INTERNATIONAL BUSINESS AND TRADE
NORMA DY LOPEZ-MARIANO, Ph.D., FRIEDr
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[Link] LESSON 1/CHAPTER 1
Chapter 1
Evolution of International Trade
[Link] LESSON 1/CHAPTER 1
Introduction
World Trade Organization (WTO) - the only global
international organization dealing with the rules of trade
between nations
Roles of WTO:
1. It operates a global system of trade rules.
2. It acts as a forum for negotiating trade agreements.
3. It settles trade disputes between its members.
4. It supports the needs of developing countries.
[Link] LESSON 1/CHAPTER 1
Lesson 1.1
Evolution of International Trade:
A Glimpse
[Link] LESSON 1.1/CHAPTER 1
Lesson Objectives
At the end of the lesson, the students should be able to:
1. explain how the Standard Theory of International Trade
developed;
2. discuss the meaning of trade surplus;
3. elaborate on industrial capitalism;
4. contrast free trade and mercantilism;
5. distinguish between absolute advantage and comparative
advantage;
6. differentiate marginal cost from opportunity cost; and
7. take a stand on whether international business and trade is
beneficial or not.
[Link] LESSON 1.1/CHAPTER 1
Lesson Key Concepts and Examples
[Link] LESSON 1.1/CHAPTER 1
• The main historical theories are called classical and are
from the perspective of a country, or country-based.
• The theory is a classical, country-based international
trade theory that states that a country’s wealth is
determined by its holdings of gold and silver.
[Link] LESSON 1.1/CHAPTER 1
• Division of labor is the separation of a work process into
a number of tasks, with each task performed by a separate
person or group of persons to boost productivity and
efficiency and enhance specialization.
• Trade surplus is the amount by which the value of a
country’s exports exceeds the cost of its imports.
[Link] LESSON 1.1/CHAPTER 1
• In a free trade system, individuals benefit from a greater
choice of affordable goods, while mercantilism restricts
imports and reduces the choices available to
consumers.
• Absolute advantage is the country’s inherent ability to
produce specific goods efficiently and effectively at a
relatively lower marginal cost.
[Link] LESSON 1.1/CHAPTER 1
• Comparative advantage refers to the country’s capability
to produce the specific good at a lower marginal cost and
opportunity cost.
• Marginal cost is the cost incurred on producing an
additional unit of a product. Opportunity cost means the
value you will get from an alternative that you did not
choose.
[Link] LESSON 1.1/CHAPTER 1
Lesson Activities and/or
Practice Exercises
[Link] LESSON 1.1/CHAPTER 1
Instruction: Answer the following comprehensively.
1. Explain how the Standard Theory of International Trade
developed.
2. Discuss the meaning of trade surplus.
3. Elaborate on industrial capitalism.
4. Contrast free trade and mercantilism.
5. Distinguish between absolute advantage and comparative
advantage.
6. Differentiate marginal cost from opportunity cost.
[Link] LESSON 1.1/CHAPTER 1
Connections and Applications
In at least two paragraphs, write your reflection on the
following topic:
Industrial Business and Trade: Beneficial or Not?
[Link] LESSON 1.1/CHAPTER 1
Lesson 1.2
Barter
[Link] LESSON 1.2/CHAPTER 1
Lesson Objectives
At the end of the lesson, the students should be able to:
1. explain the meaning of barter;
2. discuss the development of barter;
3. elaborate on the advantages of barter; and
4. elucidate the disadvantages of barter.
[Link] LESSON 1.2/CHAPTER 1
Lesson Key Concepts and Examples
[Link] LESSON 1.2/CHAPTER 1
• Bartering involves a direct trade or exchange of goods and
services.
• Advantage - It does not involve money and is very simple.
• However, it is difficult to find people who need what other
people have, and there is no standard measure of value.
• Even today, there are swap markets, online auctions, and
numerous websites that offer online bartering arrangements.
[Link] LESSON 1.2/CHAPTER 1
• The history of bartering can be traced back to 6000 BC,
when the barter system was introduced by the tribes of
Mesopotamia, then adopted by the Phoenicians, and
improved by the Babylonians.
• Salt was so valuable at that time that the salary of
Roman soldiers was paid in salt.
[Link] LESSON 1.2/CHAPTER 1
Lesson Activities and/or
Practice Exercises
[Link] LESSON 1.2/CHAPTER 1
Instruction: Answer the following comprehensively.
1. Explain the meaning of barter.
2. Elaborate on the advantages of barter.
3. Elucidate the disadvantages of barter.
[Link] LESSON 1.2/CHAPTER 1
Connections and Applications
In at least two paragraphs, write your reflection on the
following topic:
Barter
[Link] LESSON 1.2/CHAPTER 1
Lesson 1.3
Origin of Money
[Link] LESSON 1.3/CHAPTER 1
Lesson Objectives
At the end of the lesson, the students should be able to:
1. trace the origin of money;
2. give examples of items used as money;
3. explain the meaning of mint and minting; and
4. discuss the roles of China, Lydia, Canada, and France in the
development of money.
[Link] LESSON 1.3/CHAPTER 1
Lesson Key Concepts and Examples
[Link] LESSON 1.3/CHAPTER 1
• The first recognizable metal coins appeared in China in
1000 BC.
• Sometime around 770 BC, miniature replicas of tools and
weapons cast in bronze were used by the Chinese as a
medium of exchange. The small bronze celts and bronze
rings played a monetary role.
• Objects in the shape of circles became some of the first
coins.
• Around 700 BC, the Chinese moved from coins to paper
money.
[Link] LESSON 1.3/CHAPTER 1
• The first mint, an industrial facility to manufacture coins,
was established in Lydia (now western Turkey).
• Minting is the process of making a coin by stamping
metal.
• In 600 BC, around the time China started using paper
money, Lydia’s King Alyattes minted the first official
currency.
• King Croesus installed the first bimetallic monetary
system.
[Link] LESSON 1.3/CHAPTER 1
• The first regular system of exchange in Canada occurred in
Tadoussac, where French traders bartered with
Montagnais people.
• The first colonial settlement in Quebec was established by
Samuel de Champlain (1608). The beaver pelt was the
universally accepted medium of exchange in the colony. As
economic and financial needs became more complex, coins
from France came to be widely used.
[Link] LESSON 1.3/CHAPTER 1
• Silver and copper coins designed especially for the colonies
were minted in 1670.
• During the mid-1600s, Spanish dollars (piastres)
represented the first distinctive Canadian coins.
[Link] LESSON 1.3/CHAPTER 1
• The livre (French for “pound’) was the currency of the
Kingdom of France and its predecessor state of West
Francia from 1781 to 1794.
• In 1685, Jacques de Meulles, Intendant of Justice, Police,
and Finance, came up with the temporary issuance of paper
money printed on playing cards. Card money served as
money in Canada, just as coin did in France.
[Link] LESSON 1.3/CHAPTER 1
• Copper coins were introduced in 1722, but they were not
well received by merchants.
• Bills of exchange drawn on the Treasury were used for
payments of expenses in Canada.
• The advent of paper money led to an increase in
international trade.
[Link] LESSON 1.3/CHAPTER 1
Lesson Activities and/or
Practice Exercises
[Link] LESSON 1.3/CHAPTER 1
Instruction: Answer the following comprehensively.
1. Trace the origin of money.
2. Give examples of items used as money.
3. Explain the meaning of mint and minting.
[Link] LESSON 1.3/CHAPTER 1
Connections and Applications
In at least two paragraphs, write your reflection on the
following topic:
The Roles of China, Lydia, Canada, and France
in the Development of Money
[Link] LESSON 1.3/CHAPTER 1
Lesson 1.4
History of the Philippine
Currency
[Link] LESSON 1.4/CHAPTER 1
Lesson Objectives
At the end of the lesson, the students should be able to:
1. discuss the history of the Philippine currency during the pre-Hispanic
era;
2. explain the history of the Philippine currency during the Spanish era;
3. elaborate on the history of the Philippine currency during the
revolutionary period;
4. elucidate the history of the Philippine currency during the American
period;
5. discuss the history of the Philippine currency during the Japanese
occupation; and
6. explain the history of the Philippine currency during the Philippine
Republic.
[Link] LESSON 1.4/CHAPTER 1
Lesson Key Concepts and Examples
[Link] LESSON 1.4/CHAPTER 1
• Barter was the means of trade long before the Spaniards
came to the Philippines.
• Barter rings, made of gold called piloncitos, were the first
local form of coinage. These had a flat base that bore an
embossed inscription of the letters “MA” or “M,” believed to
be the name by which the Philippines was known to
Chinese traders.
[Link] LESSON 1.4/CHAPTER 1
• The cobs or macuquinas (silver coins) were the earliest
coins brought in by the galleons from Mexico and other
Spanish colonies.
• The barrilla, a crude bronze or copper coin worth about one
centavo, was the first coin struck in the country as
ordered by the Royalty of Spain. The Filipino term
“barya,” referring to small change, had its origin in barrilla.
[Link] LESSON 1.4/CHAPTER 1
• Gold coins with the portrait of Queen Isabela were
minted in Manila.
• The pesos fuertes, issued by the country’s first bank, the
El Banco Español Filipino de Isabel II, were the first
paper money circulated in the country.
• The Philippine Republic of 1898 issued its own coins and
paper currency, backed by the country’s natural resources.
[Link] LESSON 1.4/CHAPTER 1
• With the coming of the Americans in 1898, the Philippines
became one of the most prosperous countries in East
Asia. The Americans instituted the gold standard.
• The gold standard is a monetary system where a
country’s paper money has a value directly linked to gold;
countries agreed to convert paper money into a fixed
amount of gold per unit of currency.
[Link] LESSON 1.4/CHAPTER 1
• The US Congress approved the Coinage Act for the
Philippines in 1903. The coins issued under the system bore
the designs of Filipino engraver and artist, Melecio
Figueroa.
• El Banco Español Filipino was renamed Bank of the
Philippine Islands in 1912. Beginning in May 1918,
treasury certificates replaced the silver certificates
series, and a one-peso note was added.
[Link] LESSON 1.4/CHAPTER 1
• Two kinds of notes circulated in the country during the
outbreak of World War II—war notes in high denominations
issued by the Japanese Occupation Forces, dubbed as
“Mickey Mouse” money, and guerrilla notes or
resistance currencies in low denominations issued by
different provinces and municipalities.
[Link] LESSON 1.4/CHAPTER 1
• With the establishment of the Central Bank of the
Philippines in 1949, the first currencies issued were the
English series notes and the coins minted at the US
Bureau of Mint.
• The “Filipinization” of the republic coins and notes began in
the late 60s.
• The Ang Bagong Lipunan (ABL) series notes were
circulated starting in 1978.
[Link] LESSON 1.4/CHAPTER 1
• In 1983, the Flora and Fauna coin series was initially
issued.
• The New Design Series of banknotes issued in 1985
replaced the ABL series.
• Ten years later, a new set of coins and notes was issued,
carrying the logo of the new Bangko Sentral ng
Pilipinas.
[Link] LESSON 1.4/CHAPTER 1
Lesson Activities and/or
Practice Exercises
[Link] LESSON 1.4/CHAPTER 1
Instruction: Answer the following comprehensively.
1. Discuss the history of the Philippine currency during the pre-Hispanic
era.
2. Explain the history of the Philippine currency during the Spanish era.
3. Elaborate on the history of the Philippine currency during the
revolutionary period.
4. Elucidate the history of the Philippine currency during the American
period.
5. Discuss the history of the Philippine currency during the Japanese
occupation.
6. Explain the history of the Philippine currency during the Philippine
Republic.
[Link] LESSON 1.4/CHAPTER 1
Connections and Applications
In at least two paragraphs, write your reflection on the
following topic:
The History of Philippine Currency
[Link] LESSON 1.4/CHAPTER 1
Lesson 1.5
Mobile Payments and Internet
Payments
[Link] LESSON 1.5/CHAPTER 1
Lesson Objectives
At the end of the lesson, the students should be able to:
1. explain the meaning of mobile payments;
2. discuss what point of sale is;
3. elaborate on the different methods of mobile or internet
payments;
4. elucidate the meaning of mobile wallets; and
5. discuss “autopay” and “direct carrier billing.”
[Link] LESSON 1.5/CHAPTER 1
Lesson Key Concepts and Examples
[Link] LESSON 1.5/CHAPTER 1
• Mobile payments are money rendered for a product or
service through a portable electronic device.
• Near field communication (NFC) payments are the
technology that allows contactless payments using close-
proximity radio frequency identification.
[Link] LESSON 1.5/CHAPTER 1
• Sound wave-based (SWB) or sound signal-based (SSB)
mobile payments or pay-by-sound use an advanced, ultra-
low power wireless transmission technology.
• Magnetic secure transmission (MST) makes use of a
magnetic signal to process payment using a secure
tokenization system.
[Link] LESSON 1.5/CHAPTER 1
• Quick response (QR) codes are the trademark of a type of
matrix barcode (type 2D barcode) readable by
smartphones.
• Short message/messaging service (SMS), or premium
SMS payments, pay for products or services via text
message.
• Direct carrier billing (DCB) is where the payment will be
added to your phone bill or prepaid SIM card.
[Link] LESSON 1.5/CHAPTER 1
• Internet payments can be done on desktops, laptops, or
even phones (as in mobile payments).
• Wireless application protocol (WAP) payments used to
be the most common facility on smartphones, through a
more limited-capacity WAP browser or app.
• “Autopay” is scheduled to be automatically paid on a
certain date.
[Link] LESSON 1.5/CHAPTER 1
• Payment links or pay by link is most commonly referring
to a button or link sent to process a transaction for a
specified merchant.
• Neobank is an umbrella term for the new generation of
cutting-edge, fully digital banking services classified as
a type of financial technology (fintech) solution.
[Link] LESSON 1.5/CHAPTER 1
Lesson Activities and/or
Practice Exercises
[Link] LESSON 1.5/CHAPTER 1
Instruction: Answer the following comprehensively.
1. Explain the meaning of mobile payments.
2. Discuss what point of sale is.
3. Elaborate on the different methods of mobile or internet
payments.
4. Elucidate the meaning of mobile wallets.
5. Discuss “autopay” and “direct carrier billing.”
[Link] LESSON 1.5/CHAPTER 1
Connections and Applications
In at least two paragraphs, write your reflection on the
following topic:
Mobile Payments and Internet Payments
[Link] LESSON 1.5/CHAPTER 1
Lesson 1.6
Virtual Currency
[Link] LESSON 1.6/CHAPTER 1
Lesson Objectives
At the end of the lesson, the students should be able to:
1. explain the meaning of virtual currency;
2. differentiate fiat money and e-money;
3. discuss what a virtual currency exchange is;
4. elaborate on blockchain technology;
5. distinguish between centralized and decentralized relevant
to cryptocurrencies; and
6. elucidate the top six 5-star cryptocurrencies.
[Link] LESSON 1.6/CHAPTER 1
Lesson Key Concepts and Examples
[Link] LESSON 1.6/CHAPTER 1
• Cryptocurrency, virtual or digital currency, “digital
gold,” or “altcoins” are any type of digital unit that is used
as a medium of exchange or a form of digitally stored
value generated by agreement within the community of
virtual currency users.
[Link] LESSON 1.6/CHAPTER 1
• Fiat currency or fiat money or cash is the real
currency, coins, and paper money (bills) issued and
printed by the central bank of a country.
• E-money is a digital representation of fiat currency stored
in digital wallets or e-wallets.
[Link] LESSON 1.6/CHAPTER 1
• Virtual currency, which is stored digitally, would still need
to be converted first to Philippine peso, then transferred to
a destination wallet or withdrawn as cash through different
mediums that are accepted in the country done through a
virtual currency exchange.
• Cryptocurrencies use electronic coins as their form of
exchange, which is nothing more than slots in the
blockchain.
[Link] LESSON 1.6/CHAPTER 1
• Cryptocurrencies use cryptography, the process of
protecting information by using codes, for security.
• The more users a coin has, the more useful it
becomes, and the higher its price goes. But when a
coin falls out of favor, there is nothing to stop it from going
to zero.
[Link] LESSON 1.6/CHAPTER 1
Lesson Activities and/or
Practice Exercises
[Link] LESSON 1.6/CHAPTER 1
Instruction: Answer the following comprehensively.
1. Explain the meaning of virtual currency.
2. Differentiate fiat money from e-money.
3. Discuss what a virtual currency exchange is.
4. Elaborate on blockchain technology.
5. Distinguish between centralized and decentralized relevant
to cryptocurrencies.
[Link] LESSON 1.6/CHAPTER 1
Connections and Applications
In at least two paragraphs, write your reflection on the
following topic:
Virtual Currency
[Link] LESSON 1.6/CHAPTER 1
Concluding Slide
International trade has a rich history, starting with the barter
system being replaced by Mercantilism in the 16th and
17th centuries. The 18th century saw a shift towards
liberalism.
International trade not only results in increased efficiency but
also allows countries to participate in a global economy,
encouraging the opportunity for foreign direct investment
(FDI). Economies can grow more efficiently and attract
competitive economic participants more easily.
[Link] LESSON 1/CHAPTER 1
Reference
Lopez-Mariano, Norma. 2023. International Business and
Trade. Manila: Rex Book Store, Inc.
[Link] LESSON 1/CHAPTER 1