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Introduction to Import Substitution Industrialization (ISI) Import Substitution Industrialization (ISI) is a development strategy adopted by emerging economies aiming to reduce their dependence on foreign goods and services. ISI’s main objective is to protect, nurture, and expand domestic industries to compete effectively with imports. This approach goes against the principle
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Definition of an Import An import refers to a product or service that is produced abroad but obtained in your home country. Imports and exports are fundamental components of international trade. A country with more imports than exports experiences a trade deficit. In 2019, the United States recorded a trade
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What is Import Duty? Import duty, also recognized as customs duty, tariff, import tax, or import tariff, refers to a levy imposed by customs authorities of a country on goods entering their territory. The value of the imported product typically determines the import duty amount. This section will delve deeper
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What Is an Irrevocable Letter of Credit (ILOC)? An irrevocable letter of credit (ILOC) is a unique financial instrument utilized extensively in international trade transactions. It represents a guarantee issued by a bank, pledging to make payment on behalf of its client, the buyer, for goods or services, once specific
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Introduction to the Home Market Effect The home market effect, first hypothesized by Staffan Linder in 1961 and formalized by Paul Krugman in 1980, is a crucial concept within New Trade Theory that describes the tendency for large countries with large domestic demands for specific goods to become net exporters
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Introduction to the General Agreement on Tariffs and Trade (GATT) The General Agreement on Tariffs and Trade (GATT), signed in October 1947 by 23 countries, marked a pivotal moment in international economic history. The agreement aimed to create a legal framework for the reduction of trade barriers among its signatory
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What is a Free Trade Agreement (FTA)? A free trade agreement (FTA) is a legally binding accord between two or more countries to eliminate tariffs and other barriers on traded goods and services, facilitating the free flow of international commerce. The FTA aims to boost economic growth by allowing businesses
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What Is Free Carrier (FCA)? Free carrier, or FCA, is a shipping term that defines the point in international transactions when the seller’s responsibility for goods ends and the buyer takes charge. This term indicates that the seller delivers the merchandise to a specified location within their home country where
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Introduction to Ex Works (EXW) Ex Works (EXW), also known as EXW Incoterms or EXW terms, is a widely-used international trade term that represents an essential part of the 11 Incoterms (International Commercial Terms) published by the International Chamber of Commerce (ICC). This section will delve into Ex Works’ definition,
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Understanding the Basics of Exports Exports are a crucial element of international trade, representing the sale of goods or services produced within one country and offered to buyers in another. The exchange of exports and imports between economies promotes financial growth and economic stability by creating new markets, increasing revenue
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Understanding Export Trading Companies (ETC) Export Trading Companies (ETC), also known as export management companies, are independent entities that offer assistance to firms involved in exporting goods and services internationally. ETCs provide a range of services from handling the exportation process for clients, offering local market knowledge, reducing costs through
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Introduction to Export Credit Agencies (ECAs) Export Credit Agencies (ECAs) serve as vital tools for facilitating international trade and investment. These entities offer financial solutions to domestic companies seeking to sell their goods and services in foreign markets, providing loans, guarantees, and insurance to manage risks associated with exporting. ECAs
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What Is an Embargo? An embargo is a trade restriction, often employed as an economic sanction by governments, multilateral organizations or coalitions of countries to penalize a target nation for specific actions. At its core, an embargo aims to punish the targeted country and deny it access to crucial resources
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What is Economic Integration? Economic integration refers to a strategic collaboration among nations that seeks to reduce or eliminate trade barriers and establish uniform fiscal policies for mutual benefit. By creating an interconnected economic environment, participating countries aim to foster increased trade, lower transaction costs, and improve overall economic growth.
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What is Dumping? Dumping, a phenomenon in international trade, refers to exporting goods at prices lower than those in the domestic market. This deliberate pricing strategy is employed to gain a significant competitive edge over foreign competitors and can have profound implications for both the exporter’s home market and the
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Introduction to Documentary Collection Documentary collection is a trade finance method where an exporter receives payment from an importer after both parties exchange essential shipping documents through their respective banks. This financing technique, often considered less popular than advance cash payments and open account terms due to its unique risks
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Introduction to Banker’s Acceptances Banker’s acceptances (BAs) are an essential financial instrument used in international trade and investment, providing both a guaranteed payment solution for importers and exporters as well as a low-risk investment opportunity. In essence, a banker’s acceptance is a negotiable bill of exchange, where a bank guarantees
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