INTRODUCTION

Nowadays, many companies choose international trade as a way to extend their business
and reach more new markets in the world. This way not only brings them many benefit
but also give them risky. Everything has two sides. So once they choose international
trade, they have to prevent themselves from being risk to gain the stable development.

CONTENT

I. Definition: International trade

International trade is the exchange of goods and services between countries.
International trade( including import and export) allows us to expand our markets for both
goods and services. Moreover, International trade gives consumers and countries the
opportunity to be exposed to goods and services not available in their own countries. This
type of trade allows for a greater competition and more competitive pricing in the market.
The competition results in more affordable products for consumer. The exchange of
goods also affect the economy of the world as dictated by supply and demand, making
goods and services obtainable which may be otherwise be available to consumer globally.
Increasing international trade is crucial to the continuance of globalization. International
trade is also brand of economics. It is more costly than domestic trade.

II. Advantages and risks of international trade

International trade allows countries, states, brands, and businesses to buy and sell in
foreign markets. This trade diversifies the products and services that domestic customers
can receive. It offers the potential for development and expansion, but without the risks of
internal research and development.
1. Advantages of international trade

1.1. It provides a foundation for international growth

Companies that are involved in exporting can achieve levels of growth that may not be
possible if they only focus on their domestic markets. This allows brands and businesses
an opportunity to achieve stable revenues from a diversified portfolio of customers in
several markets instead of a limited customer base in a single home market.

1.2. International trade encourages market competitiveness

Boosts international competitiveness: When a brand and business competes in several

markets simultaneously, then it must focus on its competitiveness for it to be able to
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thrive. By observing a larger range of trends because of their greater level of global
market access, brands and businesses can focus on quality, design, and product
development improvements so that they can continuously improve and diversify.
Specifically, the producers in a country attempt to produce better quality goods and at the
minimum possible cost. This increases the efficiency and benefits to the consumers all
over the world.

Boosts domestic competitiveness. Exporting or importing your products provides a good

chance to increase your competitiveness within the domestic markets. Once you are to
acquire imported commodities at similar or even lower costs as compared to the ones you
acquire from the domestic market and the other way around, then you will certainly gain
profits which will boost the level of your competence.

1.3. It spreads out the risk a brand and business must assume.

Organizations can better protect themselves from risk thanks to international trade
because of the amount of diversification that can be achieved. Whether it is a financial
disaster, like the Great Recession of 2007-2009, or a natural disaster like Hurricane
Katrina, a company with an international presence can survive and even maintain
profitability without domestic customer support. A home market may be unstable, but
international trade can still let the brand and business be stable.

1.4. International co-operation and understanding

International trade offers facilities to the citizens of every country to come in contact
with one another. Commercial intercourse among nations of the world encourages
exchange of ideas and culture. It makes them realize that no country in the world is self-
sufficient and it creates co-operation, peace, understanding, cordial relations among
various nations.

1.5. It can be used as a way to get around high levels of domestic competition.

A domestic market can have several products or services that are like what a new brand
and business is trying to offer. Instead of competing for a small sliver of that domestic
market, going through international trade can help an organization target similar foreign
markets where competition may be much lower. Over time, the experiences gained in the
foreign market can help an organization be able to establish a stronger domestic presence
as well.

1.6. Availability of all types of goods and Development of means of transport

It enables a country to obtain goods which it cannot produce or which it is not producing
due to higher costs, by importing from other countries at lower costs.

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 When goods are exchanged from one county to another, it leads to development of the
means of transport and communication because international trade requires the best
means of transport and communication.

2. Risks of international trade

2.1. Political risk

Investing in different countries whose political regimes can change over time also poses
a few risks. Governments could discriminatorily change laws, regulations or contracts
governing an investment. According to the Harvard Business Review, interest in
emerging markets has soared and host countries have learned more value can be extracted
from foreign enterprises through regulatory control. Firms engaged in international
business use a combination of legal contracts, insurance and trade in financial instruments
to protect income streams. These approaches, however, offer little protection against
policy risk.

2.2. Economic dependence

The underdeveloped countries have to depend upon the developed ones for their
economic development. Such reliance often leads to economic exploitation. For instance,
most of the underdeveloped countries in Africa and Asia have been exploited by
European countries.

2.3. International trade also presents cultural complications

Different cultures have different attitudes, standards, and expectations that can create
problems for a brand and business. Failing to consider the expectation a different culture
may have can lead to mistakes that damage the reputation of the brand and can be very
costly to the bottom line. Any step of the sales process could create an offense. Something
as simple as inappropriate packaging can be enough to permanently damage a brand’s
reputation.

2.4. Not spending enough time with your potential business partners

Long distant relationships leave a lot to be desired. Two good friends of mine who have
been buying goods from China and selling to a number of countries for more years than
any of us wish to remember, spend even now, a huge amount of time up front with new
potential partners. This is time very well spent as it has meant they have developed some
very good partners and avoided some very dodgy characters along the way.

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III. Lessons the exporters must learn

1. Offer customers attractive sale terms and appropriate payment methods

To succeed in today’s global marketplace and win sales against foreign competitors,
exporters must offer their customers attractive sales terms supported by appropriate
payment methods. Because getting paid in full and on time is the ultimate goal for each
export sale, an appropriate payment method must be chosen carefully to minimize the
payment risk while also accommodating the needs of the buyer.
2. Open account
An open account transaction is a sale where the goods are shipped and delivered before
payment is due, which is usually in 30 to 90 days. The importer periodically transfers
money to the debt account to pay the exporter. Obviously, this option is the most
advantageous option to the importer in terms of cash flow and cost, but it is consequently
the highest risk option for an exporter. Therefore, exporters who are reluctant to extend
credit may lose a sale to their competitors.
When an open account payment method is used, the exporter in essence grants the
importer a commercial credit, so normally it only applies to parties who have regular and
interrelated relations.
However, the exporter can offer competitive open account terms while substantially
mitigating the risk of non-payment by using of one or more of the appropriate trade
finance techniques, such as export credit insurance.
3. Pay suppliers in advance
An advance payment is a type of payment that is made ahead of its normal schedule,
such as paying for a good or service before you actually receive the good or service. It is
the most preferable method of payment, helps your cash flows positive, and minimizes
your risk. However, few buyers will be willing to pay in advance because they concerns
that the goods may not be sent if payment is made in advance. At this point, exporter can
come up with the solution that the importer just need to pay a part of the cost to secure
benefits for both parties.

IV. Some tips about security in payment exporters must know

To prevent and minimize risks in the transaction process, there are some methods to
support payment security :
- Read carefully the information about the trading market as well as the partner who
will cooperate with you. The partner's reputation as one of the factors that ensure the
transaction is successful or not. Can make learning partners through the portal published
on the internet from the company specializes in providing beauty services tracing
information prestige or through the channel of the Association at the national partner
representative body diplomatic...
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 - In order to ensure their rights, enterprises should draft the contents, stipulate the
full and strict terms in the purchase contract, avoid the occurrence of handicap, the
incident is not worth
- Businesses need to explore carefully the advantages and disadvantages when
selecting a form of payment for the right and safest because the form of letters of credit or
wire transfers only the method of payment between buyers and sellers.
- Should use payment method sight L/C (LC confirmed if there is risk or lack of
trust with some markets) or TT deposit before delivery to increase the reliability and
safety of payment. All cases if possible or deposit requirements highest possible amount
negotiated as can’t trust anyone but myself while international sales
- Limited (or should not) use methods DP or DA or CAD to customers not by
strategy or perennial risk is huge
- If a seller is unwilling to risk the customer’s potential refusal to honor a
documentary draft, they may prefer that a letter of credit is used to secure payment. In this
manner, the buyer’s bank guarantees payment and the buyer hasn’t the discretion to reject
payment. In this case, the seller must transmit title documents (as defined above) that
satisfy the conditions of the letter of credit.
- The documentary draft (or bill of exchange, as it may be called) is a special type of
negotiable instrument, like a reverse check, that is commonly used to expedite payment. It
provides the seller with the security of not permitting the buyer to possess the goods until
the draft is paid, or is authorized to be paid. Moreover, in the event of the buyer’s failure
to pay, it permits a seller or the international bank involved in the transaction to sue the
buyer, based on the draft alone, without having to prove the terms of the underlying sales
contract. While this method is more secure than an open account transaction, there is still
some risk that the buyer may reject the documents or otherwise renege on the transaction.
The banks do not guarantee payment of the draft.
- When not really confident with the experience and skills of import and export
work, regularly learn from the experts or support units to ensure that the above risks are
minimized.

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 CONCLUSION

If you walk into a supermarket and can buy South American bananas, Brazilian coffee
and a bottle of France wine, you are experiencing the effects of international trade.
Economic theory indicates that international trade raises the standard of living. A
comparison between the performance of open and closed economies confirms that the
benefits of trade in practice are significant. International trade allows us to expand our
markets for both goods and services, helps economic develop, connects other country, and
make success of individual businesses.
However, shifting politics, new business models and changing societal expectations are
creating new challenges. As a result of international trade, the market contains greater
competition and more competitive prices, therefore exporters must study and learn lessons
carefully in order to gain the success in their own business