How do changes in prices of imported goods and input materials affect countries?

Prices of imported goods are greatly affected by a currency exchange rate regime, as well as the monetary policy in place and the link between exchange rate movements and import prices. Recent debates hinge on whether producer-currency-pricing (PCP) or local currency pricing (LCP) of imports is more predominant, and on whether exchange rate “pass-through” rates are endogenous to a country's macroeconomic conditions.

A significant issue for industry competitiveness is the degree to which exchange rate changes affect the prices of imported goods. Many researchers have focused on the issue of domestic consumer price index (CPI) and its relationship to currency exchange rates and how importers “pass through” changes in exchange rates to prices. This makes the exchange rate a consequence of domestic inflation and very important when considering monetary policy. The theoretical framework shows that there are four factors determining the axis of exchange rate pass-through: the openness of the economy, flexibility between price-firms in the economy, the reliability of the central bank, and the amount of exchange rate fluctuation “pass through” at the level of the producer-firm. The practical result is that the foreign firm’s optimum price drops as the domestic currency appreciates, because appreciations of the domestic currency behaves like a reduction in the cost of production.

The problem of domestic firm pricing is comparable to that of the foreign firm, with one exception: the currency exchange rate has no role in the pricing decisions of the domestic firm, as all costs of production are sustained in the domestic economy.

Exchange rate “pass-through” studies consider the extent to which exchange rate movements are added into imported merchandise prices or in contrast, a reduction in producer profit margins or markups. Recent studies indicate a “pass through” average of imported prices as 0.61 in the short-run and 0.77 in the long-run for the OECD country group.

The standard assumption of price behavior is that markets are imperfectly competitive, where most businesses have some power to set prices. It follows the model assumption that the average business sets a unit price (P) and a mark-up (M) over the unit labor cost in production measured at a fixed rate of capacity utilization use of plant and equipment adding only the unit materials cost. This standard business procedure takes on the analysis of the Phillips curve. This concept was developed by A. W. Phillips showing that inflation and unemployment have a stable and inverse relationship. However, in recent years there has been a new Keynesian interpretation explaining the breakdown of the simple Phillips curve in terms of the Non-Accelerating Inflation Rate of Unemployment (NAIRU).

This exists at the Short Run Phillips Curve, as the rate of unemployment at which inflation will stabilize or that this rate of unemployment, prices will raise at the same rate each year

An alternative explanation for changes in exchange rate “pass-through” aggregate import prices can be related to the composition of a country’s imports. Pass through elasticity is different across types of imports, and these changes could deliver variations in the “pass through” elasticity to the aggregate import prices.

According to the US International Trade Commission around 90% of U.S. imports in the Bills of Lading sampled for data analysis report prices in US dollars. This fraction however varies by country of origin. The fraction of imports in the exporter’s currency is, for example, 34% from Germany, 16% from U.K. and 13% from Japan.

As is well known, a significant fraction of trade takes place inter-firm. This database analysis allows the identification of transactions taking place with inter-firm transactions excluded. Test-theories of prices that are driven mainly by market forces exclude inter-firm prices from analysis.

Currency Arbitrage

A foreign exchange strategy takes place when a currency trader profits from the different spreads offered by brokers of a particular currency-pair that are being offered for trade. There are many spreads in a currency-pair market which imply disparities between the bids and ask prices. Buying and selling currency pairs from different brokers in order to profit from currency disparity involves what is known as currency arbitrage.

Why do TPP, NAFTA kill US jobs but 

not-one-on- one FTA?

Alfonso Llanes, Master Degree in International Development

Answered just now

The short answer is politics not economics. Trump likes to apply leverage when conducting negotiations about any issue specifically for negotiating bilateral trade agreements where the US economy towers any country’s GDP and it can exercise its weight. In multilateral trade agreement the US is one of many countries entering the agreement and its GDP can be dwarfed by the cumulative GDP’s of the countries entering the agreement, therefore, little leverage can be exercise which was the case of TPP.

In order to understand the overall picture of how international trade affects the economies of participating countries it is necessary to start with the basics.

By definition: Bilateral trade agreements are between two nations which gives them favored trading status with each other. The goal is to increase each country's economic growth.

Bilateral agreements are made in order to cover five general areas where they standardize business operations, to level the playing field. That keeps one country from copying the other's innovative products, dumping products, or using unfair subsidies.

Additionally, these agreements also standardize regulations, labor standards and environmental protections. A prime issue of the agreement is the elimination of tariffs and other trade taxes. This gives companies within both countries a price advantage.

Advantages of bilateral trade Agreements

These agreements are easier to negotiate than multilateral trade agreements, because they only involve two countries, meaning they can go into effect faster and securing trade benefits promptly.

It is easier to negotiate bilateral agreements since there are only two parties and it is easier to withdraw from it.

Neither the North America Free Trade Agreement (NAFTA), nor the TPP require any kind of international agreement for withdrawal. Consistent with authorizing US law, TPP’s Article 30.6 and NAFTA’s Article 2205 provide that a withdrawal is effective after six months’ notice.

Disadvantages of Bilateral Trade Agreements

They can more often than not trigger competing bilateral agreements between other countries. This can carve away the advantages the FTA had provided between the original two nations. The distinction between bilateral and multilateral agreements is not as crispy clear as we would like it to be.

A Good Example

The Transatlantic Trade and Investment Partnership is set to remove current barriers to trade between the United States and the European Union and If it passes it would be the largest agreement so far, even than NAFTA. It is currently under arbitration and considering that the EU consists of many member countries, it can negotiate as one entity. It can also be said that this makes the TTIP a bilateral trade agreement.

Advantages of Multilateral Agreements

Multilateral agreements can promote international standards as well as generate the efficiency's gained by a bigger market. Tariffs on merchandise are relatively low across most product-categories and non-tariff barriers for both goods and services which have now become key issues of trade negotiations. Additionally, there is international rivalry for standard setting, with the competition playing out across fields in areas such as energy, environmental rules, and information and communication technologies. When countries agree on common standards and rules, they can create scale and competitive advantages for their products.

An important benefit of multilateral trade agreements, for exporters, is accumulation, also known as “cumulation.” For example, TPP allowed accumulation of rules of origin making it easier for businesses to establish supply chains with hassle-free country of origin restrictions. The TPP allows components from TPP countries to be combined into a finished product with simplified origin rules.

According to the European Union (EU) it has developed the “pan-Euro Mediterranean “ cumulation,” which is a diagonal accumulation of origin regime. The system allows for the accumulation between the EU members, European Free Trade Association (EFTA) states, Turkey, countries that signed the Barcelona Declaration, the Western Balkans and the Faroe Islands. The parties include a network of free trade agreements with similar origin rules. This system allows these countries to accumulate components from other pan-Euro Mediterranean countries.”

Enlarged General Production

The purpose of trade is to deliver access to a greater variety of merchandises and services. According to the Heritage Foundation, free trade fosters competition, spurring companies to innovate and develop better products

Economic Development of Disadvantage Areas

Free trade compensates risk-taking through increased sales and market share of a given product. When a large country like the United States take advantage of free trade, its economy as a whole benefits. Economic growth spills over into smaller countries that are economically disadvantage or stalled in poverty but are open to trade and international Cooperation.

Free trade forces companies to support and maintain the rule of law. The World Trade Organization requires members to honor all agreements and abide by all WTO judgments. Countries that do not abide the rules lose business and investors move their money away to countries that play by the rules.

Market Allocation of Resources

Free trade improves the allocation of global resources. When countries or people can trade for the articles they need, they can focus on making the ones they can make best and thus, acquiring competitive advantage. Imports tend to placate inflation, as each product or service flows from the most competitive supply source to the lowest.

Incentives for Business and Individuals

Trade agreements open markets and offer business incentives and protections. This includes obligations to protect intellectual property rights labor standards and open new markets to competition. Also, it oversees environmental standards and improves customs simplification. Lastly, global investment allows for greater diversification and risk sharing of financial markets.

Increase in U.S. Exports in Millions of U.S. dollars Since Entering FTA Agreements.

Source: U.S. Department of Commerce

According to the International Affairs of the US Chamber of Commerce the Country has benefited from international Trade for the past 4 decades.

“The study employed a computable general equilibrium economic model used by economists worldwide known as the Global Trade Analysis Project (GTAP). This model, developed in the early 1990's is now maintained—and constantly enhanced—by a consortium of 31 U.S. and international organizations, including the U.S. International Trade Commission, the WTO, the World Bank, and half a dozen U.S. government agencies. The results of this comprehensive study are impressive. The increased trade brought about by these FTAs boosted U.S. output by more than $300 billion and in turn supported 5.4 million U.S. jobs. No other budget neutral initiative undertaken by the U.S. government has generated jobs on a scale comparable to these FTA's, with the exception of the multilateral trade liberalization begun in 1947.”

The broad historical context for U.S. manufacturers in assessing value-added in manufacturing—this approach avoids double counting that can result along manufacturing supply chains—U.S. manufacturing value-added rose by 58% between 1993 and 2013 in real terms, according to the U.S. Department of Commerce.

The long trend has been that U.S. manufacturing value-added has grown eight-fold since 1947 in real terms. Contrary to popular fallacy, the U.S. share of world manufacturing output, on a value-added basis, has remained fairly steady at approximately 20% in four decades. American manufacturers were hurt by the painful 2007–2009 recession. However, in the previous two decades, U.S. manufacturers established new records for output, revenues, profits, profit rates, and return on investment.

How can I get Nafta certificate for export from Canada to US?

Alfonso Llanes, Master Degree in International Development

Answered just now

North American Free Trade Agreement (NAFTA) Information for U.S. Exporters is available through the Department of Commerce at: http://www.export.gov/FTA/index.asp

North American Free Trade Agreement (NAFTA) established a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. NAFTA immediately lifted tariffs on the majority of goods produced by the signatory nations. It also calls for the gradual elimination, over a period of 15 years, of most remaining barriers to cross-border investment and to the movement of goods and services among the three countries.

The following U. S. NAFTA Web Site information is advisory only. The site is not responsible for damages caused by following the links and any information contained therein.

NAFTA Summary

Advance Rulings

An advance ruling is a written document received from the customs authority from a NAFTA country. It provides binding information on specific NAFTA questions you may have about future imports of goods into Canada, Mexico and the United States.

Certificate of Origin Ruling

This is a trilaterally agreed upon form used by Canada, Mexico, and the United States to certify that goods qualify for the preferential tariff treatment accorded by NAFTA. The Certificate of Origin must be completed by the exporter. A producer or manufacturer may also complete a certificate of origin in a NAFTA territory to be used as a basis for an Exporter’s Certificate of Origin. To make a claim for NAFTA preference, the importer must possess a certificate of origin at the time the claim is made.

Where can I find free export import data of shipping for international trade business?

Alfonso Llanes, Master Degree in International Development

Answered just now

Below is a list of reliable data from public international institutions that collect and disseminate trade data free of charge to the general public which includes:

The United Nations Commercial Trade (UN), Organization for Economic Co-operation and Development (OECD), International Monetary Fund (IMF), World Bank (WB), World Trade Organization (WTO), and Atlas Media published by the Massachusetts Institute of Technology (MIT)

https://comtrade.un.org/db/

http://www1.oecd.org/std/its/itc...

http://www.imf.org/en/Data

http://wits.worldbank.org/

https://www.wto.org/

http://atlas.media.mit.edu/en/ra...

Do US free trade zones have boundaries?

Alfonso Llanes, Master Degree in International Development

Answered just now

In an Introduction to Foreign-Trade Zones U.S. Customs and Border Protection Explain:

https://www.cbp.gov/border-secur...

Foreign-Trade Zones (FTZ) are secure areas under U.S. Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the United States' version of what are known internationally as free-trade zones.

Authority for establishing these facilities is granted by the Foreign-Trade Zones Board under the Foreign-Trade Zones Act of 1934, as amended (19 U.S.C. 81a-81u). The Foreign-Trade Zones Act is administered through two sets of regulations, the FTZ Regulations (15 CFR Part 400) and CBP Regulations (19 CFR Part 146).

Foreign and domestic merchandise may be moved into zones for operations, not otherwise prohibited by law, including storage, exhibition, assembly, manufacturing, and processing. All zone activity is subject to public interest review. Foreign-trade zone sites are subject to the laws and regulations of the United States as well as those of the states and communities in which they are located.

Under zone procedures, the usual formal CBP entry procedures and payments of duties are not required on the foreign merchandise unless and until it enters CBP territory for domestic consumption, at which point the importer generally has the choice of paying duties at the rate of either the original foreign materials or the finished product. Domestic goods moved into the zone for export may be considered exported upon admission to the zone for purposes of excise tax rebates and drawback.

Qualified public or private corporations that may operate the facilities themselves or contract for the operation sponsors foreign-trade zones. The operations are conducted on a public utility basis, with published rates. A typical general-purpose zone provides leasable storage/distribution space to users in general warehouse-type buildings with access to various modes of transportation. Many zone projects include an industrial park site with lots on which zone users can construct their own facilities.

Sub zones are normally private plant sites authorized by the Board and sponsored by a grantee for operations that usually cannot be accommodated within an existing general-purpose zone.

Does America pay in Euros when they export to Europe?

Alfonso Llanes, Master Degree in International Development

Answered just now

Anyone needing to assess the statistics relating to payment flows generated by international trade and the currency transaction used to prompt the balance of payments among nations should get a copy of:

T BPM6 COMPILATION GUIDE COMPANION DOCUMENT TO THE SIXTH EDITION OF

THE BALANCE OF PAYMENTS AND INTERNATIONAL INVESTMENT POSITION MANUAL

COMPILATION GUIDE INTERNATIONAL MONETARY FUND

The Guide provides guidance that is applicable for different economies—from the smallest and least developed to the most advanced and complex. National compilers should develop and adapt the data sources and compilation methods in ways that are appropriate to their national circumstances, by considering the practical and legal constraints in their own economies.

An economy’s data compilation methods should evolve over time as the economy changes. Therefore, the Guide does not present a prescriptive or definitive approach to compiling statistics on the balance of payments and the international investment position (IIP). Instead, the Guide identifies the relative strengths and weaknesses of alternate approaches, and identifies the adjustments that may be required to source data to derive estimates of fl ows and stocks that are consistent with the recommendations in BPM6.The BPM6 strengthens the theoretical foundations and linkages with other macroeconomic statistics, and the Guide includes elaboration on these linkages. The Guide also provides practical advice on using the data from the other macroeconomic accounts in compiling the international accounts.

Why do you need business English for work?

Alfonso Llanes, studied at Florida International University

Answered just now

The first thing we need to consider is that in a global environment we need to have a global language. For instance, international airlines use English as the language of communication between air traffic controllers and pilots in order to avoid confusion and mistranslated terms that could easily lead to accidents such as the one in Tenerife some years back. Therefore, extending this analogy to the business world has become common for non-native English speakers to study business English as a a second language and use it as a specific communication tool, to interact with English-speaking countries, or with companies that use English as the preferred language for conducting international business.

English has become the working language or bridging language of our time. This preference plays a part in a wide range of activities on what is called business globalization today. Proficiency include letter writing, delivering presentations, negotiating or just communicating ideas or proposals considered to be a prerequisite of modern-day international cooperation, and an important key for global commerce.

While business and technology have their own vocabulary, specialized areas within and between have their unique vocabularies as well. Such areas include: trade law, finance, politics and so on. It is however not practical to cover all the vocabulary in these areas. Most people learn general business vocabulary and practice carrying out business tasks in English. Others use an English textbook or dictionary to translate specific terms in their area of interest or professional skill. There are many specialized courses for lawyers; bankers etc., offered by colleges and universities across nations but these courses are usually quite expensive.

How do specialized import stores build their supply chain and deal with import regulations?

Alfonso Llanes, Master Degree in International Development

Answered just now

In general, recommendations for the importer can be found at: http://www.regulations.gov.

A specialized store needs to determine the regulatory agency that would oversee the business operation while considering that products fall under different classifications that must match the agency with oversight authority.

Guidance Documents Published by the International Council for Harmonization (ICH)

International Council for Harmonization - Efficacy

International Council for Harmonization - Joint Safety/Efficacy (Multidisciplinary)

International Council for Harmonization - Quality

International Council for Harmonization - Safety

· Know the foreign firms that produce the products they purchase and any other firms with which they do business and through which such products pass (e.g., consolidators, trading companies, distributors);

· Understand the products that they import and the vulnerabilities associated with these products;

· Understand the hazards that may arise during the product life cycle, including all stages of production; and

· Ensure proper control and monitoring of these hazards.

These Good Importer Practices are broadly organized under four guiding principles:

· Establishing a Product Safety Management Program;

· Knowing the Product and Applicable U.S. Requirements;

· Verifying Product and Firm Compliance with U.S. Requirements throughout the Supply Chain and Product Life Cycle; and

· Taking Corrective and Preventive Action When the Imported Product or Firm Is Not Compliant with U.S. Requirements.

Control, Monitor, and Verify Product Compliance during Entry.

· Conduct a risk-based monitoring program of incoming products to target your resources where they will likely have the greatest positive impact on product safety. Such a program could include the following:

· Examination of shipping records;

· Examination of certifications, certificates of analysis, letters of guarantee, etc.;

· Physical examination of the product, packaging, and labeling; and

· Risk-based product sampling and testing by the importer or an independent third party, to ensure the product is authentic, and meets company specifications and U.S. requirements. Importers should use appropriately accredited laboratories.

Each product is classification falls under applicable regulations as follows:

Product Category

Relevant Agency

Applicable Law

Roles & Responsibilities

Websites

How do I export aluminum scrap from USA?

Alfonso Llanes, Master Degree in International Development

Answered just now

Federal, state or local requirements need to be met in order to become an exporter as a business entity or an individual.

Start-up Documents and method.

Export samples are essentially as the first step for an international buyer if an initial offer and bid has already been established. Once the quality and all related issues such as quantity, delivery schedule price and so on have been successfully negotiated what follows is a pro-forma invoice where all the conditions are stated and payment method is entered in a contract of agreement. In return one should receive a formal purchase order from the overseas buyer based on the contract. The terms of payment agreed upon prior to the first shipment and order invoice needs to be entered in the export contract that could include: i.e., payment in advance, payment on delivery against acceptance of product, or a conditional letter of credit outlining the conditions for payment to take place such as a Bill of Lading, Dock Receipt etc. If insurance or a performance bond need to be placed before the contract is initiated the obligation of such risk must also be outlined in the export contract. In addition, some buyers might require an independent inspection of the product by a certifying authorized third party to conduct an inspection that meets the contractual agreement.

Any exporter must understand and be familiar with the country of destination Customs rules and requirements.

According to the U.S. International Trade Administration, the top five sources of U.S. exports in this category were No. 1 China, No. 2 South Korea, No. 3 Canada, No. 4 Mexico and No. 5 Hong Kong. The top five Customs districts from which Aluminum waste and scrap exports left the United States through March were No. 1 Los Angeles, No. 2 San Francisco, No. 3 New York City, No. 4 Seattle and No. 5 Detroit.

More than 36% of United States’ aluminum metal supply is from recycled metal, and the country is the world’s most resource-abundant secondary recovery site because of its long history of aluminum production and consumption. Around 2 million tons of scrap is exported each year, representing one-third of the total global scrap supply. Without scrap recovery the capacity of U.S. aluminum industry would be curtailed drastically as the country has already shut down about 75% of the total primary capacity.

Shipping Documentation

Transport Documentation

Methods of Payment

Insurance

Commercial Invoice

Cash in Advance

Cargo Insurance

Inspection Certificates

Commercial Letters of Credit

Coverage

Weight Certification

Standby Letter of Credit

Insurance Certificate

Packing List

Documentary Collection

Shipper’s Letter of Instruction

Open Account

Dock Receipt

Mixed Methods

Certificate of Origin

Currency of Payment

Consular Invoice

Bill of Lading

Air Waybill

Shipping Forms

Which is the best and cheapest logistics service for international production company?

Alfonso Llanes, Master Degree in International Development

Answered just now

A proper answer requires narrowing the question from general to particular other than that only averages can be provided.

The table below indicates price per metric ton, cubic measure, cargo density and so on general basis. On a particular basis one needs to have origin and destination as the initial source of data. International Customs Union use Singapore as the basis for evaluating tariffs going from east to west and vice versa.

Below is a copy to the International terms of trade in current use:

The Incoterms® Rules International Agreement

RULES FOR ANY MODE OR MODES OF TRANSPORT

• EXW Ex Works

“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e., works factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.

• FCA Free Carrier

“Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

• CPT Carriage Paid To

“Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

• CIP Carriage And Insurance Paid To

“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”

• DAT Delivered At Terminal

“Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.

• DAP Delivered At Place

“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.

• DDP Delivered Duty Paid

“Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

• FAS Free Alongside Ship

“Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.

• FOB Free On Board

“Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

• CFR Cost and Freight

“Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

• CIF Cost, Insurance and Freight

“Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”

Bill of Lading Entries for Customs valuation

 Each commodities' HTS code

 Each country of manufacture

 Total cost of goods (commodities)

 Transportation charges

 Shipment Value Protection

1. Sender’s address

2. Receiver’s address

3. Commodity description

4. Commodity country of manufacture

5. Commodity classification code – HTS, ECCN or Schedule B

6. Commodity quantity

7. Commodity price per unit