1. International Trade
Practices and Policies

2. The Need for Trade
• If we look around us, we will
see many items we use which
are imported from abroad or
which have components
imported abroad.

3. The Barangay economy
– Barangay is a self sufficient
economic unit living on
substinence agriculture. The
need of the barangay is very
limited, production for a
surplus is unnecessary.

4. The Manorial system
• Economic and social system
of medieval Europe under
which peasants'
land tenure and production
were regulated, and local
justice and taxation were
administered.

5. Is there a “World
Economy”?
• With the growing
interdependence of nations,
a “world economy” started to
exist. Through time, this
interdependence has become
more and more pronounced.

6. Trade as a “Primary instrument
of development”
• Trade is called a “primary
instrument of development”
because this has been its
proven role throughout
history. Trade became even
more important for several
reasons.

7. Mercantilism
• Mercantilism is a political-
economic movement originating in
the period 1500-1750 whose
paramount goal of national policy
is to make the nation rich and
powerful the means of which
consisted mainly in the protection
of domestic industry and the
regulation of trade.

8. What is Trade?
• A basic economic concept
that involves multiple parties
participating in the voluntary
negotiation and then the
exchange of one's goods
and services for desired
goods and services that
someone else possesses.

9. What is International
Trade?
• Is the process of
exchanging goods and
services between countries.
It involves the buying and
selling of imports and
exports.

10. Theory of Absolute
Advantage
• A country has an absolute
advantage over another if it
can produce, with a given
amount of capital and labor,
a larger output than its rival
Or in other words to
produce more of a good or
service than competitors,
using the same amount of
resources.

11. Country A can produce 1000 parts per hour
with 200 workers.
Country B can produce 2500 parts per hour
with 200 workers.
Country C can produce 10000 parts per hour
with 200 workers.

12. Theory of Comparative
Cost (advantage)
• Nations should specialize in
the production of goods in
which they have comparative
advantage and import those
products of which it has the
least advantage.

13. Cloth Wine
Britain 100 110
Portugal 90 80
it is efficient for Britain to produce cloth, and
Portugal to produce wine, as, assuming that
these trade at equal price (1 unit of cloth for 1
unit of wine) Britain can then obtain wine at a
cost of 100 labor units by producing cloth and
trading, rather than 110 units by producing the
wine itself, and Portugal can obtain cloth at a
cost of 80 units by trade rather than 90 by
production.

14. Trade practices and
policies
• Philippine exports have been
the main dollar earner of the
country. In recent years, it
has contributed about fifty
percent of total dollar
receipts of the country.

15. Exports
• are goods or merchandise
that we sell to other
countries to earn dollars.
These dollars that we earn
will later be used to buy
goods we need from abroad.

16. Other sources of
dollars
• Dollars from gold
• Dollars from invisibles

17. Imports
• The dollars we earn through
exports and other sources
are used mainly to import
goods and services we need.
Most of our imports are
composed of industrial and
manufactured items.

18.
Balance of payments
• Our balance of payments is
considered favorable if dollar
inflows or receipts exceed
outflows or payments.

19. Balance of trade
• The balance of trade is called
favorable if exports exceed
imports.
• The balance of trade is called
unfavorable if imports exceed
exports.