Chapter 17read音标
Financing International Trade Lecture Outline
Payment Methods for International Trade
慰问信格式范文Prepayment
Letters of Credit
Drafts
Consignment
Account
Open
Trade Finance Methods
Accounts Receivable Financing
Factoring
Letters of Credit
Acceptances
Banker’s
Working Capital Financing
Medium-Term Capital Goods Financing (Forfaiting)
Countertrade
Agencies that Motivate International Trade
World Trade Organisation
The
EU
大前锋
The Exports Credit Guarantee Department and its equivalents
Chapter Theme
This chapter first suggests why international trade can be difficult. Then, it explains the various ways in which banking institutions can facilitate international trade by resolving problems faced by the exporter and importer.
Topics to Stimulate Class Discussion
1. Assume that you receive a call from an old friend who has t up a computer parts store. He says
that he plans to begin exporting the parts soon. What potential complications should he consider?
桑苗2. Why do exporters sometimes ll off their banker’s acceptances? Would they be better off
obtaining a short-term loan instead? What information is necessary to answer this question?
3. What is the common role of a banking institution in international trade besides financing?
Critical debate
Do government agencies promoting exports benefit the recipient country?
Proposition Yes. They enable countries to import vital supplies needed to develop their economies. The commercial world would not necessarily export to the countries becau of the risks that they face. They are in a catch 22 position, they cannot get credit unless they are developed and they cannot develop unless they have credit to purcha goods. Government agencies are the ideal bodies to break this vicious circle. In addition, the agencies can and do promote a social and economic agenda working with the World Bank and the IMF.
Opposing View No. The commercial world will lend to the countries and has done so to a greater extent in colonial days before the First World War. Developing countries must reali that a stable currency and a stable economy is a top priority and that instability is more than just a technical problem. Corruption, over ambitious economic policies and social unrest caud by oppression all result in unstable economies. Giving credit and guarantees to the countries has unfortunately rved to support poor government practice rather than cure it. Developing countries are concerned with helping their own firms in competition with other developed countries and any desire to promote standards is lost in the need to protect home industry against competition.
With whom do you agree? Reread the ction on the ECGD and follow the website links.
ANSWER:This issue will lead to many conflicting answers. Students will vary in what they perceive as free trade. Is it appropriate for a country to promote free trade while it indirectly subsidizes some firms that export products? Every country could be criticized for subsidizing its exporters in some way. There is no perfect answer but students should realize that governments subsidize firms but simultaneously complain if other governments u a similar strategy. You might have a look in the text at the ECGD code of conduct and consider whether it is at all effective. Also it is noted in the text that much of the ECGD’s business is with arms companies.
Answers to End of Chapter Questions
1.Banker’s Acceptances.
a. Describe how foreign trade would be affected if banks did not provide trade-related rvices.
b. How can a banker’s acceptance be beneficial to an exporter, an importer, and a bank?
ANSWER: Foreign trade would be reduced without the trade-related rvices by banks, becau some trade can only occur if banks back the transaction with bankers acceptances.
A banker’s acceptance guarantees payment to the exporter so that credit risk of the importer is not
worrisome. It allows the importers to import goods without being turned down due to uncertainty about their credit standing. It is a revenue generator for the bank since a fee is received by the bank for this rvice.
2.Export Financing.
a. Why would an exporter provide financing for an importer?
b. Is there much risk in this activity? Explain.
ANSWER: An exporter could increa sales by allowing the importer to pay at a future date.
There may be high credit risk incurred by the exporter here, especially if the importer is an unknown small firm.
3. Role of Factors. What is the role of a factor in international trade transactions?
ANSWER: A factor can relieve the exporter of the worry about the credit risk of the importer. In return, the factor is rewarded by being able to purcha the accounts receivables at a lower price than their cash value.
4. Export-Import Bank. a) What is the role today of the Export-Import Bank of the U.S.? b)
Describe the Direct Loan Program administered by the Export-Import Bank.
ANSWER: The role today is to finance and facilitate the export of American goods and to strengthen the competitiveness of U.S. industries involved in foreign trade.
Under the Direct Loan Program, the Eximbank provides long-term loans to foreign buyers to purcha U.S. goods. The loan rates are channeled through banks, which rve as the intermediaries.
基础心率5. Bills of Lading. What are bills of lading, and how do they facilitate international trade
transactions?
ANSWER: Bills of lading provide a receipt for shipment, a summary of freight charges, and convey title to the merchandi.
6. Forfaiting. What is forfaiting? Specify the type of traded goods for which forfaiting is applied.
基本公式
ANSWER: A forfaiting transaction involves an importer that issues a promissory note to pay for the imported capital goods over a period of three to ven years or so. Notes are extended to the exporter who lls them at a discount to a forfaiting bank.
7. Should the World Bank be in charge of providing finance for exports?
ANSWER: The World Bank was t up along with the IMF to encourage investment in developing countries. It has a very good credit record, funding largely successful projects including basic rvices but also attempts to t up social curity systems. Whether this is development or Westernisation or spreading of US influence is a matter for debate. Certainly there is no democratic control of the Bank and loans are made for suppodly commercial reasons.
8. Government Programmes. This chapter described many forms of government insurance and
guarantee programs. What motivates a government to establish so many programs?
ANSWER: Governments may be able to boost exports by establishing policies that either protect the exporters from various types of risk or encourage lenders to provide financing to the exporters.
9. Countertrade. What is countertrade?
ANSWER: Countertrade involves the sale of goods to one country in exchange for goods from that country.
猪肉焖土豆10. Impact of a financial crisis. What steps should Brunch ltd take if a crisis occurs in country X
which is a major exporting destination for Brunch?
ANSWER: It should asss the country risk and be prepared to remove all financial and real investment if needs be. Payment for exports should be reviewed and credit requirements incread to reflect the change in risk.
Advanced Questions
11. Letters of Credit. Channel Traders (UK) is a firm bad in Grimsby, that specializes in
afood exports and commonly us letters of credit (L/Cs) to ensure payment. It recently experienced a problem, however. Channel Traders had an irrevocable L/C issued by a Russian bank to ensure that it would receive payment upon shipment of 16,000 tons of fish to a Russian firm. This bank backed out of its obligation, however, stating that it was not authorized to guarantee commercial transactions.
a. Explain how an irrevocable L/C would normally facilitate the business transaction between the
Russian importer and Channel Traders (the UK exporter).
b. Explain how the cancellation of the L/C could create a trade crisis between the UK and Russian
firms.
c. Why do you think situations like this (the cancellation of the L/C) are rare in industrialized
济南红灯区countries?
d. Can you think of any alternative strategy that the UK exporter could have ud to protect itlf
better when dealing with a Russian importer?
ANSWER:
a. The letter of credit was issued by a Russian bank to guarantee payment for the goods to be
exported by the UK exporter.
b. If exporting firms can not rely on letters of credit, they must resort to trusting the counterparty
in the trade agreement. This will reduce trade, becau exporters frequently do not know much about the counterparty.
c. Governments or regulators have a vested interest in ensuring that banks follow through on
letters of credit. Otherwi, there would be a reluctance to conduct trade in any country that does not back its guarantees.
d. The UK exporter could have attempted to obtain a letter of credit from a UK bank, with the
responsibility placed on the UK bank to guarantee payment. In this ca, the UK bank would have been put in a position to demand payment from the Russian importer or the importer’s Russian bank.
