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1.Changes in the Patterns of International TradeMain Contents• 1. Global Trends 2. Commodity Patterns 3. The Trade Network 4. Why Trade Patterns are ChangingGlobal Trends• 1.physical volume 2. in value termsCommodity Patterns• 1.in terms of value 2.agricultural products & minerals other than fuels 3.manufactures 4. servicesAgricultural Products–dropped sharply from near 50% in 1955 to just over 22% in 1995, and less nowadays–agricultural exports consist of foodstuffs & agricultural raw materials•food products accounting for 75%, mainly cereals, meat, fish, coffee, sugar & fresh fruits •the principal agricultural raw materials in world trade from 13% in 1955 to just under 3% in 1995: oil seeds, pulp, rubber, hides and furs, cotton & woolManufactures•have long been the largest component of world trade, 74% of world trade in 1995 compared with 45% in 1955, more through increases in volume than in prices.– machinery & transportation equipment:account for half the trade– customer goods: account for 20%– the rest: nonferrous metals, iron & steel, chemicals & other semi-manufacturesServices•Service to total output from 53% in 1970 to 67% in 1995.•In 1997, the service sector accounted for over three-quarters of total employment, whereas manufacturing employed only 18% of the labor force. Moreover, over the period from 1980 to 1997, employment in services rose by 1.2% a year, whereas employment in manufacturing fell by 2.7% a year.The Trade Network•large bulk of exports & imports in developed countries (two-thirds of world trade)the industrial areas account for 62% of exports, 66% of imports•developing countries: from 21% in 1963 to 28% in 1995•principal change in geographical pattern since 1973the increased importance of traditional oil-exporting developing countries, account for two thirds of fuel exports •the European Union is the largest trading area, accounting for more than one third of exports, more than half of this trade is intra-community trade.•U.S. exports: is only 10% of GNP•Japan’s exports: about 11% of GNPWhy Trade Patterns are Changing• 1. Engels’ law 2. price trends 3. technological developments 4. expansion of multinational enterprisesEngels’ law•As personal incomes rise, consumer expenditures for food grow at a lesser rate. As incomes rise consumers will spend increasing shares of their income on luxury goods-generally manufactures-and decreasing shares on necessities including food.Technological Developments•Technology has affected world trade in a number of primary products through developing synthetic substitutes for natural raw materials.•Synthetic substitutes can frequently be produced domestically with the result that international trade in certain natural raw materials has expanded only slowly.Expansion of Multinational Enterprises•The substitution by multinational enterprises of foreign production for exports.2.Some Understanding of CountertradeAlthough cash is the preferred method of payment, more and more, countertrades are becoming an important part of trade with Eastern Europe, China, and to a varying degree some Latin American and African nations.Countertrade is exchanging goods or services that are paid for, in whole or part, with other goods or services.According to the LCR (London Countertrade Roundtable), Four main reasons for countertrade:⏹Money - some people cannot pay in the currency you want"to enable trade to take place in markets which are unable to pay for imports. This can occur as a result of a non-convertible currency, a lack of commercial credit or a shortage of foreignexchange"⏹The Political Environment - local jobs and industry"to protect or stimulate the output of domestic industries (including agriculture and mineralextraction) and to help find new export markets"⏹The Political Environment - rules and regulations to protect the host country"as a reflection of political and economic policies which seek to plan and balance overseas trade"⏹Competition – to win in high competition"to gain a competitive advantage over competing suppliers."Types of CountertradeCountertrade includes four distinct types of transactions:1.offset(抵销贸易)2.counter purcha（互购贸易）3.barter trade（易货贸易）4.buy-back（回购贸易）5. switch trading（转手贸易）Offset⏹Offset has traditionally been used by governments around the world when they have made major purchases of militarygoods but is becoming increasingly common in other sectors. There are two distinct types:A. direct offset: "the supplier agrees to incorporate materials, components or sub-assemblies which are procured fromthe importing country. In some large contracts, successful bidders may be required to establish local production.Direct offset has been particularly common for trade in defense systems and aircraft."B. indirect offset: "the purchaser requires suppliers to enter into long term industrial (and other) co-operation andinvestment but these are unconnected to the supply contract and may be either defense related or in the civil sector." ⏹The overall objective of offset either, direct or indirect, in the defense sector generally:❑to promote import substitution❑to minimize the balance of payments deficitCounter Purchase⏹Definition:"A foreign supplier undertakes to purchase goods and services from the purchasing country as a condition of securing the order."For this trade, two contracts are negotiated. The seller agrees to sell a product at a set price to a buyer and receives payment in cash. However, the first contract is contingent on a second contract that is an agreement by the original seller to buy goods from the buyer for the total monetary amount involved in the first contract or for a set percentage of that amount.Counter purchase is probably the most frequently used type of countertrade. Also can be called Reciprocal(互惠贸易)or Parallel Trade(平行贸易).For example, McDonnell Douglas sold 22Dc-9s worth $100 million to Yugoslavia and, in turn, agreed to sell or buy $25 million in Yugoslavian goods. Some of McDonnell Donglas‟s commitment to Yugoslavia was settled by buying Yugoslavian equipment for its own use, but it also sold to others such items as hams, iron castings, rubber bumper guards, and transmission towers. Mc Donnell Douglas held showings for department-store buyers to sell glassware and leather goods to fulfill their counterpurchase agreement. Twice a year, company officials meet to claim credits for sales and clear the books in fulfillment of their counterpurchase agreement.⏹Counterpurchase is generally imposed for two reasons: 1.first, to stimulate exports;2.second, toalleviate the balance of payment deficit resulting from imported goods⏹Advantages:1.This arrangement provides the seller with more flexibility than the compensation deal since there is generally a time period (6 to 12 months or longer) during which the second contract has to be completed;2.Further, the goods to be purchased in the second contract are generally of greater variety than those offered in a compensation deal.Barter Trade⏹Definition: Barter is one of the most common methods of countertrade."In a barter deal, goods are exchanged for goods - the principal export is paid for with goods (or services) from the importing market. "A single contract covers both flows and in the simpler case, no cash is involved.In practice, however, the supply of the principal export is often released only when the sale of the bartered goods has generated sufficient cash.This means if Country A sells mining equipment to Country B in return for cigars - they will probably hold some of the mining equipment back until they have made some good profit from the cigars.❑Requirement for sellers:In a barter transaction, the seller must be able to dispose of the goods at a net price equal to the expected selling price in a regular, for-cash transaction.Further, during the negotiation stage of a barter deal, the seller must have some knowledge of the market and the price for the items offered in trade.❑Information Channel:Because of the almost limitless range of goods and quality grades possible and a lack ofexpertise or information necessary, sellers rely on (barter houses) to provide information and find potential buyers for the goods received.Another possibility is the use of a switch trader, an outsider who will “switch” the tradedgoods to a third country where a market exists.Buy-Back⏹Definition:"Here, suppliers of capital, plant or equipment agree to be paid by the future output of the investment concerned. "For example exporters of equipment for a chemical plant may be repaid with part of the resulting output from the factory.This practice is most common with exports of process plant, mining equipment and similar orders. Buyback arrangements tend to be much longer term and for larger amounts than counterpurchase or barter deals.Also can be called Compensation Trade (补偿贸易).⏹The buy-back agreement usually involves one of two situations:❑the seller agrees to accept as partial payment a certain portion of the output or the seller receives full price initially but agrees to buy back a certain portion of the output.❑in another situation, General Motors Corporation bought autos from Brazil in partial payment for building an automobile manufacturing plant there.⏹Advantage:Some have found that a product buy-back agreement provides them with a supplemental source inan area of the world where there is demand but where there is no available supply.⏹Disadvantage:A major drawback to product buy-back agreements comes when the seller finds that theproducts bought back are in competition with its own similarly produced goods.Switch Trading"Imbalances in long term bilateral trading agreements sometimes lead to the accumulation of uncleared credit surpluses in one or other country, For example, Brazil at one time had a large credit surplus with Poland. These surpluses can sometimes be tapped by third countries so that, for example UK exports to Brazil could be financed from the sale of Polish goods to the UK or elsewhere. Such transactions are known as …switch' or …swap' deals because they typically involve switching the document ation (and destination) of goods on the high seas."3.DistributionRetailing & Wholesaling•The figure shows the channels of distribution. You will notice that goods reach the consumer by one of a number of routes.•Distribution-activities that make products available to customers when and where they need them.• A channel of distribution or marketing channel is a group of individuals and organizations that directs the flow of products from producers and customers.Distribution•Length of distribution–How long of the distribution channel.•Width of distribution–Intensive Distribution–Selective Distribution–Exclusive DistributionLength of distribution•Types of distribution channel–M-C ( 零级渠道)–MRC ( 一级渠道)–MWRC ( 二级渠道)–MWIRC ( 三级渠道)•M-C•Services often use direct channels since the service provider, in most cases, must be there to provide the service.•Simplest method, not necessarily the most effective.•M-R-C•Large retailers, no discrepancy in quantity supplied and demanded. Popular for clothing, automobiles... •Cost of transportation and inventory are high.•M-W-R-C•Smaller retailers, widely distributed products, convenience products.•M-W-I-R-C•Mass distribution, also when there are a number of small producers etc.•May be the most efficient distribution channel for consumer products.•Convenience products.Width of distribution•Intensive Distribution:A form of market coverage in which a product is distributed through all available wholesalers orretailers who stock and sell the product in a given market area.•Exclusive Distribution ：Involves limiting distribution to a single outlet. The product is usually highly priced, and requires the intermediary to place much detail in its sell.•Selective Distribution：A small number of retail outlets are chosen to distribute the product. Selective distribution iscommon with products such as computers, televisions household appliances.Distribution•Retailing•WholesalingRetailing•Retailing is carried on by businesses which sell goods to the final consumer and most retiling is done by shops.•There are many different types of shops and retail outlets.Independent Retailer•These are usually owned by small businesses, often sole traders. Since they are small they can not buy their goods in bulk and therefore cannot obtain them cheaply.•Consequently, prices are often higher in small shops than in large supermarkets.•The small shop is often conveniently placed.•And it is often open for much longer hours. The pattern for most people is to do the bulk of their shopping in supermarkets and obtain smaller or overlooked items in the shop.Facing stiff competition, small shops still survive and they do so for the following reason:•they provide a convenient service the shop is around residential area.•they often have much more convenient hours of opening.•small shops because they know their customers, will often give credit and will put goods “on the slate”. Multiple Shops (GB) or Chain Store (US)•It‟s multiple shop. As the name suggests, these are shops operated by large companies with numerous branches. There are two types of multiples:–the multiple specialist shops which specialist in the sale of a fairly narrow range of goods.(专卖店)–the multiple variety chain store which sells a variety of goods.(综合连锁商店)Departmental stores• A department store has been described as a number of•shops under one roof, and in fact each department specializes in a particular range of goods.–the big advantage that a departmental store has is that it can offer the shopper the opportunity to do all his/her shopping under one roof.–and even in many cases have lunch during shopping.–Departmental stores offer a variety of credit facilities, for example through the use of account cards. Supermarkets and Hypermarkets•Supermarkets are usually in the control of multiples, although it is possible for an independent retailer to open a supermarket. The distinguishing feature of a supermarket is its size, not the type of ownership.• A supermarket has floor space of at least 186 square meters. The hypermarkets are very large shops with over 2500 square meters of floor space. Hypermarkets started in France.The growth of supermarkets in the past ten years or so has been due to a number of factors: – 1. They usually stock a wide range of goods so that once in, the shopper can obtain all requirements.– 2. The goods are on display and are selected by the customer, therefore resulting in less labor being required with a corresponding saving in costs and therefore prices.–3. Prices are often also low because goods can be bought in bulk at a discount.–4. Supermarkets stock only goods with a quick turnover (goods which sell well). Supermarkets concentrate on stocking the minimum but never running out. This is a delicate balance and requires the use of well thought out stock keeping methods (zero storage). This policy. However, saves costs and ensures that the goods are always fresh.Shopping Mall (“摩尔”“销品贸”，意为超大型购物中心)• A shopping mall is a building or set of buildings that contain stores and have interconnecting walkways that make it easy for people to walk from store to store. The walkways may or may not be enclosed. In the United Kingdom and Australia these are called shopping centers or shopping arcades.•Shopping mall is a newly complex business-style, update of hypermarket, which is combination by shopping, entertainment, dining and tour etc.,the feature is the large size in floor, virescence, parking lots with more callings, more stores and multiple services.Voluntary Retail Chains•An independent retailer cannot obtain the benefit of bulk buying and often has to buy small quantities at high prices from the wholesaler. In order to try to reduce prices many independent retailers have organized themselves into groups. Orders for goods are placed through the group and higher discounts can be obtained.Wholesaling•Retailers do not stock large quantities of any one type of goods and this means that he obtains few of his goods direct from the manufacturer.•The wholesaler occupies a place between manufacturer and retailer and is therefore sometimes known as a “middleman”.•Retailer deals with wholesalers in a number of different ways:–In some cases, he places his orders with wholesalers‟ representatives who visit his shop from time to time.–For other goods he will visit wholesaler‟s warehouses. Select what he feels will sell well and then place orders.Wholesalers always ask retailers to do cash-and-carry business. As the term “cash-and-carry” suggests he pays for the goods and takes them away on the same day.•Types of wholesaler–Merchant wholesaler buy products and resell them.–Functional wholesaler do not take title, they expedite exchanges among producers and resellers, compensated by fees and/or commission.•The wholesaler‟s service to the Manufacturers and Retailers. Without wholesalers, retailers have to order goods from large numbers of manufacturers and this would surely be very time-consuming both for the retailers and the manufacturer. By channeling orders through a wholesaler the retailer needs to contact only one source for most of his goods.•Following figure shows the reduction in the number of contacts which results from the presence of a wholesaler.Advantages of wholesaler‟s presentation:• 1. By selling a lot of goods to one source the manufacture can save:–transport cost–administration costs–simplify paperwork. (Each order involve paperwork and this of course will be saved if fewer orders are necessary)• 2. As pointed out earlier, the wholesaler stores his goods in warehouses. There are expensive in terms of rent and labor and these costs are saved by the manufacturer.• 3. The wholesaler can take some of the risks from the manufacturer. Goods are sometimes produced which go quickly out of fashion. Often it is the wholesaler who takes this risk, sometimes being left with stock which has gone out of demand.• 4. Wholesalers also help manufacturers and retailers with cash problems. Manufacturers often want their money quickly back, so that they can buy materials for new batches of goods. If they sold directly to small retailers they might have to wait because the small retailers often requires some credit perhaps one month. Wholesalers may assist manufacturers by paying quickly for large supplies but then giving credit to retailers as shown in the following figure.5. The wholesaler can buy goods from manufacturers throughout the year even thought demand is “seasonal”. For example Christmas card. Retailers sells Christmas card for the Christmas period, but manufacturers produce these all the year round and supply them to wholesalers who have the task of storing them for sale at the appropriate time. The wholesaler then plays an important part in smoothing out supply and demand fluctuation. Sometimes the situation is reversed: supply is seasonal but demand is regular throughout the year. Such as fruit, much of the fruit grown is harvested at a certain time of theyear and then stocked. Large quantities are produced and the wholesaler will take these large quantities, selling them to retailers at regular intervals.•International payment is used for international settlement or clearing.•Terms of sale are typically arranged between the buyer and seller at the time of the sale. Type of merchandise, the amount of money involved business custom, the credit rating of the buyer, the country of the buyer, whether the buyer is a new or old customer, are items to be considered in establishing the terms of sale.•The four basic payment arrangements, (1) letters of credit (2) bills of exchange (3) cash in advance, and (4) open accounts.•International payment instrument:Bill of Exchange (汇票) Promissory Note (本票)Check (支票) •International payment method:Remittance (汇款方式) Collection (托收方式)Letter of Credit (信用证方式)4. International Payment InstrumentInternational Payment MethodInternational Payment Instrument–Bill of Exchange (汇票)A bill of exchange is an unconditional order in writing addressed by one Person （the Drawer）to another（the Drawee）signed by the person giving it requiring the person to whom it is Addressed (the Drawer，who when he signs becomes the Acceptor to pay on demand，or at a fixed or determinable future time a sum certain in money to Or the Order Of a specified person，Or to bearer（the Payee)．–按照付款时间不同分类：有即期汇票(Sight Bill)和远期汇票(Time Bill)。