International Trade - Lecture Summary

Introduction

• Chanakya 2.0 Series
• Conducted by CA Jasmeet Singh
• Subject: Business Economics Chapter 9 - International Trade

Chapter Structure

• Five Units:
  1. Introduction to International Trade
  2. Trade Negotiations
  3. Trade Policies
  4. Exchange Rate
  5. Movement of Capital

Unit 1: International Trade

Definition

• Exchange of goods, services, and resources between countries
• Trade from one country to another

Elements

• Includes textiles, services, and other resources
• Exchange of labor

Process

• Transactions among residents of different countries
• Multi-use of currency

Benefits

• Increase in economic efficiency
• Reduction of domestic monopoly
• Access to new markets and materials
• Increase in technology and innovation

Disadvantages

• Not equally beneficial for all countries
• Exploitation of small countries by powerful companies
• Environmental damage
• Spread of trade cycles
• Loss of political autonomy

Theories of International Trade

Mercantile Theory

• Increasing exports and reducing imports

Absolute Advantage

• Nationwide superiority in a specific textile

Comparative Advantage

• A country's superiority in a specific textile

Heckscher-Ohlin Theory

• Using labor and capital for production

New Trade Theory

• Imperfect competition and increasing returns in trade

Unit 2: Trade Policy

Tariffs

• Taxes on imports
• Various types of tariffs: Specific, Ad Valorem, Mixed, Compound, Technical

Non-Tariff Measures

• Quota, Price Control, Non-automatic Licensing

Unit 3: Trade Negotiations

Regional Trade Agreements

• Unilateral, Bilateral, Regional Preferential

GATT and WTO

• Replacement of GATT by WTO
• Management of trade rules

Unit 4: Exchange Rate

Exchange Rate Determination

• Market-based, Fixed, and Managed rates

Real and Nominal Exchange Rate

• Based on the exchange of goods
• Effect of inflation

Unit 5: Movement of Capital

Foreign Direct Investment (FDI)

• Long-term business investment
• Acquisition of control and management

Foreign Portfolio Investment (FPI)

• Short-term investment
• Investment in financial markets

Conclusion

• Benefits and drawbacks of FDI and FPI
• Importance and challenges of FDI in India

Important Concept:

• Difference between Fixed Float and Managed Float
• Process of Appreciation and Depreciation
• Guiding Principles of the WTO