Section: IIIA4

NAME SIGNATURE GRADE

Bool, Joana Marris ____________________ ____________________
Caballero, Arlyn ____________________ ____________________
Castor, Crismarie Gel ____________________ ___________________
Libreja, Cyril Theresa ____________________ ____________________
Palomares, Rhose Allen ____________________ ____________________
Tomas, Paul Jefferson ____________________ ___________________

1. Define the following:

Exports - An export is a function of international trade whereby goods produced in
one country are shipped to another country for future sale or trade.
Imports - An import is a good or service brought into one country from another. The
word "import" is derived from the word "port," since goods are often shipped via boat
to foreign countries. Along with exports, imports form the backbone of international
trade; the higher the value of imports entering a country, compared to the value of
exports, the more negative that country's balance of trade becomes.
Balance of Payments - A statement that summarizes an economys transactions with
the rest of the world for a specified time period. The balance of payments, also
known as balance of international payments, encompasses all transactions between
a countrys residents and its nonresidents involving goods, services and income;
financial claims on and liabilities to the rest of the world; and transfers such as gifts.
The balance of payments classifies these transactions in two accounts the current
account and the capital account. The current account includes transactions in goods,
services, investment income and current transfers, while the capital account mainly
includes transactions in financial instruments. An economys balance of payments
transactions and international investment position (IIP) together constitute its set of
international accounts.
Balance of Trade - The balance of trade (BOT) is the difference between a country's
imports and its exports for a given time period. The balance of trade is the largest
component of the country's balance of payments (BOP). Economists use the BOT as
a statistical tool to help them understand the relative strength of a country's economy
versus other countries' economies and the flow of trade between nations. The
balance of trade is also referred to as the trade balance or the international trade
balance.
International Reserves - International reserves are any kind of reserve funds that can
be passed between the central banks of different countries. International reserves
are an acceptable form of payment between these banks. The reserves themselves
can either be gold or else a specific currency, such as the dollar or euro.
Exchange Rate - An exchange rate is the price of a nations currency in terms of
another currency. Thus, an exchange rate has two components, the domestic
currency and a foreign currency, and can be quoted either directly or indirectly. In a
 Section: IIIA4
NAME SIGNATURE GRADE
Bool, Joana Marris ____________________ ____________________
Caballero, Arlyn ____________________ ____________________
Castor, Crismarie Gel ____________________ ___________________
Libreja, Cyril Theresa ____________________ ____________________
Palomares, Rhose Allen ____________________ ____________________
Tomas, Paul Jefferson ____________________ ___________________

direct quotation, the price of a unit of foreign currency is expressed in terms of the
domestic currency. In an indirect quotation, the price of a unit of domestic currency is
expressed in terms of the foreign currency. Exchange rates are quoted in values
against the US dollar. However, exchange rates can also be quoted against another
nations currency, which are known as a cross currency, or cross rate.
Mercantilism - Mercantilism was the primary economic system of trade used from the
16th to 18th century. Mercantilist theorists believed that the amount of wealth in the
world was static. Thus, European nations took several strides to ensure their nations
accumulated as much of this wealth as possible. The goal was to increase a nation's
wealth by imposing government regulation that oversaw all of the nation's
commercial interests. It was believed national strength could be maximized by
limiting imports via tariffs and maximizing exports.
Mercantile system - mercantilism is economic nationalism for the purpose of building
a wealthy and powerful state. Adam Smith coined the term mercantile system to
describe the system of political economy that sought to enrich the country by
restraining imports and encouraging exports.

2. Identify the reasons for unfavourable balance of trade

Most of the time, trade deficits are an unfavourable balance of trade. As a rule, countries
with trade deficits export raw materials. They import a lot of consumer products. Their
domestic businesses don't gain the experience needed to make value-added products. Their
economies become dependent on global commodity prices. Such a strategy also depletes
their natural resources in the long run.

Once in a while, a trade surplus is an unfavorable trade balance. China and Japan have
both become dependent on exports to drive economic growth. They must purchase
significant amounts of U.S. Treasurys to keep the dollar's value high and the value of their
currencies low. That's how they keep their exports competitively priced and maintain their
trade surplus. But this export-driven strategy means they rely on U.S. customers and U.S.
foreign policy. In addition, their domestic market is weak. Chinese and Japanese citizens
must save to provide for their old age, since the governments don't have strong social
services.

3. Identify the bulk of the countrys international reserves

 Section: IIIA4
NAME SIGNATURE GRADE
Bool, Joana Marris ____________________ ____________________
Caballero, Arlyn ____________________ ____________________
Castor, Crismarie Gel ____________________ ___________________
Libreja, Cyril Theresa ____________________ ____________________
Palomares, Rhose Allen ____________________ ____________________
Tomas, Paul Jefferson ____________________ ___________________

International reserves are a countrys external assetsincluding foreign currency

deposits and bonds held by central banks and monetary authorities, gold and SDRs. The top
10 holders of international reserves account for nearly two-thirds of the worlds total foreign
currency reserves. China, with US$3.3 trillion at the end of 2011, tops the list. Twenty years
ago it had only US$18 billion, and ten years ago US$146 billion. Second is Japan with
US$1.3 trillion (as of December 2012.) They are the only two countries with reserves above
US$1trillion.

Top Ten Countries with the Largest International Reserves (in US$ Millions) 1.China 2.Japan
3.Eurosystem 4.Saudi Arabia 5.Russian Federation 6.Switzerland 7.Brazil 8.Korea 9.China,
PR: Hongkong 10.India

International Reserves of Countries Worldwide (in US$ Millions).Data is latest available

from the International Monetary Fund (IMF) and the World Bank. The foreign currency
portion of international reserves (IRs) is held in reserve currenciesmostly US dollars, but
also euros, UK pounds and Japanese yen. SDRs (special drawing rights) are international
reserve assets created by the International Monetary Fund (IMF), which member countries
can add to their foreign currency reserves and gold reserves to use for payments requiring
foreign exchange. The SDRs value is set daily using a basket of four major currencies: the
euro, Japanese yen, pound sterling and US dollar. Ample IRs allow a government to
manipulate exchange ratesusually to stabilize rates and provide a more favorable
economic environment or to purchase its domestic currency to protect the country from an
attack by speculators. IRs are also an important indicator of a countrys ability to repay
foreign debt and are a factor in determining a countrys credit rating.

In fact, the fragile global recovery in 2012, says the World Bank, and related decreasing
exports by developing countries, forced some of them to dip into their international reserves
to support their currencies.

In general, it is believed that reserves are adequate if they can cover approximately
three months of a countrys imports or all of the external debt maturing over the coming year.
According to the same World Bank report, the proportion of crude oil and industrial
commodities exporters where international reserves were less than the critical three months
of imports rose from 6.3 percent to 9.4 percent between January 2011 and September 2012
and the share of countries with less than five months of import cover rose from 12.5 percent
 Section: IIIA4
NAME SIGNATURE GRADE
Bool, Joana Marris ____________________ ____________________
Caballero, Arlyn ____________________ ____________________
Castor, Crismarie Gel ____________________ ___________________
Libreja, Cyril Theresa ____________________ ____________________
Palomares, Rhose Allen ____________________ ____________________
Tomas, Paul Jefferson ____________________ ___________________

to 25 percent. But in the group of non-oil noncommodities dependent countries, the share of
countries with less than three months of import cover rose from 14 percent to 25 percent in
the same period, and those with less than five months of import cover rose from 44.4
percent of the total to 58.3 percent.

Very high reserves, while assuring in the recent financial downturn, can also have
negative implications for the holder of the reserves and for the global monetary system. For
one thing, by investing heavily in foreign reserves, a country invests less in its own
economypossibly spending less on education, healthcare and infrastructurewhich may
have otherwise offered a route to longer-term growth. For another, with most reserves held
in US dollars, a stronger US dollar has been supported despite high current account deficits
in the US, contributing to global economic imbalances.

4. Identify some of our trade problems

Economic restrictions, poor infrastructure and bureaucracy remain the major concerns
pulling back Philippine trade and investment from reaching their full growth potential,
according to a report by the Nordic Business Council Philippines (NBCP). In its 2016 country
report of the Philippines, NBCP identified key challenges that continue to affect the countrys
competitiveness as a trade partner and investment destination. Topping the list are the
economic restrictions in the 1987 Constitution which limit foreign participation in several
industries.

Take for instance Art. II, Sec. 19 that mandates a self-reliant and independent national
economy effectively controlled by Filipinos, which paves the way for several government
regulations, laws, and orders that restrict foreign investors. For example, it allows only 40
percent foreign equity share in mining, agriculture, forestry, and transportation related
undertaking while zero percent foreign equity share in media, the report read. As a result,
the NBCP said the Philippines for decades has been lagging behind with ASEAN-6 peers in
terms of attracting foreign direct investments.

Another concern cited is infrastructure, an area in which the report said the Philippines
had underinvested over the last 10 years, limiting the countrys growth potentials with an
average allocation of two to three percent of its GDP.
 Section: IIIA4
NAME SIGNATURE GRADE
Bool, Joana Marris ____________________ ____________________
Caballero, Arlyn ____________________ ____________________
Castor, Crismarie Gel ____________________ ___________________
Libreja, Cyril Theresa ____________________ ____________________
Palomares, Rhose Allen ____________________ ____________________
Tomas, Paul Jefferson ____________________ ___________________

Challenges in airports, power, roads, seaports, and telecommunications are evident that
affected the overall performance of the Philippines, NBCP said. The report also cited
bureaucracy and corruption as economic stumbling blocks for the Philippines. Due to
repetitive, complex, and often conflicting orders and procedures of government agencies on
business permits, licensing, entry approval, and an array of regulations, investments are
delayed and foreign investors are discouraged, the NBCP said.

5. Identify, define and briefly discuss the different trade agreements as to:
Single market agreements (e.g. European Union) - The Single Market refers to the
EU as one territory without any internal borders or other regulatory obstacles to the
free movement of goods and services. A functioning Single Market stimulates
competition and trade, improves efficiency, raises quality, and helps cut prices. The
European Single Market is one of the EUs greatest achievements. It has fuelled
economic growth and made the everyday life of European businesses and
consumers easier.
The Single Market Strategy
The Single Market Strategy is the European Commissions plan to unlock the full
potential of the Single Market. The Single Market is at the heart of the European
project, but its benefits do not always materialise because Single Market rules are
not known or implemented, or they are undermined by other barriers. So the
Commission has decided to give the Single Market a boost by improving mobility for
service providers, ensuring that innovative business models can flourish, making it
easier for retailers to do business across borders, and enhancing access to goods
and services throughout the EU. the strategy to boost the Single Market
Barriers to trade
The Commission works to remove or reduce barriers to intra-EU trade and prevent
the creation of new ones so enterprises can trade freely in the EU and beyond. It
applies Treaty rules prohibiting quantitative restrictions on imports and exports
(Articles 34 to 36 TFEU ) and manages the notification procedures on technical
regulations (2015/1535) and technical barriers to trade.
Regional trade agreements (e.g. NAFTA, AFTA). Treaties among two or more
governments that agree to offer more favorable treatment to trade between
themselves than they do to goods imported from outside the region. It usually takes
 Section: IIIA4
NAME SIGNATURE GRADE
Bool, Joana Marris ____________________ ____________________
Caballero, Arlyn ____________________ ____________________
Castor, Crismarie Gel ____________________ ___________________
Libreja, Cyril Theresa ____________________ ____________________
Palomares, Rhose Allen ____________________ ____________________
Tomas, Paul Jefferson ____________________ ___________________

the form of the removal or reduction of tariffs on imports from regional partners,
pthereby creating free trade area.
International trade agreements ( e.g. GATS and WTO) - What is the main purpose of
the GATS? The creation of the GATS was one of the landmark achievements of the
Uruguay Round, whose results entered into force in January 1995. The GATS was
inspired by essentially the same objectives as its counterpart in merchandise trade,
the General Agreement on Tariffs and Trade (GATT): creating a credible and reliable
system of international trade rules; ensuring fair and equitable treatment of all
participants (principle of non-discrimination); stimulating economic activity through
guaranteed policy bindings; and promoting trade and development through
progressive liberalization.
International institutions like World Bank and International Monetary Fund - What are
the purposes of the Bretton Woods Institutions? The International Monetary Fund
and the World Bank were both created at an international conference convened in
Bretton Woods, New Hampshire, United States in July 1944. The goal of the
conference was to establish a framework for economic cooperation and development
that would lead to a more stable and prosperous global economy. While this goal
remains central to both institutions, their work is constantly evolving in response to
new economic developments and challenges.

The IMFs mandate. The IMF promotes international monetary cooperation and
provides policy advice and capacity development support to help countries build and
maintain strong economies. The IMF also makes loans and helps countries design policy
programs to solve balance of payments problems when sufficient financing on affordable
terms cannot be obtained to meet net international payments. IMF loans are short and
medium term and funded mainly by the pool of quota contributions that its members
provide. IMF staff are primarily economists with wide experience in macroeconomic and
financial policies.

The World Banks mandate. The World Bank promotes long-term economic
development and poverty reduction by providing technical and financial support to help
countries reform certain sectors or implement specific projectssuch as building schools
and health centers, providing water and electricity, fighting disease, and protecting the
environment. World Bank assistance is generally long term and is funded both by
 Section: IIIA4
NAME SIGNATURE GRADE
Bool, Joana Marris ____________________ ____________________
Caballero, Arlyn ____________________ ____________________
Castor, Crismarie Gel ____________________ ___________________
Libreja, Cyril Theresa ____________________ ____________________
Palomares, Rhose Allen ____________________ ____________________
Tomas, Paul Jefferson ____________________ ___________________

member country contributions and through bond issuance. World Bank staff are often
specialists on particular issues, sectors, or techniques.

References:

https://www.gfmag.com/global-data/economic-data/international-reserves-by-country

http://www.philstar.com/business/2016/03/28/1566659/challenges-face-philippine-trade-
investments?nomobile=1