In this article, we examine the world of trade and the complexities of trading and management of products and services:
Helping you better understand your:
- Supply chain
- Sourcing
- Purchasing
- PLM (product lifecycle management)
- And the business of buying and selling of products
Looking at the transactions, exploring why business is done between two companies, how the country is involved, the politics, and power dynamics.
Every business, every person, and every country wants a financial gain and benefit; analyzing tariffs, quotas, duties, taxes, and profits to control the flow of goods.
Examining the strengths, weaknesses, opportunities, and threats of select industries, markets, and transactions.
Trade
In essence, trade encompasses all transaction of products or services that are sold, transferred, or exchanged to the agent, wholesaler, brand, retailer, and/or consumer.
Discovering the geographical boundaries for particular products or services within the exporting country.
Most developed countries control their imports and exports by managing their GDP (Gross Domestic Product) or GNP (Gross National Product) to determine their economic strength.
Looking at how GDP encompasses the products produced within the country’s boundaries (local scale) and GNP focuses on products produced by enterprises owned by residents of that country (international scale).
Most countries require import/export licenses to control the flow of products and services. I intend to dive deeper into understanding what affects trade between two countries.
Currency manipulation
Some importing countries disagree with another country’s control of their currency fluctuation for the benefit of purchasing goods from their country.
The country receiving the products from the export country claims that the currency is devalued and being unfairly sold at lower prices.
The fact is that the manipulating country reduces the demand for its own currency while increasing the demand for foreign currencies: this allows the exporting country to sell their products below market value which makes the importing country’s domestic production less attractive.
Currency manipulation affects foreign exchange reserves and monetary policies.
Looking at analytics comparing monthly, quarterly, and bi-annual periods, you will start to discover irregularities in trade between two trading countries.
Trade Practices
Exploring the basis of the bilateral economic relationships and trade deficit comparisons of each country determines whether the relationship is unbalanced, unfair, and damaging.
To determine if one side is being favored you can explore the GDP and GNP in respective countries.
Unfair Trade Practices
It is important to determine if the company’s product or services were deceptive, unlawful, fraudulent, or injurious to the consumer?
The current dispute between the USA and China stems from “unfair trade practices”; as a result, the USA has imposed punitive tariffs on goods being imported into the USA from China.
In the interests of fairer trade practices, we need to take into considerations mutual respect, equality, and honesty but because of many complexities this becomes a challenge.
There is a battle to understand and control the who, when, where, and how of what is being said and done.
Proprietary information has been one challenge along the way as it is well known that many products are copied within emerging countries and possibly exported illegally around the globe.
Products that are imported illegally steal the legitimate revenues, profits and tax dollars.
Many countries, including China, are aware of this issue and have reduced their fraudulent practices within their country to bring clarity and integrity to the consumers and the marketplace.
Another threat is the alleged cyber economic espionage against international firms. The lack of enforcement of intellectual property rights (IPR) laws is the major problem with mature economies.
Dumping
“Dumping” occurs when one company exports a product at a price that is lower than the price in the importing country’s domestic market.
To prevent this issue, many countries have established an anti-dumping duty as a protectionist tariff that domestic government imposes on foreign imports that it believes are priced below fair market value.
The tarrif is established as consumer protection from misleading or aggressive selling practices.
The current state
Today, we live in a volatile world surrounded by insecurity and doubt:
- Unstable governments
- Vast inequalities among population
- Terrorist organizations
- Mass security threats
- Technology replacing the workforce
One of the major concerns expressed by the USA is the security concern derived from technology exports.
Governments want to know what information is being collected, for what purposes, for whose benefit? And how does that jeopardize their country’s stability?
