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Foreign trade
Webpage link per country proper partner http://rosellanicolini.com/exterioren19.htm http://rosellanicolini.com
3th lesson 26-09-
Basic accounting GDP is all together Look at GDP per capita GDP/N
GDP = C + I + G + X – M
GDP = Y
C = CONSUMPTION
I = INVESTMENT
G = PUBLIC EXPENDITURE = GOVERNMENT
X = EXPORT
M = IMPORT
( X – M ) = IMPORTANT FOREIGN TRADE
EXPORT INCREASES GDP INCREASES
IMPORT DECREASE GDP INCREASE
Country consuming wat producing = self sufficient
( X – M ) = TRADE BALANCE X > M > 0
Trade balance is how you are preforming on international market If firms are efficient If competitive If citizens prefer buying own products
Remittances = money immigrants send home or receive from abroad Ecuador receives biggest Us sends
Disposable income/ money = how much you can use for buying Yd = Y – TAX + R R = REMITTANCES
Yd = Available income Net result between GDP tax and remittances Yd = Y – Tax + R = C + I + ( G-tax ) + ( X – M + R ) ( G – Tax ) = DEFICIT = difference public expenditure and tax = D ( X – M + R ) = TRADE BALANCE = TB
Deficit NOT SAME as trade balance Trade balance how you do compared to rest of world
Deficit what you can spend
YD = C + I + D + TB
Deficit = “ tekort” Deficit payed by tax Compensate deficit by trade balance TB < 0 negative, wealth will decline
Problem of twin deficit when both are negative < 0
TB is really quick get out of crisis D is more complicated
Export of GDP EXPORT QUOTA = ( X / Y ) x 100 0.3 or 30% Exporting everything is not good Lower is export is not big part of GDP
EXPORT QUOTA = ( X / ( X + M ) ) x 100 0.5 or 50% Because need to be balanced, half of total trade flow Then trade balance = 0 = INDEX OF COMPETITIVENESS Because > 0.5 when exporting more than importing
X - M = trade balance X + M = Total trade flow
INDEX OF OPENESS = how much economy relies on imports and export (trade) INDEX OF OPENESS = ( X + M) / Y x 100 Total flow / y
if INDEX OF OPENESS > 1 or 100 = SMALL OPEN ECONOMY SMALL OPEN ECONOMY = a country relies all source of income on trade ( no internal production ) Belgium, Vietnam, Ireland trade is much more than GDP Any crisis appearing abroad comes to you OR no small open economy
If INDEX OF OPENESS < 1 or 100 Not dependent on trade
INDEX OF TRADE BALANCE = in case trade balance is negative is sustainable INDEX OF TRADE BALANCE = ( X – M ) / Y x
Trade balance constantly negative = permanent deficit.
VER = vertical export restrictions = up to maximum export. = SO PRICE DOES NOT DROP TO MUCH developing countries
Intageble policy = limit import with restrictions in quality
TARIC = code to identify a product
Small country means = not relevant traders (also import) Big country = important principle actor world will suffer from spillovers
Tariff (small country ) Import is difference between ask and produce Price + tariff needs to be between (above ) and worldprice Makes import schrink protect inefficient producers Loss of proficiency of producers = triagles Between triagles = money goes to government
Spillover effect = worldprice goes down , through tariffs by big trader Suffering from effect due to policy. Trade policy can effect productivity
Quota does the same
Subsidy local consumer pays for it Government pays a lot Subsidy for export is forbidden Country belong to WTO should follow rules , others not Temporal and well argued Not discriminate between WTO MFN most favorite nation
European union has same custom union ( no unique country actions )
Cost of policy is bigger than potential gain All substitute policy are costly Subsidize
Four kind of tariff
- Ad–valorem = tariff is percentage of price
- Specific tariff = is paid over the volume unit € x kg/liter
- Mixed = % of price + € / weight
- Compound = 1) is any of above 2) max or min
Don’t sum up two specific tariffs
Custom value = VA
https://www.taric.es/productos-y-servicios/nettaric/nettaric-tariff
2308
Midterm matererial is this and next Thursday (up to ockt 15)
OCKT 15 AULA 25
Nominal protection = (PT – P )/ p x PT = price with tariff P = without tariff
Real or effective protection = (VA t – VA ) / VA x Need to know: Value added of the product = final price – cost Vat = VALUE ADDED + TARIFF When positive trade policy is effective
Example: t jersey 5% nominal = 90 pt = 90 + 5% of 90 t =4, n = 5% real: VAt = Pt – C 94,5 – 30 = 64, VA = 90 -30 = 60 (64,5 – 60 ) / 60 = 7,5 %
Example : 5% p 7%c Nominal rat ( Pt – P ) / 90 = 5% VAt = Pt – Ct = 90 (1+ 0,05 ) – 30 ( 1+ 0,07) = 62, Dus 94,5 – 32,1 = 62, (62,4 – 60 ) / 60 =4%
Example : 7% W nominal = not 0 Real VAt = T -Ct = 90 – 30 ( 1+0,07 ) =57, Real = ( 57,9 – 60 ) /60 = -3,5 %
Customs union EUROPEAN UNION
Austria Italy Belgium
- Iceland
- Liechtenstein
- Norway
- Switserland
Vot? Tvo?
GROUPS OF PRODUCTS :
FREE
- soivre food / animals/ plants
- CITIES same as above. And not under risk of extinctions
- CECA coal and steel quality
ADMINISTRATIVE PERMIT ( Because specific or problems)
- Art and cultural goods
- Guns
- Slot machine and games (gok) only for country that not belong to the EEE
Release of merchandise is everyting you need for cutstom of import Custom of export when exporting is useless Brooker has to be located at custom of import Customer waiting for import tells custom
Logistic firm gives all documents to brooker Responsibility of seller to produce centificate Brooker reviews and calculates tariff
All tariffs all duties need to pay cash (brooker payed cash as well)
Incoterms teruis of soles not same as invoice FCA = CIF FCA = any kind , everything but ship kind of transport CIF = for the boat
Statistical value = value of merchandise without DVA
FCA + TARIFF FCA is base imponible TARIFF = importe TVA over amout above
Value of merchandise at custom is not price
- transport cost+ insurance + adjustment of any ( cost of operations)
Sequence of costs Tariffs over value merchandise without TVA TVA is over cost merchandise with tariff
Temporal import
Active Passive
Temporary import underbond
Export never suffer from tariff
Import is without tariff when is piece of something that is going to be exported
Passive temporty import under bond = exporting piece of machine will be used abroad to create a product and signed a contract to buy that product. Than import of that product is exempted from tariff
Import
- Those of agreement terus = incotery of sales
- Step of administrative task
- Release of merchandise at custom of import stops
Export
- Access the quality of product search for market
- proximity
- role imports
- coutry risk
- cultural aspects
- network for distribution
CARI 85 %
CESCE country risk
FAD just for spain
Info on webpage! Group reports : Subject next week and presenting sloth Product and brand potential export for spain Condition and potential market
Individual report :
T1 i1 responsibility seller increases
- By shipment FAS free along side or FOB free of boards FAS = EXW + T1 + i FOB = FAS + upload
- Other transport FCA free career Seller is responsible for all until customs export so EXW
Between Export T1 i1 (country exporter) customs export. and Custom imports ( group C) ( country import) buyer importer (group D) = = international transports
Custom imports (group c) ( country import) buyer importer (group D) = shipment
- CFR = FOB + international transport costs ( seller not in charge of insurance ) Insurance has to be identical over the value of insurance or merchandise + 10 %
- CIF = CFR + international insurance
Other transport
Group d buyer importer
- DAT = CIP + download
- DAP = DAT + T3 i
- DDP = counter part EXW = DAP + TAX/ TARIFF
EXW = SELLER LOWEST BUYER HIGHEST
DDP = SELLER HIGHEST BUYER LOWEST
IMPORTANT !!!
Look at responsibility of seller , compute from this side ( commercial terms , bc provide
products )
E < F < C < D
If you pay merchandise with documentary draft never incoterm D
Eu is custom union so incoterms 1. EXW or 2. DDP = DAP? Out of EU 1. EXW 2. FOB (FCA) 3. CIF (
Tariffs are payed over value of merchandise Value of merchandise VA = CIF + adjustment
Adjustment is all … costs that a buyer makes while making 3 conditions: Commission has to refer to specific merchandise Commission is payed by buyer , adjustment never exists in DDP? Compulsory
TVA is computed over value of the custom VA + tariff
http://rosellanicolini.com/inco_3_prelim_14.pdf document by seller is the DUA terms of sales is CIF seller is responsible for good shape up to customs of buyer if place it would be other transport is CIP buyer is right because, seller has to deliver in good shape in newyork seller is insurance for the travel meanwhile buyer pays already than he pays twice when something would happen he can check when merchandise arrives buyer payment before arrival when both agree documentary draft is C group incoterms
http://rosellanicolini.com/inco_prelim_14.pdf EXW < FOB < CIF compuse EXW : materials : 30000 labor is value added : 40000 product cosits : 3000 product requirements : 250 exw means merchandise has to be ready at premises. Red topes : 300 = 75550
Compose FOB: exw: 75550 Transport hamburg: 550 Opload: 30 Transport tax: 15 Document export: 150 = 76290
Compose Cif: FOB : 76290 International transport cost: 1250 International Insurance: 360 = 77905
Warning :
Insurance =- 440 ( 2200 – 1760 in madrid) Total cost = 16636
Over total costs total tva = total cost x 21% = 3494 MARKUP is 25% of the cost without tva = 4159
Minimum price = total costs + markup = 16636 + 4159 = 20795 20795 + TVA
20795 / 1000 = 20, 795 + 21% = 20,795 + 4,37 = 25,
When computing anything TVA is out
Check if adjustment are included , 3 conditions! Tariff is paid over VA + adjustments if any
TVA SPAIN IS 21%
http://rosellanicolini.com/Incoterms_14_15.pdf exercise 1
EXW = 2000000 = cost of merchandise ready to be sold or delivered from place of seller FAS = free alongside ship (incoterm) = FAS = exw (2000000) + TRANSPORT COST (4000 ) + TRANSPORT INSURANCE ( 850)
- export duty ( 700) = 2005550
FOB = FAS ( 2005550) + UPLADING CHARGES ( 360) + DELAY UPLOAD (120) = 2006030
CFR = FOB (2006030) + TRANSPORT COST buenos aires / vigo( 110000) + DELAY DEPARTURE (200) = 2116230
CFR INTERNATIONAL export insurance is for the buyer
CIF = CFR ( 2116230) + INTERNATIONAL INSURANCE (1900) = 2118130
DAT = Delivery at the terminal = download , buyer needs to come and pickup DAT = CIF ( 2118130) + DOWNLOAD COST (410) + TRANSIT DUTY (850) = 2119390
http://rosellanicolini.com/Incoterms_14_15.pdf CIF = VA 90150 because no adjustments TARIFF = 9015 ( 90150 x 10% )m TRANSPORT INSURANCE OAD /SEN 250 DOWNLOADING SEVILLA 20 COMMISIONS paid over documentary draft = incoterms here 540,9 ( 90150 x 0,6%) = 99975,9 ( 3000 333,253 c
Oefententamen 3 30material 50 labour 15% klok 20% MATERIAL
Nominal 80 12 15 % Effective Nominal 80 6 7,5% Effective
https://www.investopedia.com/ask/answers/041515/what-are-differences-between-ex-works- exw-and-free-board-fob.asp
