how it works
International Free Trade areas & Associations
Canada’s position in International Trade
16. THANK YOU !
Harprit(Harry) Pal S Marahrh
Program of Accounting and Finance Professionals
Costi, Brampton, ON, Canada
Tel.: (647)867-1325, e-mail: harpritpal@live.com
