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KROK Economics and Law University

International Relations Faculty

International Economics and Business Department

Research Paper:

The Development of foreign trade of Ukraine

2nd year student

of “International Economics KROK

Exclusive” Programme:

Anna Posikera

KYIV - 2011Scientific advisor:

PLAN

INTRODUCTION

CHAPTER I. THEORETICAL ASPECTS OF FOREIGN TRADE ORGANIZATION

1.1 Principles of foreign economic activity

1.2 Concepts and theories of international trade

1.3 Regulation of foreign trade

CHAPTER II. MODERN TRENDS OF FOREIGN TRADE DEVELOPMENT OF UKRAINE

2.1 Evaluation of export potential

2.2 Export and import flows of commodities

2.3 Export and import flows of services

2.4 Problems of foreign trade of Ukraine

CHAPTER III. DEVELOPMENT PERSPECTIVES OF UKRAINE’S FOREIGN TRADE

3.1 Strategy of foreign trade of Ukraine

CONCLUSION

REFERENCES

INTRODUCTION

The promotion of independence of Ukraine started its actual output on the world stage as a subject of international economic relations. Changes in the geopolitical situation of Ukraine, were made after independence, and situational features of the current state of transformation processes in the economy substantially increased role of foreign economic relations in development. Reinforcing this factor is dictated objectively undertaken by market transformations, which form a qualitatively new framework for further economic and social development. Only part of Ukraine in world economic space and of how this process will take place depends on further economic and social development of States as the world economy organic subsystem.

The most effective and efficient strategy of Ukraine's integration into the global economy is to combine economic restructuring with its focus on strong growth in exports and its differentiation potential. This can be achieved by improving the overall investment climate and attracting investments in related sectors, establishing a mechanism to stimulate exports and the formation of viable competitive export industries.

As a subject of international economic relations, Ukraine has consciously to log in economic links to the most effective use all their capabilities and improve competitiveness.

The main objective of the course work - to explore the features of Ukraine's foreign trade. Subject of research are economic relations with the formation of modern international economic relations.

The research object is a foreign trade of Ukraine.

The urgency of the work is that at this time in our country, the real prospects for a truly open economy, its effective integration into the world economy. Active use of external factors contribute to overcoming the negative processes in the economy and further development of market relations. Theoretical and methodological basis of course work are the main provisions and conclusions expressed in the fundamental scientific works of domestic and foreign economists in the theory of international trade.

The work consists of three parts, which consistently explored issues of modern international economic relations and Ukraine's place in this system.

In the first chapter I will tell you about “THEORETICAL ASPECTS OF FOREIGN TRADE ORGANIZATION”. After that I will move on to “ MODERN TRENDS OF FOREIGN TRADE DEVELOPMENT OF UKRAINE”. And then I will give you some background about “DEVELOPMENT PERSPECTIVES OF UKRAINE’S FOREIGN TRADE”.

To conclude I would like to say that today the issue of foreign trade of Ukraine is very important and needs special attention, that is why I chose the topic for my course work, named „The Development of foreign trade of Ukraine

CHAPTER I. THEORETICAL ASPECTS OF FOREIGN TRADE ORGANIZATION

1.1 Principles of foreign economic activity

export import foreign trade

Ukraine's economic entities and foreign economic entities in carrying out foreign trade activities are guided by relevant principles.

1. The principle of sovereignty of the people of Ukraine in the implementation of external low economy activity that is:

- Exclusive right of the people in Ukraine alone and independently carry out foreign economic activities in Ukraine, following the laws in force in Ukraine;

- Ukraine obligation to comply strictly with all agreements and obligations of Ukraine in international economic relations.

2. The principle of freedom of foreign trade enterprises to production, that is:

- The right to foreign economic entities to voluntarily engage in foreign economic relations;

- The right of foreign economic activity to make it in any form not expressly prohibited by applicable laws of Ukraine;

- The obligation to adhere to the foreign trade activity of the established laws of Ukraine;

- Exclusive right of ownership of foreign economic activity in all the results obtained by them foreign economic activity.

3. Principle of legal equality and nondiscrimination, which is:

- Equality before the law in all subjects of foreign economic activity, regardless of ownership, including the state in foreign trade activity;

- Prohibition of any, except those provided for in this Law, the state action resulting in restrictions on rights and discrimination of foreign economic activity and foreign business entities by ownership, location and other characteristics;

- Restrictive inadmissibility of activity on the part of any of its subjects, except as provided by law.

4. Rule of law, that is:

- In the regulation of foreign economic activity only by the laws of Ukraine;

- Prohibition of the use regulations and administrative acts of local bodies in any way to create conditions for foreign economic entities, which are less favorable than those specified by laws of Ukraine.

5. The principle of protecting the interests of foreign economic activity, which is that Ukraine, as:

- Ensure equal protection of the interests of foreign economic entities and foreign business entities in its territory under the laws of Ukraine;

- Provides equal protection to all foreign economic entities of Ukraine outside of Ukraine in accordance with international law;

6. The principle of equivalence of exchange, the inadmissibility of dumping in the import and export goods.

1.2 Concepts and theories of international trade

Foreign policy of any state concentrates on such questions: what goods to export and import that with which further improve information: what products to export and import that with which countries to trade and to what extent, if you want the state to intervene in free flow of goods, and if so, to what extent?

Today, developed two types of trade theory, which in many ways answer these questions. According to the theories of the first type of state is be involved in trade. These theories and study explain which products and to what extent the country and who will traded without any government restrictions. These theories include: the theory of absolute advantage, comparative advantage, country size, proportion of production, product life cycle, similarity of countries' international competitiveness of nations "and so on. The second type of theories involves government intervention in the free flow of goods between countries to change the volume, composition and direction of trade. The theories this type include: the theory of mercantilism neomerkantylizmu, depending and others. The purpose of theories of international trade was and is to help companies and governments in choice of specialization and the most expedient option strategies to promote deliberate use of national resources.

Mercantilism. The first theory of international trade - the theory of mercantilism – was developed by European scientists Manom Thomas (1571-1641), Charles Deyviantom (1656-1714), Jean Baptiste Colbert (1619-1683), Sir William Petty (1623 - 1687). Prove the role of the product and the need national economic output to foreign markets. Mercantilism - an economic doctrine and economic policy, which represents commercial bourgeoisie in feudal times and formation of capitalism. According to the theory of mercantilism wealth of the country measured by number gold and silver in their possession. Mercantilists believed that the economic system consists of three sectors: industrial, agricultural and foreign colonies. For effective functioning of the economic system most relevant to their opinion, were the traders, their work was seen as a major factor production. Thus, the source of wealth is the sphere of circulation, not field production of monetary wealth ototozhnyuvalosya capital.

Because in the world, according to supporters of this theory, there is limited of wealth (gold and silver), the country can increase its wealth and poverty at the expense of others, is due redistribution.

One of the main prerequisites merkantylistskoyi theory was that economic system functioned under conditions of underemployment due to what additional inflow of gold from abroad could in conjunction with,surplus labor to increase production. If employment population was complete, the flow of gold from abroad would cause the inflation and not found effective use.

Mercantilists merit is that they were first offered a coherent theory of international trade, showed its importance for economic growth countries, have developed a model of its development, first described that in the modern economy is called the balance of payments.

Theory of absolute advantage

The founder of classical school of economic thought was Adam Smith (1723-1790). He declared that the basis of wealth nations and peoples is an international division of labor and an appropriate specialization of different countries in producing those goods for which they have absolute advantage.

The theory of absolute advantage is based on two assumptions:

1) the only factor of production is labor

2) full employment, that all available labor used in producing goods

3) global economy has two countries, so international trade involved only two countries that produce and sell with each other only two goods

4) production costs - permanent and their reduction increases demand for goods

5) the price of one good expressed in amount of labor required to produce other

6) transportation costs of transportation of goods from one country to another is zero

7) foreign trade is free from restrictions and regulations.

The advantage of the theory of absolute advantage is that it is based on labor theory of value and confirms the advantages of division of labor not only nationally but also internationally.

The disadvantage of this theory to explain international trade is that it does not answer the question why countries trade among themselves even the absence of absolute advantage in producing certain goods, is when one country has absolute advantage in producing all goods.

The theory of comparative advantage

The theory of absolute advantage A. Smith, David Ricardo developed (1772-1823), proving that absolute advantage is only a partial case of general rules.

Advantages of the theory of comparative advantage:

1) first described the balance of aggregate demand and aggregate supply. Although It was envisaged that the cost of goods determined by the amount of work, necessary for its production, the theory of comparative advantage showed that the cost really depends on the ratio of aggregate demand and offers the goods on the domestic and foreign markets.

2) proved existence of gains from specialization and trade for all member countries, not just one country due to the fact that others suffer losses.

3) Allows you to conduct scientifically based foreign policy.

Shortcomings of the theory of comparative advantage resulting from these assumptions, the which it is based.

Therefore, applying it to analyze foreign economic relations should take into account that it:

1) No takes into account transport costs.

2) Ignores the impact of foreign trade on income distribution within countries, fluctuations in prices and wages, inflation and international capital flows.

3) Based on the assumption existence of only one factor of production - labor.

4) Ignore existence of such important conditions of international trade, the differences in the provision of inputs.

5) Based on the premise full employment, which means that one industry workers freed can immediately find jobs in other, more productive. In other words, an assumption about fixed costs and therefore ignored law costs are rising.

6) Do not explain trade between approximately equal in economic development, none of which has relative advantage over another.



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