Business Journal

Posts Tagged ‘Trade’

The subprime crisis of the big power has led to the global financial crisis. It seems that such an expression overstates the strength of the big power. But we cannot ignore the economic globalization which makes economic communities connect with and affect each other positively or negatively.

In the financial tsunami hitting every corner of the world, what are the status quo and future trend of international trade? First of all, it is necessary for us to look at the trade chain: raw materials – finished product processing firms (manufacturers) – (suppliers – trade companies) – logistics companies – importers – wholesalers – retailers- end consumers, financial service providers such as banks, and Internet platforms for international trade led by Alibaba. On the chain, all the elements are interactional and can transmit to each other. Price transmission is a key element. Rate of exchange influences trading price. We can begin with importer, one of initiators of trade. With the global financial tsunami seeming to gradually calm down, a procurement manager working with a large company that was founded one hundred years ago talked about their current situation: we are now facing extremely high pressure in retail and need to reduce retail prices of our products in market. The manager urges suppliers to cut down price with three simple reasons: 1. Against the background of current financial crisis, prices of raw materials have decreased; 2. Significant reduction in prices of energy products such as petroleum means lower freight and storage cost; and 3.With the decreasing and stable amplitude of the financial crisis wave, rate of exchange will tend to level off and rise. Then why do suppliers need to reduce their prices? Because the consumption end of commodities is facing much lower purchasing power of the country due to the financial crisis. The information from the consumption end is that the consumer confidence index goes down and end consumer groups (including corporate and individual procurement) reduce their costs, expenses and consumption. With such a weak market, merchants can only use price reduction as their sharp tool to stimulate consumption. Merchants promote psychologically by enabling consumers to buy the same goods as before with less money. Wholesalers and retailers in the middle of the chain deliver goods on the chain from one level to another. During this course, they gain profits and ensure normal circulation of goods. Their sensitivity to price and inventory leads to importer’s action mentioned above. As for wholesalers facing high retail pressure, lower purchasing power and weak sales, price is the only and effective solution to improve sales.

As for consumables, those who are able to provide the market with inexpensive commodity with proper quality will have a large market share, no matter they are wholesalers or importers. This is low-price transmission resulting in larger trade volume. With increasingly stable financial community, trade will tend to be active and large in size when consumers have suitable savings and their purchasing power and consumption confidence index rise. Maybe experts and scholars then will conclude that the crisis has ended and economy begins a recovery journey. When it comes to the bulk commodity market, economists say that its bull market has ended since crude oil price peaked. Those people trading at the peak of the bull market have made a great loss due to substantially lower price. The time for them to recover from such a loss may be longer than that for the crisis to come to end. Therefore, goods at low price will be favorites of people in a certain period of time. Read the rest of this entry »

U.S. Trade Policy and Declining Manufacturing: Where do we go from here?

Paul Crist, August 14, 2010

The U.S. economy and the manufacturing sector in particular, face both short-term and long-term challenges.  There is debate about whether government can or should play a role in addressing those challenges, and if so, what are the fiscal, industrial, regulatory, and trade policies that would benefit the stakeholders, which essentially include all U.S. citizens in one way or another.

I should acknowledge at the outset a bias toward thoughtfully considered government interventions to guide the economy and trade in ways that benefit American workers and allow them to participate in the gains that accrue from their labor.  There are economic reasons for my bias that have nothing to do with either socialist or altruistic impulse.  That bias in no way means that I favor protectionism or a retreat from global trade, or that government intervention in the economy is always desirable, but there are, I believe, issues and stakeholders that get too little consideration and solutions to structural economic problems that are given short shrift in the name of conservative ideological orthodoxy.

There is ample evidence that without adequate and well-designed regulatory intervention in domestic and global markets, capital and political power tends to migrate upward and become concentrated at the top of the economic ladder. We see that phenomenon in country after country, most recently in the U.S.  Concentrated wealth becomes problematic when it undermines social cohesion and a sense of shared purpose.

The wealth/income gap is at the core of social and political stress and instability in most developing countries, and the U.S. is now experiencing the pangs of disequilibrium once confined to so-called “poor” countries.

As inequality increases, it can begin to undermine demand for goods and services.  The wealthy may consume a great deal, but there are simply not enough of them to maintain aggregate domestic or global demand.  Further, at the extreme, even those at the top may suffer negative economic effects if insufficient demand results in their capital being inefficiently allocated to producing goods and services, assuming international markets are not soaking up domestic demand shortfalls.

Despite what conventional trade and economic theories suggest, there are benefits to large countries in maintaining a diverse economic base that includes a broad manufacturing sector.  Not everyone in a large country is suited to higher education and high-skill employment.  The alternatives for non-college-educated workers ought to go beyond low-paid service sector jobs.  Comparative advantage theory may be great on paper, but societies have more complex goals that trade theory alone cannot address.

Comparative advantage may also have lost some of its relevance in a highly globalized world where the factors of production, labor, capital, goods, services, and information can cross national borders quickly and easily. Read the rest of this entry »

Those who are old enough to clearly remember how it is to have an economic recession would know how difficult it is to continue investing in an unsure financial environment.  However, no matter how unsure a nation’s economic climate is, there is one market which continues to be volatile, highly liquid and an ideal financial venture for veteran and beginner investors alike. That is none other than trade forex or foreign exchange trading. Read on to learn more about broker forex trading, trade forex and the foreign exchange market in general.

The trade forex or foreign exchange market involves the trading of one currency to another.  The typical currencies which are highly marketed in broker forex trading includes the United States dollar, the European currency or Euro, the Japanese yen, British pound sterling and the Swiss franc. This is aside from the Hong Kong, Canadian and Australian dollars. So what is the first rule that you need to remember when dealing with broker forex trading or the trade forex industry? The most basic advice that experts usually provide to beginners is this. Learn about the different types of broker forex trading.

Let us take a look at the most basic types of broker forex trading. First, there is the spread betting. As one of the most popular types of trade forex, this works like a “bet”. As an investor, you would basically put your money and bet it on whether the value of the currency will rise or fall. The second type of broker forex trading is day trading.  This is actually a type of trade forex which is not recommended for the non-experts, simply due to the fact that it is quite risky.  The way that day trading works is by making a currency trade that is good for one day only.  Finally, there is scalping where a number of short-term trades are combined with the basic forex trading.  The good thing about this type of trade forex is that you can minimize the rapid fluctuation in currency trading.

Now, if you would seriously like to make a success out of your trade forex venture, you need to do your homework and learn about the ins and outs of broker forex trading.  Reading up on the subject and learning about the basic trading principles, tricks and techniques is necessary.  Just a it is when it is your first time to get involved in any business venture, you may make some mistakes in entering and exiting a trade at first – but you will eventually learn from these mistakes.  Remember that the foreign exchange industry is not a get-quick-rich scheme at all. You do need to do your part to turn this into a successful business venture. The best advice that you can probably get if you would like to be in the trade forex industry is to enter it with your eyes open.  This way, you can make the most out of this type of financial venture and increase your chances of success.