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Concept of international division of Labour International Trade International division of labour The division of labour between countries. It comes out when social division get to a certain stage and the internal economy division developed beyond national development bound.It is the foundation of international trade and market. Factors of international division of labour Social productivity is the decisive factor to the formation and development of the international division of labour . Natural conditions is the foundation of the formation and development of the international division of labour . 3.Population, labor scale and market restrict the development of international division of Labour 4.Capital internationalization is an important condition of the further development of the international division of labour 5.International relations of production determines the nature of the international division of labour 6.Superstructure can promote and delay the formation and development of international division of Labour Absolute advantage It is put forward by Adam Smith that every country should produce with its absolute advantages ,and make full use of the land, capital, and labor . Comparative advantages David Recardo recognized that if two countries have different opportunity costs for different goods ,they will both come out ahead if they specialize in manufacturing and trading those goods in which they have a lower opportunity cost（or comparative advantage），even if one country has an absolute advantage in producing all the goods. The main assumptions of Comparative advantages 1.Two countries produce two kinds of products, namely 2 x2 model 2.No transportation, insurance costs 3.there exists perfect competition between Factor market and product market. Countries pursue the free trade policy without any restrictions 4.Labor time determines commodity value and labor is homogeneous 5.Production costs are equal and there is no scale benefit 6.Income distribution is not influenced by the trade Comparative advantage trap( David Ricardo trap) Is broadly speaking,when a country allocate resources according to comparative cost , it may lead to a structural defect.For instance,industrialization process could lead to the excessive outflow of economic resources from agriculture department,which will take the economy out of the normal operation In terms of the international division of labor, it mainly refers to the situation that the industry lags behind during the opening process in those last appeared countries. The main assumptions of H-O modle Two countries use two kinds of production factors to produce two kinds of goods The supply of production factors is fixed and homogeneous Technical level of producing same commodities is equal in all contries Completely free trade No transportation cost and transaction cost 6.No factor intensity reversal 7.Demand conditions are unchanged Factor-proportions Theory The absolute difference in the international commodity prices is the direct reason for international trade The different proportion of international commodity price is the necessary reason for international trade 3.The different proportion of international commodity price comes from the different proportion of factor price 4.The different proportion of factor price comes from the different proportion of factor supply An important conclusion of import and export commodities The goods a country export is produced with its rich resources. And what it import is produced with resources that is scarce in its own country. Leontief paradox 1.Labour is homogeneous 2.Factor intensity reversal 3.There exist tariff and trade barriers 4.Natural resources are scarce The comparative advantage of nations（Porter‘s diamond） The theory aims to find why a country can be a leader in a certain area .The diamond includes four determinations of national competitive advantage： 1.Factor endowment 2.Demand conditions 3.Firm strategy，structure and rivalry 4.Related and supporting industries The form of regional economic integration （According to the degree of demolition of trade barriers ） 1.Preferential Trade Agreement 2.Free Trade Area 3.Customs Union 4.Common Market 5.Economic Union 6.Monetary Union 欧盟 EU 北美自由贸易区NAFTA 亚太经合组织 APEC Trade diversion effect After concluding a customs union, tariff is reduced within the alliance, then the trade objects are changed .There will be a lost for the lower efficiency and higher costs caused by the diversion. Trade creation effect After concluding a costoms union，the tariff reduction within the alliance contributes to the trade expansion and economic welfare improvement between the countries . The influence on international trade caused by regional economic integration Positive aspect： 1.To promote the internal economic growth of trade group's internal economy 2.To promote internal international division of labor ,deepen technical cooperation,and accelerate the optimization of the industrial structure combination 3.To promote the internal trade liberalization within economic and trade group.Accelerate the development of foreign trade 4.Raise the status and bargaining strengthen the bargaining power of the group in the international trade 5.Accelerate the economic group's internal capital concentration and monopoly Negative aspect： The member countries of the group maintain trade barriers to other countries.This has a bad influence on the trade expansion of both member countries and non-member countries.Also,it has an adverse impact on the trade development of developing countries. Export promotion measures: Financial measures Export subsidy Export duty reduction or exemption export rebate Export reward credit facilities Export credit Export credit Guarantee Dumping measures Commodity dumping Exchange dumping Special zone measures Free port Export processing zones Bonded area Science-based industrial park Customs territory Its the realm where a country's tariff law is fully implemented.Only when there are inbound and outbound activities through the Customs territory,can the country collect customs duties on the import and export commodities. The characteristics of the tariff 1.The objects of tariffs is the imported and exported goods.No matter what type the goods is or whether there's after-sales profit,they must collect customs duties in accordance with the provisions 2.The executive of the customs tariff is the customs 3.Tariff has an foreign-related role The role (effect) of tariffs Positive aspect： 1.Can increase the financial revenues of the country 2.Can protect domestic production and domestic market 3.Can regulate domestic production, market, price, finance 4.Tariff of foreign-related role: Tariffs and international economic relations and diplomatic relations are closely linked.So it is an important factor in signing a friendly international trade treaty such as the WTO's multilateral treaty.In the economic and trade group, mutual exemption of tariffs is a link between members in economic alliance Negative aspect： 1.It increases the burden of consumers 2.Bad for the performance of the international trade 3.Excessive Protection may lead to the protection of backward 4.It is easy to worsen the friendly relationship between trading partners 5.Smuggling is easy to emerge Import Surtax In addition to general duties on import goods, countries often impose on import duties for a certain purpose.This collection of extra tariffs is called import surtax . Counter-vailing Duty It is an import surtax directly or indirectly on foreign commodity which has accepted bonuses or subsidy. Anti-dumping Duty It is a kind of surtax on the dumping foreign goods.The purpose of the levy is to resist the import goods dumping at low prices and to protect domestic products and Market Generalized System Preferences ,GSP It is put forward by the United Nations.It is the system that developed countries commit to offer a general, non-discriminatory and nonreciprocal to the import goods from developing countries and regions,especially to the manufactured goods and semi-finished products. Three principles : general, non-discriminatory, nonreciprocal Tariffs imposition methods： ad valorem duties A specific duty An alternative duty Compound/mixed duties Non-tariff Barriers,NTBS Restrictive measures on import other than tariffs .It is relative to the tariff barriers.It consists of import quotas, exchange controls, customs delays ,government purchasing policies ,subsidies, boycotts ,technical barriers and so on. Types of non-tariff barriers Import Quotas System: Foreign country restricts mostly imports not only by means of tariffs but also by qualitative measures.These usually take the form of import quotas for each particular product.Once the quota for the period has been filled,no more import licenses are issued Voluntary Restriction Export :Sometimes,when one of its domestic industries is badly hurt by foreign imports，a government will undertake to persuade the export countries to voluntarily restrict their exports.The government usually obtains co-operation for such a program of voluntary restraint by making explicit or implicit their intention to impose quotas or increase tariffs. Government Procurement Policies of Discrimination :In some countries ,government departments and agencies are required,officially or unofficially to buy locally made goods rather than imports. Technical Barriers to Trade ,TBT :Measures referring to product characteristics such as quality，safety or dimensions，including the applicable administrative provisions，terminology symbols，testing and test methods，packaging，making and labelling requirements as they apply to a product Organization structure form of WTO WTO———Ministerial Conference——— TPRB,The Trade Policy Review Body The General Council DSB,The Dispute Settlement Body Appellate Body Characteristics of WTO WTO possess the qualification of a legal person WTO covers broad areas WTO Strengthens the basic principles of the existing multilateral trade system Members assume obligations uniformly WTO has established a more complete dispute settlement mechanism which can apply to all agreements Basic principles of WTO Non-discrimination principle（Most-favoured-nation treatment and national treatment） Reciprocal trade 3.Gradually realize the trade liberalization 4.To promote fair competition and trade 5.Give developing countries preferential treatment principle 6.Transparency Principle The rights and obligations after China's entry into WTO The rights： Our products,services and intellectual property rights can enjoy the multilateral, unconditional , and stable most-favoured-nation treatment and national treatment among the member states Most of our industrial and semi-manufactured goods exported by developed countries enjoy GSP （Generalized System of Preference）treatment Enjoy most of the preferential treatment or transitional arrangements for developing country members Enjoy the interests from other WTO members for openning or expanding goods, services and market access Use the WTO dispute settlement mechanism to solve the economic and trade disputes with other countries fairly, objectively and reasonably and then create a good economic and trade development environment To participate in the activities of the multilateral trading system and obtain the decision-making authority of the international economic and trade rules 7.The WTO members enjoy the rights of using all the rules to take exception, guarantee measures to promote the development of domestic trade and economic 8.Get the trade data of other countries The obligations： According to the provisions of the WTO，we should give other member nations most-favoured-nation treatment and national treatment in goods, intellectual property rights, etc. In accordance with the relevant provisions of the WTO agreement，we should expand degree of market access of goods and service namely reduce tariff and standardize non-tariff measures and gradually expand opening up of service trade market. According to provisions of the Intellectual property agreement ，we must furtherly standardize intellectual property rights protection. According to the dispute settlement mechanism，solve trade friction with other member states justly.Do not engage in unilateral revenge. 5.Increase the transparency of trade policies, laws and regulations 6.Standardize foreign capital investment in commodity trade 7.Pay membership fees according to the share of world exports The opportunities and challenges to the domestic enterprises after China's entry into WTO The opportunities： 1.To eliminate the discriminatory treatment in the trade relations 2.Help to play our absolute advantage and comparative advantage 3.Help domestic enterprises to utilize foreign capital and invest abroad 4.Economic and trade relations will be further improved on both sides of the Taiwan strait, mainland China, Hong Kong, Macao and Taiwan 5.To reduce the cost of enterprises which are based on imports of raw materials and parts processing The challenges： 1.To adapt to the market economy 2.Monopolies which depend on monopoly and privilege in the domestic market will be challenged 3.The product with poor quality and high price will be involved in the fierce competition with Similar products of good quality and low price from home and abroad 4.Enterprises which give priority to vulgar competition will be challenged and gain pressure when faced with intensive competition 5.Enterprise with bad credit and a weak legal concept will be severely punished by fair competition and legal system Three Elements of Transnational Corporations；TNCs 1.Must be an industrial and commercial enterprise 2.Enterprise must have a central decision-making system and a common policy 3.Each entity of the enterprise share resources, information, and also the responsibility Characteristics of TNCs 1.TNCs have large scale and abundant strength 2.Implement a global strategy 3.Internal integration 4.Diversified operation Monopolistic Advantage Theory The advantages of enterprise which has a lot or even complete monopoly some business elements.It is put forward by Hymer, an American scholar and then further explained by Kindleberger. The advantages include： Product differentiation advantage Scale economic advantage Technical management advantages Alternative investment advantage Eclectic paradigm of international production Professor Dunning of Reading University put forward three groups of variable namely ownership advantages, internal optimization advantages, location advantages which determines the selection of multinational companies from export trade, foreign trade and licensing trade. (1.Enterprise have more monopolistic advantage than foreign enterprises , such as technical knowledge advantage. 2.Enterprise benefit more from expanding the scope of utilizing advantages through the internal market than selling or leasing to foreign companies. 3.Enterprise can benefit more from the combination of the input factors in the host country than using the domestic input factors.) Four Strategies for Chinese Corporations' Transnational Operation （Four Operation Strategies for Chinese TNCs ） Human Resources Allocation Strategy ※Choose good leaders of overseas enterprise ※Cultivate excellent workforce and keep relatively stable and low turnover of expatriates in senior management Market Access Strategy ※Market research and transnational management strategy ※selection of target market for foreign direct investment ※arrangement of the time sequence and timing control to enter the overseas market ※selection of ways to enter the overseas market （consolidation ， merger， new sole proprietorship, strategic alliance） ※choice of corporate organization and the management pattern for foreign direct investment Market Operation Strategy ※Multinational financing ※The internalized operation and Virtual Operation ※Specialized operation and diversified management ※Networked management ※Brand strategy Comprehensive Innovation ※Regulations and system innovation ※Management innovation ※Technology and product innovation ※Corporate culture construction ※Advantage creation