Trade, Commerce, & International Finance

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Cooperation of UNCITRAL and the International Chamber of Commerce: new possibilities for companies from the belt and road initiative for dispute resolution in trade finance

Cooperation of UNCITRAL and the International Chamber of Commerce: new possibilities for companies from the belt and road initiative for dispute resolution in trade finance

Notably, shortly following the inception of DOCDEX, a prominent dispute resolution expert commented that alternative dispute resolution was expanding into new fields and niches and adopting new forms with great future potential. 14 Eventually, this respected expert’s view turned out to be prescient, but it is doubtful that he could have foreseen how vast the potential of the system was going to be: within two decades DOCDEX successfully transformed from a limited service for letters of credit disputes into a universal trade-finance dispute resolution platform.
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Finance of International Trade

Finance of International Trade

Freight forwarders, or forwarding agents as they are otherwise known, are probably the most versatile operators in the trade chain. They collect goods from exporters, sometimes actually packing them for shipment, transport them to ports of shipment by road, rail or barge and arrange with the shipping company (or airline) for them to be loaded on board. Their knowledge of overseas markets, the documentation required and the current import regulations applying in foreign countries is of great value to exporters who will often entrust them with the preparation of certain documents requiring chamber of commerce certification and consular legalisation. Of particular importance is the ability of freight forwarders to issue bills of lading covering goods during transport by several different means; these are known as multimodal bills of lading. Exporters may benefit from the freight forwarder combining their goods with those from other exporters and negotiating with the carrier for a bulk discount on the freight.
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Trade finance and international currency

Trade finance and international currency

most data in this field are either estimation or based on survey report. Despite the limited data availability, it’s safe to conclude that bank trade finance is important in facilitating international trade, although its contribution varies in different estima- tion. For bank trade finance, the most important instrument is Letter of Credit (LC). Committee on the Global Financial System (2014) estimated that bank trade finance directly supports about one-third of global trade, with LC covering over half of bank finance. International Chamber of Commerce (ICC, 2014) has a similar conclusion on the importance of LC in bank trade finance: in 2013, the share of traditional commer- cial LC in export and import trade finance is 41% and 36%. Not very surprisingly, this number has a great variation across region and nation. ICC Banking Commission (2014) reported that Europe and North America used more of Document Collection (DC), while Asia-Pacific countries heavily rely on LC, covering 75% and 68% of their export and import bank trade finance. Niepmann and Schmidt-Eisenlohr (2014) em- pirically studied LC in United States, finding that LC only covers 8.8% of U.S. export in 2012, though with different degrees across country and industry, varying between 0 and 90%. For example, 30% of U.S. export to China is financed by LC. According to Niepmann and Schmidt-Eisenlohr (2014), the use of LC is highly correlated with contract environment and rule of law: LC is mostly employed for exports to countries with intermediate degrees of contract enforcement. It is also used for riskier destina- tions than DC. In short, LC plays an important role in trade finance, especially for developing and Asia-Pacific countries.
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TRADE FINANCE NEWSLETTER

TRADE FINANCE NEWSLETTER

The costs of exporting are significant relative to production costs, and needless to say, this applies in particular to exports to distant and exotic markets such as the BRICs. Moreover, export costs consist of more than transport, insurance, trade finance, exchange rate hedging and tariffs. Actually, fixed and sunk export costs are at least equally important and include the costs of gaining market-specific knowledge and knowledge about how to do business in the foreign market, setting up and running a foreign distribution channel, adapting products to foreign standards (and taste), adjusting the organisation and complying with administra- tive formalities and regulations and the like. Unlike transport and tariff costs, for example, fixed and sunk export costs do not vary with sales, and average trade costs are thus larger and more likely to be restrictive for SMEs. Hence, volume matters.
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Trade Finance and Services

Trade Finance and Services

Basel II 7 defines commodities finance as structured, short-term lending to finance reserves, inventories, or receivables of exchange-traded commodities (e.g., crude oil, metals, and crops) where the exposure is repaid from the proceeds of the sale of the commodity and the borrower has no independent capacity to repay the exposure. This situation occurs when the borrower has no other activities and no other material assets on its balance sheet. In these transactions, a commodity trader makes a purchase (backed by a commercial letter of credit) from a producer. The bank takes security over the underlying commodity through the bill of lading and the assignment of receivables from the sale and delivery of the commodity. Advance rates range from 90 percent for billed receivables to 80 percent for inventory. Typically, a timing gap exists between the purchase and sale legs of a transaction, exposing the transaction to commodity price risk, thereby requiring the commodity trader to hedge the risk.
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TRADE FINANCE NEWSLETTER

TRADE FINANCE NEWSLETTER

When I look back on the past winter and spring, the global economy and trade have been strongly influenced by the crisis in Ukraine and its consequences for the relations between the world and Russia. In our September 2013 newsletter, we commented on the new Rus- sian economy and the political drive to modernise and diversify. Recent events show how quickly political events can change the basis for trade. The increased political risk leads to a risk of payment delays or indeed default by commercial partners. We see this reflected in our day-to-day discussions with customers on how to mitigate the effects it has on their business. In this edition, we offer you our latest outlook on Russia for your consideration. We are encouraged by the positive feedback we get on our efforts to keep you and all our other customers in focus. It is important to me that we provide excellent services in all the situations where you meet us. It is important to me that we excel when we propose to set up new trade finance or supply chain structures. We must offer timely and professional advice and services when handling complicated documentary payments, and we must execute ordinary payments within the agreed time limits. Operational excellence is important to us, and we explain why in this newsletter.
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Fettered Cross-Border Capital Flows, External Finance Dependence, and International Trade

Fettered Cross-Border Capital Flows, External Finance Dependence, and International Trade

Furthermore, capital controls can affect trade by increasing transaction costs. Capital controls stifle the development of liquid and efficient foreign exchange markets and modern payment instruments, which would increase the cost and uncertainty associated with international transactions (Tamirisa, 1999, p.71). Akin to this, Wei & Zhang ( 2007 ) argued that one of the responses of firms to capital controls is to miss-invoice imports and exports to circumvent capital account restrictions. In response to this, custom officers would increase inspection at the border in a bid to guard against firms that may try to evade the capital restriction and thereby dampening trade. Capital controls can also reduce trade by limiting knowledge and technology transfers through foreign direct investment. Multinational enterprises typically prefer to move across the border to optimize their operations and then repatriate profits. As stressed by Markussen ( 1995 ), when a firm invests in a foreign country, it often brings with it its proprietary technology to compete successfully with indigenous firms. Domestic firms benefit from these through supply chain linkages, labor turnover, and market restructuring. These gains impact on the productive capacity and the quality of exported goods of local firms. In the event of capital controls, firms tend to lose out from these gains as capital controls deter foreign direct investments. Also, the inability to convert local currency to foreign currency can be a barrier for firms that source essential intermediate inputs abroad.
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Innovation, Trade and Finance

Innovation, Trade and Finance

following. Assuming that the home country is importing innovative goods, we find that import protection, in raising the domestic price and earnings per firm, also boosts the debt capacity of constrained firms. Protection thereby relaxes finance constraints and allows innovative firms with an above normal rate of return to invest at a larger scale. For this reason, a small level of protection can raise domestic welfare, provided that terms of trade effects in the importing country are small. The second policy is an R&D subsidy which boosts innovation and welfare, not because of knowledge spillovers which are excluded in our model, but because these subsidies strengthen the internal funds for financing subsequent expansion investment. Being left with larger own assets after R&D spending, innovating firms succeed to attract a larger amount of external funds, allowing them to more fully exploit profitable investment opportunities with an excess rate of return. The policy again boosts national welfare and shifts comparative advantage towards the innovative sector.
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The growth of e commerce in international trade and its possible effects on the sustainable development

The growth of e commerce in international trade and its possible effects on the sustainable development

Electronic commerce or e-commerce promises to be an exciting and innovative change to the way that trade is currently conducted. The methods of doing business are changing rapidly and the amount of business conducted on the internet is growing and will continue to flourish. E- commerce represents both an opportunity and a threat to international trade and the environment. Currently, there is no substantial data to support either position. In addition, there are no policies or regulations that are specifically designed for environmental issues in e-commerce. Organizations that are responsible for monitoring and implementing international trade policies and practices such as the World Trade Organization (WTO), European Union (EU), the United States Department of Commerce (DOC) and non-governmental organizations (NGOs) have only just begun to study the effects of e-commerce or have yet to review all of the issues involved. E- commerce will, in the near future, change not only the way trade is conducted, but will also change the volume of goods traded between countries. E-commerce is also changing manufacturing and distribution systems, product design, and the relationship between the producer and consumer. Whether or not the effects of these changes will be positive for developed and developing countries is yet to be determined. The changes to the current trading volume could have a negative effect on some international environmental objectives such as sustainable development. There is also a potential for developing countries to be further exploited by developed countries as e-commerce matures. In addition, there are questions as to whether the internet will increase the "digital divide" between the "have and have-nots."
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International Trade and Finance: Key Policy Issues for the 114 th Congress

International Trade and Finance: Key Policy Issues for the 114 th Congress

Industrial Policies Numerous policies have been implemented by China to promote the development of domestic industries deemed critical to its future economic growth. China’s primary goals include transitioning from a manufacturing center to a major global source of innovation and reducing the country’s dependence on foreign technology by promoting “indigenous innovation.” The latter policy can amount to discrimination against foreign firms and has become a major source of trade tension with the United States. The Chinese government has responded that they have not and will not discriminate against foreign firms or violate global trade rules, but many U.S. business leaders remain skeptical even as they have acknowledged China’s pledge to delink indigenous innovation from government procurement. Some U.S. firms have also complained about Chinese pressure to establish production facilities in China, share proprietary technology with Chinese partners, or set up R&D centers as a condition for gaining market access. Over the past year or so, several foreign business groups have complained about China’s enforcement of its anti-monopoly laws, arguing that such enforcement may be unfairly targeting foreign firms. The Obama
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E Commerce in Light of International Trade Agreements: The WTO and the United States Jordan Free Trade Agreement

E Commerce in Light of International Trade Agreements: The WTO and the United States Jordan Free Trade Agreement

The US-JO FTA was thought as a breakthrough to the WTO deadlock in the sense that the FTA included explicit provisions concerning e-commerce. However, a close examination of the FTA provisions on e-commerce revealed that the U.S. and Jordan did not invent specific and additional rules needed for e-commerce. The approach of the U.S. and Jordan was based on the simple premise that e-commerce is commerce, that it is only the form by which the commercial transaction is performed which may be new, and not its substance; thus the U.S. and Jordan considered that exiting WTO rules and obligations are directly applicable to commerce performed electronically or otherwise. For the present, the U.S. and Jordan maintained the status quo of uncertainty regarding how to deal with e-commerce in trade agreements. The e-commerce provisions in the US-JO FTA showed the need to push the debate over e-commerce and trade agreements forward. Future bilateral trade agreements should expand existing trade rules or draw up new rules to specifically cover electronic commerce. There is a host of e-commerce issues that need to be addressed in future bilateral trade agreements. Among them are the classification of the content of certain electronic transmissions, the defi- nition of “e-commerce,” concepts of technological neutrality, and the issue of “likeness” of e-goods; development-related issues, including access to infrastructure and technology; fiscal and revenue implications of e-commerce; and the relationship and possible substitution effects between e-commerce and traditional forms of commerce. Jordan is expected to address certain issues if it desires to broaden its benefit from the e-commerce provisions of the US-JO FTA. In network access and reli- ability, Jordan does not have universal, affordable access to the telecom- munications infrastructure as well as sufficient bandwidth available to meet the increase demand of expanding e- commerce. In standards, the U.S. and Jordan must try harmonize some of their services to ensure seamless interoperability. In marketplace rules, an effort must be made to clarify the classification of some products as goods, services or some other category when they are delivered electronically, and to determine the fin- ancial implications of foregoing tariffs on all intangible products trans- mitted digitally. The U.S. and Jordan should discuss how commitments on basic telecommunications at the WTO will be implemented. In intel- lectual property protection, the Jordanian legislator must make necessary changes to current laws to provide protection for electronically transmit- ted intellectual property, and cooperative efforts will be required to make information on the rights of creators of intellectual property and the treatment of their copyrighted materials over open communications net- works widely available and easily accessible.
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International Finance

International Finance

Certified Project Director (IPMA Levels A, B, C and D). Has consulted and taught courses in the field of lean management and project management at the Centre of Commercial Education Ltd. (SIA Komercizglītības centrs). Has worked as the Head of Process and Project Management Department at Citadele banka JSC. Prior to this, was responsible for managing projects on constructing transportation infrastructure as the Director of IT and Project Management Department at Riga Municipality. For 14 years has been involved in finance management, last 9 years - in IT projects management both at the organizational and international levels. Has successfully worked as Group Projects and Programs Manager at Hansabanka JSC.
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HOW TO ACCESS TRADE FINANCE

HOW TO ACCESS TRADE FINANCE

The distance and the length of the payment period can affect the financing needs of the firm engaged in international transactions. Longer payment periods may be required due to long shipping periods plus the time needed to complete all the necessary paperwork that usually accompanies international shipments. In addition, the increasing leverage exercised by large retailers against small suppliers/exporters has forced exporters to extend generous terms, and to accept settlement on open account terms. This development puts pressure on the working capital requirement of many SME exporters. Besides differences in risk levels and financing requirements, the sources of finance can also vary for international and domestic transactions. While international transactions tend to be riskier, they have greater possibilities to tap financial institutions that are more oriented towards foreign markets. Some of these financial institutions, such as export credit agencies or export insurance facilities, are specifically suited to firms engaged in international business. These specialist firms and service providers are discussed in this chapter.
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Towards a Theory of Trade Finance

Towards a Theory of Trade Finance

The model could be extended allowing for heterogeneity both in the firm and in the product dimension. Product differences could imply different degrees of enforceability in court or dif- ferent time horizons of trade relationships (high or low γ). Firm differences in size could affect the relative negotiation power between the exporter and the importer, the ability to enforce contracts in court, the ability to punish deviations from a trigger strategy and the ability to switch contracts in the face of fixed costs. Another extension would be to explicitly introduce currencies and to study the interaction of the payment contract decision with exchange rate risk. This would give a suitable framework to study two questions. First, which new effects arise from payment contracts for the optimal decision in which currency to price exports? Second, how this affects the transmission mechanism of international shocks?
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Trade finance in a liquidity crisis

Trade finance in a liquidity crisis

Such evidence indicate that the decline in exports since the onset of the current crisis is not solely due to a drop in demand, but that nancial constraints are an important part of the story. To quantify the relative impact of a decline in trade nance is substantially more di cult, not the least because of the lack of data. On the one hand, the above evidence tell us that trade nance cannot remove all nancial frictions in international trade. If that were the case, local nancial development would not have such a strong impact on exports. The evidence that the investment strategies of MNCs and their local suppliers depend on local nancial conditions further indicate that international trade nance has its limits; after all, a MNC is better positioned to extend credit across international borders than rms interacting at arm's length. On the other hand, the sheer amount of trade that relies on trade nance indicates that increased nancial distress in one country is likely to spill over to other countries through this channel. Further, it is known from previous crises episodes that domestic trade nance falls relative to sales in times of nancial crises (Love et al, 2007).
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International Macro-Finance

International Macro-Finance

Financial markets and their role in international risk sharing have inspired a vast body of theoretical literature. Over the past 40 years, international finance and economics has evolved into a vibrant field spreading from the basic international version of the CAPM to some of the most sophisticated dynamic stochastic general equilibrium (DSGE) models. Interestingly, however, the research effort in Economics has evolved almost in parallel with that in Finance. In Economics, the main focus has been on real quantities and interna- tional relative prices such as consumption, investment, current account, terms of trade and exchange rates. International portfolio choice and international equity markets have been largely overlooked. Indeed, the asset structure of these models has been mostly of two types: either the only asset is an international bond and markets are incomplete, or there is a full set of Arrow-Debreu securities and markets are complete. Both approaches have been very useful, but they cannot address many questions pertaining to portfolio problems and to the international equity markets. Finance, on the other hand, has focused more on cross-country portfolio allocations and asset prices. Terms of trade and hence exchange rates have been largely overlooked because the majority of the models featured a single-good framework, in which forces of arbitrage equate terms of trade to unity. Models with endogenous portfo- lio selection, equity prices and time-varying terms of trade and exchange rates in a single framework have been quite rare. Although we have learned a tremendous amount from this research, in recent years two main phenomena have required a redefinition of the agenda behind the theories of financial markets in the international context: contagion among de- veloped and relatively unconnected countries, and the role that asset prices and exchange rates play in the global imbalances.
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Essays in international finance

Essays in international finance

Efficient Market Hypothesis (EMH) states that bilateral exchange rates should be the best guess of the market about the relative fundamental value of two currencies based on all publicly available information at that time under the condition of either in absence of risk premia or if the time variation in the risk premia is small compared to that of the fundamental pricing kernel. Even under the EMH, bilateral exchange rates should correspond to their economic fundamentals, and should not fluctuate randomly around their past values. Evans and Lyons ( 2002 , 2005b ) shift the focus toward the private information originating from order flows, which offer better forecasts of exchange rates than economic fundamentals. The success of their method lies in the fact that order flows capture the surprise component (the expectations revision about both observable and unobservable exchange rate determinants) in the present value model of Engel and West ( 2005 ). In general, the answer to the question “Are exchange rates really predictable?” would be: “It depends” — on the choice of predictors, sample period, data transformation 1 , forecasting horizon, model specification 2 , and the evaluation method of forecasts. So, this Ph.D. thesis also provides an overall analysis of the existing literature in this chapter and accordingly we forecast exchange rate using a large set of predictors, including (i) macroeconomic fundamentals and yield curve factors, (ii) signals generated from technical analysis, (iii) option-implied information, (iv) crash sensitivity measured by copula tail dependence and hedging pressure via futures market, (v) financial indices of various asset classes, (vi) policy uncertainty indicator. Moreover, Lustig, Stathopoulos, and Verdelhan ( 2013 ) theoretically derive that the term structure of carry trade risk premia is downward sloping because investment currencies tend to have low local sovereign term premia relative to funding currencies. We then decompose exchange rate changes into forward premium component and carry trade risk premium component, which is the part that entails forecast. Hence, exchange rate returns over a range of forecasting horizons can be modelled as a function of common (term structure) factors. To summarize, we assess exchange rate predictability over a range of horizons using a term structure model of currency risk premia and from the perspective of market microstructure in Chapter 4 ,
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ICTF/Thunderbird Essentials in International Credit & Trade Finance Course Content Experts

ICTF/Thunderbird Essentials in International Credit & Trade Finance Course Content Experts

Paul Beretz is the Managing Director of Pacific Business Solutions, a consulting and educational company he created in 1999, and a founding partner of Q2C (Quote to Cash) Solutions. He is a faculty member at St. Mary’s College (CA), instructing working professionals in a blended-learning program (on line and face-to-face) in both a BA and MA in Leadership and Organizational Studies. His adjunct faculty postings also include UC Berkeley, Michigan State University and an executive summer course at Dartmouth College. Paul has given over 150 presentations and in-house training programs to Fortune 500 companies, associations and professional groups. He has been an expert witness, written articles for trade publications, quoted by news organizations (e.g. Bloomberg), edited books on financial management and authored a book for the American Management Association.
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Trade polices for electronic commerce

Trade polices for electronic commerce

The costs of trade diversion for the importing country depend on the nature of the policy restriction on the alternative mode of delivery, ta. If the restriction is a customs duty, as is[r]

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An Empirical Analysis of the E-Commerce Adoption Constraints in International Trade among SMEs in Ghana

An Empirical Analysis of the E-Commerce Adoption Constraints in International Trade among SMEs in Ghana

E-readiness is low in African countries (Mutula and Brakel, 2006). Dada (2006) arrived at a conclusion that procedures of e-readiness focus on the broad society while discarding the level of organizations. Adoption of e-commerce is largely affected by factors of companies other than those of the environment. The number of people who patronize products online are rising quickly, thus, profits of e- tailors are steadily moving rapidly. Since e- commerce provides a wider range of chances with higher opportunities, there are 24hour chances for a customer to continue accessing online products (Kim, 2002). There is no limitation in e –commerce as there is in conventional shopping (LaRose, 2001). There are no hardships and no pressure of delivery in engaging in e-commerce. This therefore encourages consumers to act impulsively (Verhagen and Van Dolen, 2011). Currently, purchasing online has received attention. Considerable studies in academia have been conducted to identify online impulsive buying behavior (Dawson and Kim, 2009; Verhagen and Van Dolen, 2011; Wells et al., 2011; Park et al., 2012). Some studies have resulted in accepting that emotions dominate process and behavior of buying impulsively (Yu and Bastin, 2010). The reasons that influence buying impulsively include marginal need for product, low price, emotions and spontaneous behavior. When this happens, the individual does not consider financial consequences (Stern, 1962; Sharma et al., 2010). Impulsiveness is a fundamental trait of humans despite the fact that, a shopping environment is used frequently to determine impulse buying (Silvera et al. 2008). Buying impulsively is a fundamental feature of customers (Rook and Fisher, 1995). There is also strong proof that shows that tendency of consumers to buy on impulse varies from person to person (Dittmar and Drury, 2000; Hausman, 2000; Verplanken and Herabadi, 2001). The relevance of electronic business in third world countries like Ghana cannot be underestimated. E- commerce is a beneficial development instrument which has been largely acknowledged as a revolution
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