IBM 416 Lecture Notes - Lecture 5: Trade Finance, Eurozone, Soot

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Article 1: Boxed In
· Why decreasing exports is particularly bad for countries like Singapore and Hong
Kong? they are important trade hubs
· What is the obvious cause of falling trade? the global economic slowdown
· What is the global trade closely related with? global GDP. At a more granular level, too,
the patterns of trade match the fortunes of economies
· How did the European Union imports change since 2011? fallen by 4.5%
· How did the Middle East imports change since 2011? increased imports by 7.4%
· What are the three factors to forecast global trade (by IMF)? Global economy, Looser
policies in the euro area, Successful emerging markets
· What is the relation between GDP and global trade? Trade has generally grown faster
than GDP in recent years, rising from 22% to 33% of world GDP between 1996 and 2008.
· Why trade finance is important for exporters? Businesses that operate internationally
rely heavily on banks. Once they have bought raw materials and other inputs, they must make
their products before exporting them to a destination country. They may deliver them to a final
buyer before receiving payment. This creates a lag between incurring costs and receiving
revenues, a gap bridged by short-term trade-finance loans
· What is the role of the large euro-area banks in global trade? large euro-area banks
accounted for 36% of global trade finance in 2011. French and Spanish banks alone provided
40% of trade credit to Latin America and Asia.
· Why the euro-zone banks have been cutting back their trade-financing operations?
1. international trade takes place in dollars, and risky-looking euro-zone lenders are finding
it harder to access dollar liquidity. 2) the need for European banks to slim their balance-
sheets: trade finance, because of its short-term nature, is easy to prune. 3) Many lenders
are also under pressure to concentrate their activities on domestic markets.
· What is the current condition of increased protectionism? Increased protectionism may
also be starting to drag on trade. The number of new trade disputes is ratcheting up to a level that
is beginning to look worrying. Disputes: Argentina is involved in a host of arguments. America,
India and China are embroiled in a spat over steel. On September 4th Brazil said it would raise
tariffs on 100 products. Risk: commitment to free trade could flag, particularly as electoral
pressures take their toll.
Article 2: Tips for Increasing Sales in International Markets
· Why did Mr. Siegel start Orb Audio? After Ethan Siegel’s wife, Lalenya, returned from
her law office to their Manhattan apartment covered in soot from the Sept. 11, 2001, attacks, the
couple decided to find work that would let them spend more time together. And so, in 2003 Mr.
Siegel and a friend started Orb Audio, a maker of high-end home theater systems.
· What was the reason of the increase in demand for Orb Audio products in 2008?
When the value of the dollar dropped in 2008, Mr. Siegel noticed a boom in calls and Web visits
from abroad.
· Why does Orb Audio have a strong presence in Finland? “Somehow, 10 percent of our
business is in Finland because a couple years ago someone got our speakers and wrote a nice
review in an Internet forum”
· What is the National Export Initiative? a program aimed at doubling American exports
in five years.
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