English: South Korea GDP (PPP) evolution from 1911 to 2008 in millions of 1990 International dollars. Source: Angus Maddison. South Korean flag from File:Flag of South Korea.svg. (Photo credit: Wikipedia)
English: The Eastern Bloc – after the annexations and installations. Dark red is the expanded Russian SFSR, light red are annexed or expanded Soviet Socialist Republics and pink are Soviet satellite states. (Photo credit: Wikipedia)
Countries that were most affected by the 1997 Asian Financial Crisis. (English version) (Photo credit: Wikipedia)
Countries that were most affected by the 1997 Asian Financial Crisis. (English version) (Photo credit: Wikipedia)
English: Chart of 20 biggest exporters of SALW, dates from smallarmssurvey.org Deutsch: Chart der 20 größten Exportländer von SALW in 2006, Daten vom smallarmssurvey.org (Photo credit: Wikipedia)
Go to {http://www.commerce.gov/} and click on “Trade Opportunities for U.S. Businesses.”
Countries that were most affected by the 1997 Asian Financial Crisis. (English version) (Photo credit: Wikipedia)
List of countries by leading trade partners (Photo credit: Wikipedia)
Seal of the Export-Import Bank of the United States. (Photo credit: Wikipedia)
The Small Business Administration (SBA) also has an extensive web site {http://www.sba.gov/} with information about exporting to different countries, contacts and leads, and so on.
Utilizing Export Management Companies
Seal of the United States Department of Commerce (Photo credit: Wikipedia)
English: Diagram of German gun exports 2007, source German government www.bmwi.de Category:Weapons Category:Export Category:International trade (Photo credit: Wikipedia)
Export management companies (EMCs) are export specialists that act as the export marketing department or international department for client firms.
The FITA Directory of Export Management Companies web site {http://fita.org/} provides information on export management companies, and also trade leads and international market research.
Reducing the Risk of Exporting
1. Firms can reduce risk by carefully choosing their export strategy, and following some basic guidelines.
2. Firms should hire an EMC or export consultant to help identify opportunities and navigate through the tangled web of paperwork and regulations so often involved in exporting
3. focus on one, or a few markets at first
4. enter a foreign market on a fairly small scale in order to reduce the costs of any subsequent failures
5. recognize the time and managerial commitment involved
6. develop a good relationship with local distributors and customers
7. hire locals to help establish a presence in the market and be proactive
8. consider local production.
A great web site to visit to determine whether a company is ready to export is the International Trade Centre, run by UNCTAD/WTO.
If you go to the site {http://www.intracen.org/ec/welcome.htm} you can use the interactive quiz to gauge export readiness. Click on “Export Fitness Checker”, then on “Use the Export Fitness Checker online” to see the quiz.
Export and Import Financing
Firms engaged in international trade face a problem – they have to trust someone who may be difficult to track down if they default on an obligation.
Including a third party in a transaction adds an element of trust to the relationship.
For more information on the challenges of export and import financing consider {http://www.businessweek.com/smallbiz/content/mar2010/sb20100318_940081.htm}.
Letter of Credit: A letter of credit is issued by a bank at the request of an importer and states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.
Draft: A draft is simply an order written by an exporter instructing an importer, or an importer’s agent, to pay a specified amount of money at a specified time.
Bill of Lading: The bill of lading is issued to the exporter by the common carrier transporting the merchandise.
A Typical International Trade Transaction:
The typical international trade transaction involves 14 steps.
Export Assistance
There are two forms of government-backed assistance available to exporters:
1. Financing aid is available from the Export-Import Bank
2. Export credit insurance is available from the Foreign Credit Insurance Association
The Export-Import Bank (Eximbank) is an independent agency of the U.S. government that provides financing aid to facilitate exports, imports, and the exchange of commodities between the U.S. and other countries.
Export credit insurance protects exporters against the risk that the importer will default on payment. In the U.S., export credit insurance is provided by the Foreign Credit Insurance Association (FICA).
Countertrade
Countertrade refers to a range of barter-like agreements that facilitate the trade of goods and services for other goods and services when they cannot be traded for money.
Countertrade began in the 1960s primarily in the Soviet Union and Eastern bloc countries. Its popularity increased during the 1980s when many developing countries that were short of hard currencies used countertrade instead. More recently, its use increased after the 1997 Asian financial crisis.
Types of Countertrade
There are five distinct versions of countertrade:
1. barter
2. counterpurchase
3. offset
4. compensation or buyback
5. switch trading
Pros and Cons of Countertrade.
1. The main attraction of counter trade is that it gives a firm a way to finance an export deal when other means are not available.
2. Countertrade is unattractive because it may involve the exchange of unusable or poor-quality goods that the firm cannot dispose of profitably.
The American exporter agrees to ship under a letter of credit, and specifies relevant information such as prices, delivery terms, and the like. The Philippine importer applies to the Bank of Manila (or some other international bank) for a letter of credit to be issued in favor of the American exporter for the merchandise the importer wishes to buy.
