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    Financial Institutions and Traditional International Trade Theories

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    Identify two regional or international institutions (e.g., International Monetary Fund, World Bank, United Nations, World Trade Organization) of which at least one is a financial institution.

    Then, select two countries that could apply traditional international trade theories (e.g., absolute advantage, comparative advantage, factor endowment) to enhance their participation in international trade.

    Finally, explain how each identified institution could help facilitate the trading process between the two countries.

    Use at least five references.

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    Our first international institution will be IFC, which is part of the world bank.

    IFC fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and governments.

    IFC helps companies and financial institutions in emerging markets create jobs, generate tax revenues, improve corporate governance and environmental performance, and contribute to their local communities. The goal is to improve lives, especially for the people who most need the benefits of growth.

    IFC invests in enterprises majority-owned by the private sector throughout most developing countries in the world. Developing regions include:

    Sub-Saharan Africa
    East Asia & the Pacific
    South Asia
    Europe & Central Asia
    Latin America & the Caribbean
    Middle East & North Africa

    IFC emphasizes five strategic priorities for maximizing its sustainable development impact:
    Strengthening its focus on frontier markets, particularly the SME sector;
    Building long-term partnerships with emerging global players in developing countries;
    Differentiating IFC from its competitors through sustainability;
    Addressing constraints to private sector investment in infrastructure, health, and education; and
    Developing domestic financial markets through institution building and the use of innovative financial products.

    Reference: http://www.ifc.org/ifcext/about.nsf/Content/WhatWeDo

    The two countries selected for this assignment are India and China. As we know, both China and India are the fastest growing and largest emerging market of the world, attracting huge investments and business from corporations all over the world. The strong economic growth, as evident from the high GDP growth and booming economies of these two countries have captured the attention of whole world. Both these countries are now being considered the future superpowers of the world.

    One of the primary reason for the success of these two countries in the global market has been the strong comparative advantage offered by these countries. For example, India's vast pool of educated, English speaking labor force available at extremely low costs has turned India into an outsourcing hub, especially for services like Information Technology. Similarly, China's strong manufacturing capacities enabled it manufacture a wide range of products at extremely low cost compared to other countries.

    Admittedly India's strength is not mass produced, low margin, low value addition, standardized products. However, in the high value addition items India definitely enjoys a distinct edge.

    India's "current" growth model has been more services driven and its strengths are a well-educated workforce, having information technology and technical competency with English language proficiency. China seems lagging in these departments. Also, China is deficient in most private services and this represents a huge market opportunity for India.
    Though other areas of collaboration do exist yet, ...