Exportation of Goods and Services: Exports are the goods which we send out of our own country to other countries e,g, most West African countries are purely agricultural and so exports are agricultural products such as Cocoa and Palm products. Nigeria is one of the major exporters of petroleum.
Most of the agricultural export products are exported through the marketing boards. Today, export procedures have been deregulated while Nigerian National Petroleum Corporation is solely in charge of petroleum exports in Nigeria.
Outline of Export Procedures and Documentation
The potential exporters of made-in-Nigeria goods require vital information about export trade to guide them in planning their business activities. An export merchant planning to export commercial commodities should proceed as follows:
Identify the products of export: Product development and testing forms an important growth strategy for exporters wishing to penetrate overseas markets.
Identify Overseas Market
Finding a foreign buyer involves field research to obtain information about the prevailing market size, price product acceptability, competition promotional costs, distribution channel etc.
Obtain a Sales Contract
This should be between the Nigeria exporter company and the overseas buyer indicating price per unit, quantity ordered and mode of payment.
Obtain a Letter of Credit
An irrevocable letter of credit is preferable and should be opened by the overseas buyer’s bank which should have a correspondent banking relationship with Nigerian banks.
Obtain clearance (Export License) from the Nigerian Export Promotion Council (NEPC)
Benefits of Import and Export
Import Serves Domestic Industries
Domestic industries would have pretty difficult time if basic raw materials, machinery and other needs are not met. Some domestic industrial needs are only met by imports.
Import serves Domestic Consumers
International trade enlarges the range of consumers choices of goods and services. Without international trade, consumers will have fewer choices
Exports are vital to many Domestic Promoters
The market for the nation’s export is very important e.g. without international trade, the market for the Nigerian crude oil, columbite, cocoa, rubber etc. would have been limited to domestic economy.
Exports serve as a Foreign Exchange Earner
Exports of goods and services act as foreign exchange earners to the domestic economy. Foreign exchange availability is an essential requirement for the survival of any national economy.
Exports serve as Agent of Growth
Other countries’ demands for goods and services produced within a domestic economy acts as a catalyst to the growth of the total spending and hence growth in the Gross National Product of such economy.
International Marketing Institutions
General agreements on tariffs and trade (GATT) The GATT, established in 1948, is the world global trade organization. It is an organization that includes about ninety members, including all the principal market economies of the world. By the early 1980 the GATT was an organization whose future directions appeared quite uncertain but its evolution up to that point had been based on a number of fairly well defined propositions.
GATT commenced operations in 1948 with only nineteen member countries. The early 1980s ninety member countries had come to include most of the important trading nations outside the communist world and two or three within with considerable particularity. The agreement lays down rules of the game aimed at four goals:
- A reduction in import restrictions, including gradual revolution in existing tariffs through periodic negotiation, and the ultimate elimination of import licensing restraints.
- The adoption of the principle of non-discrimination by each member country in applying its trade restrictions to the commerce of each of the other member countries.
- The settlement of trade disputes
- The grants of waiver from any GATT commitment upon the basis of an international consensus.
Objectives of GATT
GATT aims at contributing the following objectives by entering into reciprocal and mutually advantageous arrangement direct to the substation reduction of tariffs and other barriers to trade, and to the elimination to discrimination in international trade. The objectives:
- Improvement in the standard of living of member countries.
- Ensuring full employment and a steady growing volume of real income and effective demand.
- Expansion of world trade and production
- Ensuring the full use of the world resources.
World Trade Organization (WTO)
The World Trade Organizations (WTO) is an international body dealing with rules relating to international business operation. The organization is responsible for global agreements, negotiation and ensures that regulations and rules made by all are obeyed by all, and to keep various trade policies within agreed limits and bounds. It came into existence m on 1″ January 1995 as a result of the Uruguay Round of Trade Negotiations (URTN).
Objectives of world trade organization (WTO)
The objectives of WTO are as follows:
- To facilitate trade among countries by creating conditions for competition that is fair and equitable.
- To encourage countries to enter into negotiations for the reduction of tariffs and the removal of other barriers to trade.
- To require members to apply a common set of rules to trade in goods and services.
- To be responsible for overseeing the multi-lateral trading system, this has gradually evolved over the last 60 years.
- To provide a forum for continuing negotiation to liberalize the trade in goods and services through the removal of barriers and the development of rules in new trade – related subject areas.
The WTO agreements have a common dispute settlement mechanism through which members enforce their rights and settle the differences that arise between them in the course of implementation
International Monetary Fund (IMF)
Olatunde (2005) defined International Monetary Fund (IMF) as an inter-governmental institution that seeks to stabilize exchange rates between currencies and maintain their convertibility. Its one hundred and fifty five (155) member nations contribute to the fund according to the assigned quota, providing resources on which a country can draw to support its currency in times of crisis.
Each country’s quota is based on its relative economic significance within the group, which is determined by a number of factors including the value of its exports. The IMF is responsible for ensuring the stability of the international monetary and financial system. The system of international payment and exchange rate among national currencies that enable trade to take place between countries. The fund they seek is used to:
- Promote economic stability and prevent crisis.
- Help resolve crisis when it occurs
- Promote growth and alleviate poverty
Objectives of IMF
The IMF was set up to achieve the following objectives among others:
- To promote international monetary cooperation, which became necessary because of the immediate crisis in the monetary situation among the nations of the world in respect of what the respective value of each nation’s currency will be shortly after the end of the second World War.
- To increase the volume of trade among nations. This is to be achieved by trade liberalization, that is, by the removal of exchange control mechanism such as tariff and quota systems.
- Advancing loans to countries that have problems of balance of payment deficit to enable such countries to maintain their exchange rate especially in the short run.
- To help in the stabilization of exchange rates among nations. This is one of the primary reasons for setting up of the fund.
The World Bank (International Bank for Reconstruction and Development)
The World Bank could be well described as a bank, a development agency and a development research institution. It is a large and complex organization comprising a set of imprecisely focused institutions with overlapping responsibilities. One of the principal reasons for establishing the World Bank, at its inception, was to be relevant, following the establishment of the European recovery programme in 1948.
The main objectives of the World Bank are:
- To assist the economic development terms, for development projects. member countries by providing loans, on reasonable
- To provide and coordinate technical assistance for member countries on investment projects in which they lack the requisite manpower.
- To conduct project feasibility and evaluation studies and act as executing agency for development projects financed by the United Nations Development Programme.
- To promote foreign-private investment by guarantees or through participation in loans and other investment made in the private sector of the economics of member countries.
The Classical Theory of Trade
It has long been realized that nations benefit in some ways by trading with other nations. Though, over time the underlying belief has changed considerably. Most of the gains of international trade were discovered from the discussion of the earliest views of the role of international trade in the pursuit of domestic goals.
Some of these ideas were found in the writings of the mercantilist school of thought. However, some of these ideas were challenged by time and writers who were subsequently identified as the classical economic thinkers.
Theory of absolute advantage: Adam Smith applied his ideas in the domestic trade context about economic activities and specialization to exchange between nations. He concluded that countries should specialize in and export those commodities in which they had absolute advantage and should import those commodities in which the trading partners had absolute advantage.
His claim was that each country should export those commodities it produced more effectively because the absolute labour required per unit was less than that of the prospective partner.
Basic assumptions of Ricardian model: David Ricardo(1817) in his book; The Principle of Political Economy And Taxation stresses that potential gains from international trade are not confined to absolute advantage but also from comparative advantage. He, however, based the benefit on some basic assumptions which includes:
- Each country has a fixed endowment of resources and all units of each particular resource are identified.
- The factors of production are completely mobile between alternative uses within a country. This assumption also implies that the prices of all factors of production are the same among alternative uses.
- The factors of production are completely immobile externally, i.e. they do not move between countries. Therefore, price factor may be different between countries prior to trade.
- The labour theory of value is employed in the model.
- The level of technology is fixed for both countries although technology can be different
- Unit cost of production is constant. Thus, the hours of labour per unit of production of goods do not change regardless of the quantity produced. This means the supply curve for any goods is horizontal
- There is full employment
- The economy is characterized by perfect competition which implies that no single consumer or producer is large enough to influence the market. All are price takers. All participants have full access to the market information, there is the free entry and exits and all prices equal the marginal cost of production.
International Trade
International trade has played a critical role in the ability of countries to grow, develop and be economically powerful. International transactions have become increasingly important as countries seek to obtain the many benefits that accompany increased exchange of goods, services and factors.
The relative increase in the importance of international trade makes it increasingly imperative that students of international economics in particular should understand the basic factors that underlie the successful exchange of goods and services and the economic impact of various policy measures that may be proposed to enhance the nature of international trade.
Benefits of International Trade
This implies that not only the individual nations are experiencing the economic benefits that accompany the international exchange of goods and services but also each national economy prosperity is dependent upon economic prosperity in the world as a whole.
Also competition for markets is greater and that countries must be able to facilitate changes in their structure of production consistent with changes in relative production costs throughout the world.
It also brings about the need for greater adjustment requirement and greater needs for policy coordination among trading partners. This adjustment becomes necessary if they are to benefit from such trading relationship. This adjustment is often much more difficult to achieve, and it calls for greater fiscal discipline by such nation’s managers.
Reasons for International Trade
Countries of the world engage in international trade for the following reasons:
- Inequitable Distribution of Natural Resources: Redistribution of the unevenly distributed natural resources is one of the reasons why international trade takes place.
- Difference in Climatic Conditions: Different agricultural products are produced in different areas as a result of climatic differences hence, the need for exchange.
- Differences in Skill and Technical Know-How: These lead to differences in produced goods and the need for exchange.
- Differences in the level of industrialization: These bring about disparity in the level of production which will necessitate exchange.
- The quantity and quality of labour force: This leads to differences in level of production which will give rise to exchange of goods and services.
- Costs of production: A country imports goods she can even produce locally if their costs are cheaper abroad.
- The need to expand local market: For instance, one of the reasons why Europeans came to West Africa was to look for more market for their endless goods produced during the industrial revolution
Obstacles Encountered in International Trade
Problem of distance: International trade involves two or more countries that are far from one another
Problem of transport and communication: communication are not efficient. Problem arises when transport and
Currency differences: Before a country buys anything from another country, she must change her currency for the other country’s currency because every country has its own currency
Language problem: Two countries that speak and understand the same language can trade easier than the other way round.
Cultural problem: Certain aspects of people’s culture constitute stumbling block to international trade.
Problem of politics: Differences in political opinion and ideologies cripple free flow of trade between countries.
Climatic problem: The harsh climatic conditions of some countries scare away traders from other parts of the world.
Artificial barriers: These barriers include protectionist laws that constitute obstacles to free flow of trade between countries of the world.
Advantages of International Trade
International trade has many advantages or benefits. They include:
Equitable re-distribution of natural resources: Natural resources found in one country are used in other countries of the world through international trade.
Enjoyment of special skills: Through this trade, countries that do not possess enough skill enjoy the special skills of other countries that have enough.
Exchange of products: This trade makes it possible for a country to get products she cannot produce.
Increase in standard of living: Since international trade makes foreign essential goods and services available to people of a particular country, the trade contributes immensely in increasing their standard of living.
It leads to specialization: A country tends to specialize in the production of products she has comparative advantage over other nations.
It encourages healthy competition: Countries compete in order to increase their volume of trade and escape deficit balance of payments.
It fosters friendly relations among the countries of the world: Since only friendly countries sign trade agreements, every country tries to be friendly with others so that trade can take place between them.
International trade brings about world peace: The hostilities in the world are reduced through the signing of trade agreements among countries of the world.
Expansion of world market: Goods which could not have been sold in the countries where they were produced, find ready markets in other countries of the world. It is a source of revenue: Government realizes a lot of revenue through the imposition of different forms of taxes on goods that come into its country from other countries.
Disadvantages or Criticisms of International Trade
It leads to exploitation of poorer countries: The poorer nations are always at the mercy of the richer ones that dictate and determine prices in the world market.
It leads to dumping of goods: The industrialized nations use less industrialized countries as dumping ground for their manufactured goods.
It encouraged dependency: Dependency has destabilizing effects because the economy of the dependant country will be affected if anything happens to the economy of the country it is depending upon.
It leads to the importation of harmful goods: Majority of the harmful goods that come into a country do so through international trade.
It may lead to unemployment: Some cheaper goods that come from other countries may contribute in stifling infant industries thereby causing mass retrenchment.
Encouragement of over-production: This arises as a result of the non-adherence to the principles of comparative cost advantage; every country therefore produces without considering the quantity being produced by other nations of the world.
International trade can result into international wars: Wars may start from trade disagreement between countries that involve in trade.
It discourages self-reliance: The trade makes the citizens of a country to develop insatiable appetite for foreign made goods, a trend that does not encourage self-reliance.
Summary
You have learnt that international marketing is an exchange that takes place across national boundaries for the satisfaction of human wants and needs. There are domestic marketing (marketing activities within a national boundary) and international marketing, that is, the marketing activities that take place among many countries.
The marketing programme must be built around a sound product or service that is properly priced, promoted and distributed to a target that has been carefully analyzed.
There are several reasons why firms go international. These include profit motives, existence of local competition, foreign opportunities, the product life cycle, and the need for foreign exchange earnings.
The International marketer’s task is more complicated than that of the domestic marketer because the international marketer deals with multiple levels controllable uncertainty. These formed the major problems or challenges i.e. – language, culture, political instability and foreign exchange regulation among others.
Important components of international market are discussed such as import, export, and international trade. Imports are goods and services brought into the country from foreign countries while exports are those goods which are taken into another country. In both cases, the marketers had to undergo some conditions or procedures and documentations and have to abide by the laws and regulations of both domestic and foreign regarding import/export.
Also trade relationship brought about the need to set up some organizations to monitor and assist such mutual relationship. Some of these are: International Monetary Fund (IMF) World Trade Organisation (WTO) and World Bank: International Bank for Reconstruction and Development