International Trade Finance & Investment

the assignment breaf is in the module guide

International Trade
Finance & Investment

EXECUTIVE SUMMARY
The report summarises various factors that lead to instability of the developing countries in
global fiscal and capital market. Main factors about the work of capital market in allocation of
equity in various aspects like trade, investment, and development within a geographical location
as well as outside of that location are summarised in this report. Also various problems that are
faced by a developing nation due to policies of foreign trade and industrialisation are also
summarised in this report.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
REFERENCES..............................................................................................................................11
CONCLUSION..............................................................................................................................12

INTRODUCTION
International trade can be referred as a process of selling and buying of commodities or
services across international borders due to the need, requirement, and demand for that product.
It is a very crucial aspect in economic development of a country and it helps in increased growth
and profitability (Ahn, 2020). This report covers topics such as analysis and evaluation of
domestic economy and internation trade investment and development and its various different
aspects are also considered. Apart for this the report also covers explanation of the challenges
that are faced by the developing economies because of industrialisation and trade policies and its
impact and various factors that affect a country.
MAIN BODY
1. Domestic economy and international trade investment and development
Background of financial market
It is a market that holds a very important position in the current market scenario and the
financial market also possess a long history. It is a market of various possibilities in which an
individual purchase of sell assets of their choices. It is very beneficial in short as well as in long
run and used by many firms and organisations too so that profits can be increased. Financial
market includes various instruments such as shares, debentures, bonds, commodities, foreign
exchange, etc. It has the potential to change the equations drastically if used correctly.
Investors and major financial companies are known to be a field in which loan and bond lending
is sold and acquired as a loan market (Accominotti and Ugolini, 2019). Investing in debt is
perceived primarily to require a lower risk than investing in equity, but to achieve a lower return
on investment. Various types of bonds are known to be the best and most popular form of
allocating in securities, and their valuation fluctuates less than every other finance investment.
For example , Company ABC aims to provide $200 million in funds to bondholders, some of the
most common debt instruments are debt loans, shares, etc. Although the stock market requires a
portion of the ownership and operation of the company that produces ample sales or income.

National economy and capital allocation: The financial sector is independent, formed and
concentrated on international trade in the United Kingdom, which remains progressive at about
1.4 percent in 2019 and is expected to be approximately 1.3 percent in 2020. This has shown that
business investment has an enormous role to play in speeding the overall economy, and the
economy of the coming year it would be decreased due to a fall in the real estate market or slow
job opportunities. It was also noted that increasing investment in trade and business and slow
consumer demand will hold back the full GDP in the coming years. These forecasts assume that
the initial Brexit contract arrangement could lead to slow economic growth , especially compared
to the previous year.
2

Banking system: The UK banking sector, which started in the 17th century in the Kingdom of
England, has matured too much, providing numerous important banking systems that facilitate
the operation of various organizations and private financing. Four large banks such as Royal
Bank of Scotland (RBS), Lloyd Group, HSBC and Barclays have recently been seen by the UK
banking sector (Roberts, Choer Moraes and Ferguson, 2019).
The above diagram reflects the number of banking institutions in the United Kingdom with the
global market share. Its been reported that at the period of financial instability, HBOS and Lloyd
TBS merged or merged to create the biggest bank in the UK.
3

Role of central bank: The Bank of England was founded for the first and only time in 1694 and
was nationalised in 1948. BOE has played a range of positions, such as controlling the rate of
return, that tends to stabilise the annual inflation of the United Kingdom by around 2%. This also
monitors the real procurement of money or funds and government fiscal services within the
economy in order to preserve adequate cash flow and reserves, manages the foreign currency
reserve of the United Kingdom to aid in the regulation of disputes debts or commitments, and
also serves as a last term creditor to provide funds to create effective liquidity and eradicate fun
constraints.
Monetary policy: In economic terminology, the decisions taken by a government of the United
Kingdom to assess the successful cost of borrowing money and the vast volume of money money
supply in the market are known as monetary policy (Schnabl, 2019). In order to deter recessions
and to hold inflation lower, the central goal of a successful financial markets ought to be to
improve overall economic elasticity. The aim of UK fiscal and monetary policies is to sustain
CPI 2 percent + /-1 as the important components of higher spending are considered to be lower
growth. The monetary policy of the United Kingdom, but at the other side, is primarily focused
on the maintenance of a sustainable and efficient economy that tends to reduce poverty.
Regulations governing the financial system: Right before the 2008 global financial crisis, a
almost endless succession of new laws , regulations, directives, commissions, boards and
agencies have been set up to either modify or amend the existing regulatory structure and drive it
forward. There have been no institutions controlling the system of taxation in the United
Kingdom, such as the FPC (Financial Policy Committee) is forced to define, control and take
clear action to reduce the ongoing and upcoming years threats affecting the resilience of the
whole UK financial system. In order to maximise the capital of multinational banks and
taxpayers to cover expenses, this mainly resolves the growing difficulties with the overall
financial system. The prudential governmental body, which would be responsible for regulating
financial reporting procedures in approximately 1720 UK banks , financial companies, insurers
and large investment firms, is also part of BOE.
There's many a few certain UK institutions that have placed more focus on fiduciary laws such as
micro credit problems, that requires rules for private sector organisations such as creditor, major
bank, financial institution, protection undertakings.
Domestic money market:
4

(a) Savings: Savings are the procedures under which a certain part of existing earnings is
preserved in order to satisfy prospective provisions. Savings offer assistance to increase bank
balances, facilitate stock investments and improve short-term accumulation of assets (Redmond,
and Nasir, 2020). It is also a standardised way of calculating stable national wealth, which is
greater than gross domestic product intake and other taxes. Consequently, saving is stated to be
very necessary in the short future to sustain and improve UK economic growth as it relates to
investment financing.
(b) Loans: It is rare in modern days to have enough capital in hands for customers and firms to
satisfy their expensive demand or spending in different outlets. In order to help reduce the effect
of operational free cash flows and develop financial health, long-term loans are thus needed.
Stock markets
London stock exchange:The London Stock Exchange (LSE) is the country's largest financial
exchange and the biggest in Europe. The domestic producers, that opened in 1773, were
consolidated into companies, generally known as LSE, in Great Britain and Ireland in 1973. The
London Stock Exchange lets firms raise funds from foreign buyers.
AIM:Admittedly, the Alternative Investment Market (AIM) is a micro-market of the London
Stock Exchange ( LSE) that is primarily structured to help small firms collect money from the
stock market. It enables small businesses and businesses, by regulated trade skill build, to
generate money , making trade policies more competitive than the main market. After its
coronation, there have been 3,600 small businesses from across the globe that have been part of
the Target. Via AIM 's law, all sorts of small, early-stage companies are advantageous so they
will easily collect capital to fund business operations.
International economy and capital allocation:
International capital markets: The global capital market has a specified structure within the
international environment under which officials, individuals and firms tax and spend across
national borders. The foreign stock market has many advantages, such as offering higher returns
and lower bond yields, and offering additional future rewards for firms in different markets that
seek to mitigate risk factors.
1. Commercial banks:
5

a) Savings:This applies to the sacrifice of expenditures, particularly capital spending. As the
other supplies the other with sources of financing, saving appears to be closely related to internal
spending. It is possible to invest additional money to use them to generate valuable goods, such
as machinery and equipment, by not using flexibility to buy manufactured goods and services.
b) Loans: Debts to other individuals , businesses, etc. are borrowed by some, such as firms or
other organisations, in finance (Ugurlu and Jindrichovska, 2019). The lender (i.e. the creditor)
recognizes a mortgage and but throughout to be obligated to pay interest on the national debt
until the principal value on the loan is borrowed and repaid.
2. Bond markets: The banking sector, often referred to as the lending market, is an international
financial industry sector where financial liabilities authorised by regulatory authorities and
government agencies can be easily exchanged by interested parties. Euro-dollar debt is U.S. debt.
Contralateral currency debt in both U.S. provided by an offshore corporation and held in a
corporate entity And the country of origin of the lender. Such bonds are crucial sources of
investment and financing for international or global ceremonies and multiple nations of nations.
3. Foreign Exchange markets: Admittedly, as a ferox or FC market, the frequently recognised
exchange rate are a world market over the counter ( OTC), attempting to set global exchange
rates. This merely offers the stakeholders with a lawful and authorised framework for the sale ,
purchase, currency speculation and exchange of investment products. Of that kind economies are
mentioned on the basis that, depending on the type of payment, there are two types of forward
and spot financial markets.
4. Global stock markets: Stock markets are regulated trading forums, putting together all the
diverse sellers and buyers of diverse financial assets or shares, such as commodities, bonds and
other exchangeable products (Liu and Woo, 2019). In making fiscal securities traders into a legal
and efficient medium, there are various huge stock exchanges markets across the world that are
beneficial. Any major stock exchanges are below:
 Tokyo Stock Exchange, Japan
 Shenzhen Stock Exchange, China
 Toronto Stock Exchange, Canada
 Hong Kong Stock Exchange, Hong Kong
 London Stock Exchange, United Kingdom
6

5. Derivatives: In financial perspective, a derivatives is a financial protection that has a basic
asset that relies on relying or group. In financial terms, the steps taken by the government of the
United Kingdom to settle on the efficient price of borrowing money are known as financial
markets and the vast amount of money money supply in the market. In order to deter recessions
and to hold inflation lower, the central goal of a successful monetary policy ought to be to
improve overall social elastic properties (Betz and Pond, 2019). The aim of UK monetary or
fiscal policy is to hold CPI 2 percent + /-1 as lower deflation is considered to be the key
components of increased revenues. In the other hand, the financial system of the United
Kingdom is largely focused on the maintenance of a sustainable and efficient economy that tends
to reduce particular capital for poverty. These FE derivatives are perceived to be a valid tariff
arrangement between separate parties that may be changed according to the valuation of the
underlying assets. The most substantial structural capital in commodities is equities, shares, cash,
currencies, currency values, and inflation rates. This funds are normally acquired from brokerage
firms.
6. Non – bank financial institutions: Offering a variety of banking-related products and services,
commercial banks are known as NBFI without a banking institution. These organizations are
usually not allowed to hold in their deposit accounts conventional marketable securities for
consumers (Ding, Jin and Xie, 2019). The main aim of NBFC is to facilitate complementary
banking products and services including such procurement, risk management , financial advice,
purchase and sales, currency value, and control of monetary policy.
Financial investment and trade theory:
Ricardian theory: In 1817, the Ricardian definition was first formulated with the primary sole
purpose of elaborating on the existence and authenticity of real wealth. The core concept behind
this hypothesis is that price of land is due to production variations and the condition of separate
state land. It's because of the powerful and unstoppable soil forces that gaze at the supply of land.
Ricardo claims there is property-rent, and although various land areas with differing degrees of
competitive authority are much more important than others, including some forests.
Contributions of international trade:
World trade organisations (WTO)- This is one of the worlds largest most relevant international
institutions set up to coordinate between various nations for trade and business regulations. The
7

key aim is to help exports and imports suppliers of essential products and services to improve the
global economy (Leibovici and Waugh, 2019).
8

Challenges faced by country due to development/industrialisation.
In this part of report chosen country is Russia in which there are some issues which are explained
below in such manner:
a) Political Stability in Russia: Due to innovation / industrial revolution, Russia faces a lower
score in the index of economic development. In the year 2017, Russian raking was -0.05, which
is increased compared to past decades. As per World Bank datasets from 1996 to 2017 time. In
that time, Russia's key trait was -1 points, with a low of approx. -1,51 points in 2004 and a
median of approx. -0,67 points in 2017. Such detrimental social cohesion poses barriers to the
successful execution of Russia's microeconomic and macro-economic strategies.
b) Labour productivity in Russia: Manufacturing employment has improved recently due to the
effects of industrial development. Even so, this degree of productivity growth has decreased due
to the global recession in 2015 and 2016 (Russia Labor Productivity. 2019). Manufacturing
output within Russia improved by approximately 1.5% p.a. in 2017. After an estimated 0.3
percent decline in 2016. Output in Russia averaged approximately 3.15 percent from 2003 and
2017, touching a peak of approximately 7.50 percent in 2006 and a low of approximately -4.10
percent in 2009. Growing other countries' involvement in labour productivity poses the problem
of over-dependence on the labour of other nations and implicitly contributes to unemployment.
c) Environmental Concerns in Russia: Russia produces a significant proportion of the world's
greenhouse gas emissions, rendering it a major actor in global warming negotiations. The Kyoto
Protocol did not come into force until Russia ratified it (Environmental Concerns: Russia. 2019).
Russian positions, though, are only an analytical problem in the upcoming climate talks. Russia's
research and community has taken a far more pessimistic view on rising temperatures caused by
humans than the rest of the world, school education is too poor, and global warming awareness
accessible to the public is very small. This affects Russia's foreign reputation and some investors
may stop making investments because of such a reputation.
Challenges Russia is facing due to trade policies set by WTO:
a) Recent trade policy: In Russia, when shipping to Russia, US businesses face no non-tariff /
tariff trade barriers. For example, distributors of beer beverages with long-standing standards and
conditions that all excise duty, import tariffs and bear-alcohol taxes have been paid via security
deposit or investments, in which the refund process is too sluggish.
9

b) Approaches to trade agreements: Agreements on trade may be partial or total. Bilateral here
applies to the fact that on certain particular financial reach, only two countries exchange with
each other. Usually, those deals prohibit other nations from doing business with their competing
nations. Although more than two countries with feel accepted on some particular or general trade
issues enter into Multilateral arrangements. W T O 's policies here prohibit Russia from entering
into any arrangements of any sort that offer incentives to other BRICS nations.
c) Challenges faced due to trade policies set by WTO / GATT: One of Russia's main problems is
that the WTO and GATT economic practises are actively and implicitly affected by the US and
other developing nations. Such measures are still unlikely to halt the US-China trade war that is
having a huge effect on Russia economic activity.
10

REFERENCES
Ahn, J., 2020. A theory of domestic and international trade finance. Emerald Publishing Limited.
Accominotti, O. and Ugolini, S., 2019. International trade finance from the origins to the present:
market structures, regulation, and governance.
Roberts, A., Choer Moraes, H. and Ferguson, V., 2019. Toward a Geoeconomic Order in
International Trade and Investment. Journal of International Economic Law, 22(4),
pp.655-676.
Schnabl, G., 2019. China's overinvestment and international trade conflicts. China & World
Economy, 27(5), pp.37-62.
Redmond, T. and Nasir, M.A., 2020. Role of natural resource abundance, international trade and
financial development in the economic development of selected countries. Resources
Policy, 66, p.101591.
Ugurlu, E. and Jindrichovska, I., 2019. Estimating gravity model in the Czech Republic:
empirical study of impact of IFRS on Czech international trade.
Liu, T., Lu, D. and Woo, W.T., 2019. Trade, finance and international currency. Journal of
Economic Behavior & Organization, 164, pp.374-413.
Ding, H., Jin, Y., Liu, Z. and Xie, W., 2019. The relationship between international trade and
capital flow: A network perspective. Journal of International Money and Finance, 91,
pp.1-11.
Leibovici, F. and Waugh, M.E., 2019. International trade and intertemporal substitution. Journal
of International Economics, 117, pp.158-174.
Betz, T. and Pond, A., 2019. Foreign financing and the international sources of property
rights. World Politics, 71(3), pp.503-541.
Environmental Concerns: Russia. 2019. [Online]. Available
through:<https://naturvernforbundet.no/international/environmental-issues-in-russia/
category930.html>
Russia Labor Productivity. 2019. [Online]. Available through:
<https://tradingeconomics.com/russia/productivity>
11

CONCLUSION
The above research outlined the definition of the growth of international / global trade and
financial resources. The wider term is called finance, which explains borrowing, funding,
development, fiscal leverage, capital outflows, inflows and spending problems. Besides that,
WTO policies often play a significant role in the economic development and capital markets in
various countries.
Recommendations:
1. To reinforce its success in the global capital markets, Russia must follow WTO strategies.
2. Naivety of environmental problems will result in a serious risk to the region, so Russia must
put more focus on this region.
3. Trade disputes with America also have a huge effect on the economies of the region, so Russia
can take measures towards settling those conflicts in spite of WTO policy.
4. For ultimate business and market growth, Russia must take into account the challenges listed
above.
12

13

1

2