Emerging Markets “Large or small, most nations have something of

value for international trade in terms of natural”

- Are markets of countries that are in the
resources, labour, technology, location or
process of transformation
culture
- Are markets of countries that are in
transitional phase between developing and
developed status Characteristics of Emerging Markets

- An economy that experiences considerable 1. Market Volatility

economic growth and possesses some, but not
- Stems from political instability, external price
all characteristics of a developed economy
movements, and/or supply-demand shocks due
to natural calamities.

Emerging market are NOT only small or poor - It exposes investors t the risk of fluctuations in
exchange rates, as well as market performance

examples:
2. Growth and investment potential
- China - considered an emerging market
- Merging markets are often attractive to foreign
- it has vast resources and a population
investors due to the high return of investment
about 1.3 billion
they can provide
- Bangladesh - despite poor governance and
weak public institutions, the country has
achieved an average annual growth rate of 5% 3. High Rates of Economic Growth
since 1990
- Government of emerging markets tend to
- In December 2005, Goldman Sachs implement policies that favor industrialization
named Bangladesh one of the "Next Eleven"- and rapid growth.
group of developed and developing countries
- Such policies lead to lower unemployment,
that have very optimistic outlook for investors
higher disposable income per capita, higher
investments, and better infrastructure.

Emerging Markets are in process to make their

economy
4. Income per Capita (per person)
- Strong
- Emerging markets usually achieve a low-
- More open to international investors, and middle income per capita relative to other
countries, due to their dependence on
- More competitive in Global markets
agricultural activities.

- As the economy pursues industrialization and

manufacturing activities, income per capita
increases with GDP
Government Trade Policies International Trade

- Trade agreements, that are negotiated to - Is an exchange involving a good service

create trade and investment regulations and to conducted between at least two different
open markets countries

- A measure that influences how much a nation - The exchange can be imports or exports
imports and exports in terms of goods and
services
Why does international trade occur?
- Is a system of laws and regulations that
governs how one nation behaves toward - Occur because one country enjoys a
another in the context of international trade comparative advantage in the production of a
and business, whether through protectionism or certain good service specifically if the
free trade opportunity cost of producing that good or
service is lower for that country than any other
country
Spectrum of Trade Policies ( in an economy)

1. Free Trade

- is when there are no government or very little

Sources of Comparative advantage
restrictions in a country's trading practices
1. International Difference in climate
2. Protectionism
- International differences in climate play a
- Is when governments set trade restrictions to
significant role in international trade.
help domestic industries

- Limit reliance on other countries

2. Difference in factor endowments

- Imply that some countries are more resource-

Why government Trade Policies Important?
rich than others in land, capital, and human
1. Political Reasons capital

- Protecting jobs and industries, national - A country enjoys a comparative advantage in

security, retaliation against foreign policies, and production of the resources are abundantly
protecting their consumers. available within the country.

2. Economic reasons 3. Difference in technology

- Protecting new industries from competition - Most commonly observed in superior

and building strategic trade policies. production processes seen in different countries
International Trade Policy Rationale and goals of trade and investment
policies
- Refers to agreement made in the multilateral
trade system under the sponsorship of the - Government Policies are designed to regulate,
general agreement on tariffs and trade (GATT) direct and protect national activities. The
and World Trade Organization (WTO). exercise of these policies is the result of national
sovereignty, which provides a government with
- Is the buying and selling goods between
the right to shape the environment of the
various countries.
country and its citizens
- Vital to any country's prosperity, and more
- The domestic policy actions of most
specifically the economic development
governments aims to increase the standard of
- Can be defined as the government's rules and living of citizens and to improve the quality of
regulations guiding and controlling how trade is life, and achieve full employment
done with foreign countries
- These policies affect international trade and
investment indirectly

- In more direct ways, a country may also pursue

technology transfer fro abroad or the exclusion
The international Organization of foreign industries to the benefit of domestic
1. ITO - Founded in 1958 nfant firms.

- Regulate and protect national policies - Government officials can also develop
regulations on imports to protect citizens
2. GATT - Started in 1947
- Nations institute foreign policy measures
- Non discrimination, transparent procedure. designed with domestic concerns in mind but
(balances opportunity to the developed and explicitly aimed to exercise influence abroad.
developing countries)
- A major foreign policy goal is national security
3. WTO - Introduced in 1955

- Keeps Global Trade running smoothly

Restrictions of imports

- Many countries including the United States

The government role in International Trade have passed antidumping laws which help
- Include regulation, allocation, distribution, and domestic industries by restricting foreign
stabilization products being sold below the cost of
production, or at prices lower than those in the
- Involved to a certain extent with the major home market
decisions not just being made by one body or
group - Imports are also restricted by nontariff
barriers, such as buy-domestic campaigns. It is
difficult to remove these barriers.

- Imports can also be reduced by tightening

market access and entry of foreign products
through involved procedures and inspections
Effects of import restrictions - Export financing and mixed aid credits to
exporters.
- Import control may mean that the most
efficient sources of supply are not available,
resulting in second-best products or higher
costs for restricted supplies

- Import control may result in the downstream

change in the composition of imports

- Due to inefficiency, import controls may cause

a lag in technological advancements

Restrictions of Exports

- Nations control their exports for reasons of

short supply, national security and foreign policy
purposes, or the desire to retain capital.

- National Security controls are placed on

weapons and high technology exports

- Although restriction of exports is a valuable

international relations tool, it may give a
country's firms the reputation of being
unreliable suppliers and may divert orders to
firms of other nations

Export Promotion

- Export promotion is designed to help firms

enter and maintain their position in
international markets and to match or
counteract similar efforts by other nations.

- Various approaches toward export promotion

include:

- Knowledge transfer

- Direct or indirect subsidization of export

activities

- Reducing governmental red tape for

exporters