The Role of Trade Terms in Communication in Matters of International Economic Relations

THE ROLE OF TRADE TERMS IN COMMUNICATION IN MATTERS OF INTERNATIONAL ECONOMIC RELATIONS

Ph. D. Student: CRISTINA CARMEN PREDA

CONTENTS:

INTRODUCTION

CHAPTER I: THE ESSENTIALS OF INTERPERSONAL COMMUNICATION

1.1.Concepts and characteristics of communication

1.2.The evolution of concerns and concepts in interpersonal communication field

1.3.Types of communication

1.4.Communication and languages

1.5.Perturbations of communication process. “The unknowns” of communication

CHAPTER II: THE FUNCTION OF COMMUNICATION IN ITERNATIONAL ECONOMIC RELATIONS

2.1. Transmedias of business communication

2.2. The influence of cultural aspects on communication in international trade relations

CHAPTER III: NEGOTIATION APPROACH FROM THE COMMUNICATION POINT OF VIEW IN INTERNATIONAL TRADE RELATIONS

3.1. Negotiation – the main form of communication in international trade communication

3.2. International negotiations of trade politics

3.3. The negotiation of external economic contracts

CHAPTER IV: COMMUNICATION IN ELECTRONIC TRADE FIELD

4.1. Conceptual basis of electronic trade

4.2. Negotiation and electronic trade

4.3. Common regulations on international level

CHAPTER V: THE ROLE OF INCOTERMS DELIVERY CONDITIONS IN INTERNATIONAL TRANSACTIONS

5.1. The purpose of creating INCOTERMS rules

5.2. A short history of INCOTERMS rules

5.3. The content of INCOTERMS rules

5.4. Types of transport and INCOTERMS rules involved

5.5. The role of INCOTERMS rules in Common Market

5.6. RAFTD – American variant of INCOTERMS rules

5.7. Case study – the correlation between choosing delivery condition, price and profit in international trade transactions

CONCLUSION

BIBLIOGRAPHY

KEY WORDS: communication in international businesses, internationaltrade negotiations, trade terms, communication and electronic contraction, INCOTERMS

ABSTRACT

The last decades have known unprecedented evolutions concerning the development of internationaltrade relations, proven fact of the much more rapid increase of international trade than of production, and therefore rising the degree in which national economies depend on international exchanges, on the economic activity as a whole. In this context, the development of businesses internationally tends to become a requirement for companies, but also for national countries that interfere directly as actors of economic life in international commercial relations, but also indirectly by drawing international trade agreements fated to raise the international market of companies.

Therefore, for meeting a success, companies and authorities must take into account economic differences but cultural internationally. These represent different approaches of some human communities determined to solve the essential problems of human being. As going out to business means to communicate, the problem involved is not that of the existence of communication, but knowing what’s what to communicate in case of a cultural diversity. Even in the happiest cases, communication doesn’t represent just a simple process and so much the more in an international environment where communication is more complex than we could imagine. The understanding of some items as race, nationalism, history, territory, religion, language and other distinctive cultural characteristics is necessary to an accurate and efficient communication in international environments.

In this context, communication becomes the fundamental activity in every successful international business, the desire to avoid the impediments which can negatively affect the efficiency of all types of communication in international trade relations has become an essential and permanent concern of companies that operate in the international framework, and also of international tribunals which are militating in favor of unification and settlement of rules in multilateral trade : World Trade Organization, International Chamber of Commerce, United Nations Organization .

This work deals with an interdisciplinary present subject for international economic relations who is the function of communication in international trade relations, in particularly the delivery terms INCOTERMS to unify and facilitate the development of international economic contracts representing a useful research for foreign trade companies but also for specialists in international enterprises.

The first chapter of the work The essentials of interpersonal communication analyses the evolution of interpersonal communication concepts setting specialized literature, the functions that accomplishes, the elements of communication process and his characteristics. It also presents the relationships established between the communication process, language and speech, emphasizing the conditions that must be fulfilled in order to achieve the communication process. After presenting the different types of communication (interpersonal, grouped or at distance), the connection between communication and the essential language types: verbal and non-verbal. It is new that the chapter identifies blockings and impediments of communication process and some ways of reducing them.

In The function of communication in international economic relations we are analyzing the importance of communication process in international businesses. The more and more rapid evolution of Information and Communication Technology has involved radical exchanges and has determined new challenges for business environment. As far as the business field is concerned we can observe the existence of a new trend, upstream and downstream and that the evolution process has a new average. Moreover, the quantity of accessible information is continually growing, while cognitive skills of human being are the same. These new challenges lead inevitably to the next dilemma: how will the companies react at these challenges? To manage these new challenges, the communication adapted to all members of existing environments, we must take into account the cognitive restrictions, the preferences of users and providing integrated services to all members, particularly in international trade relations. In this case, the study of Transmedia Model presents a special importance in identifying the opportunities of an adapted communication and follows the difference of intercultural elements and the unification of settlements in order to achieve international business success.

The third chapter deals with the negotiation and contraction in international trade.Therefore, we are analyzing different aspects of international trade negotiations, the function of knowing their elements for businessmen. An essential problem is the importance of communication in reciprocal and multilateral negotiations for their success. This chapter surprises and analyses separately the function of organically structures (WTO) in the unification of trade regulations in order to make easier the international trade relations and also the negotiation aspects of foreign trade. The negotiation of sale and purchase, the most known way of foreign economic contract is presented in detail and at the end we present other types of contracts used in international trade relations.

A new aspect of trade seems to develop in the international trade relations of the last decades, the electronic trade. That’s why the analysis of electronictrade communication is useful for this scientific work and the forth chapter Communication ofelectronic trade hints at this aspects. The comprehension of the characteristic elements of electronic trade, its importance in international trade relations helps us to identify the role of communication process in international business in order to facilitate electronic trade.

Electronic negotiation and contracting are different from traditional negotiation and contracting from the point of view of making the contract and legal organization. This chapter presents also common regulations at international level concerning electronic trade and the initiative of WTO in this domain.

The last chapter The role of INCOTERM delivery conditions in international transactionsconstitutes a strict analysis of these international trade itemsin order to facilitate the development of international transactions by the International Chamber of Commerce and realize an efficient communication. The elaboration of these delivery conditions was for the first time in 1936, and its last revision in 2000 and since then they have performed, completed and adapted to international market characteristics. The last revision in 2000 of INCOTERMS has foreseen new rules for electronic trade.

As well, in this last chapter we are emphasizing the different elements that appear in INCOTERM regulations opposed to RAFTD rules elaborated and used by the USA according to the assignment to property right, risk, obligations of the salesman and those of the customer as far as negotiation of international sale and purchase contracts are concerned. Therefore we refer to the role of delivery conditions of negotiation in order to achieve international success.

The main conclusions involved after this analysis are:

Communication involves so many elements- from function until structure – that a definition with motivational and structural aspects, expression skills, both written and oral, couldn’t describe his whole proportions. The communication process is defined in several ways, due to the fact that in most cases communication is seen from a different perspective: philosophical, sociological, psychological, pedagogical, linguistic, as a theory of information. This offers certainly – for each domain –a precise vision of communication, but unfortunately restrictive; on the other side, a general interpretation can be vague and indefinite.
When we examine the communication act from a pragmatic point of view, the conditions in which such an action is developed are very important. Therefore, in order to realize a proper communication partners must fulfill a series of requirements during the whole process of communication, step by step.
The recent evolutions and more and more rapid in Information and Communication Technology have led to radical changes and have determined new challenges for business environment. As regard to productive field we may see the existence of a new trend, upstream and downstream, and the developing process has a new average.Moreover, the quantity of accessible information is continually growing, while cognitive skills of human being are the same.These new challenges lead inevitably to the next dilemma: how will the companies react at these challenges? On the one side, the possibilities of new means of communication lead to the hope that detailed information is more accessible. Simultaneously, a new pressure from different groups like financial community, agents and customers. On the other side, cognitive abilities are reduced and a quantity of information will never pass through human attention.(their ability to select is hardly modifiable).
The quality of communication in international businesses depends on the characteristics of people involved in the process ( personality, cultural specificity) the way in which we transmit the message and the answer( verbal and non – verbal), the way in which the process takes place( face to face or distanced) , the communication technique involved ( oral or written messages, on paper or electronic).
Communication doesn’t represent just a simple process in an international environment, where communication is much more complex than we could imagine.The understanding of some items as race, nationalism, history, territory, religion, language and other distinctive cultural characteristics is necessary to an accurate and efficient communication in international environments. In this context, negotiations must answer to complex problems which are due to the need of continuous developing of interpersonal relations in general, and to those diplomatic and economic in particular.
As opposed to negotiations that take place between partners from the same country, international negotiation has some characteristics: the role of distance, the complexity of negotiation process, and the longer period. The main elements that distinguish international negotiation opposed to national are: cultural differences, those in juristic systems and in political administrative system. If the last two elements are emphasizing the contraction process (juristic field) and the execution of the contract (political and administrative field) the problem of intercultural is very important to international negotiation.
In order to avoid measures of precaution and the deprivement of international trade benefit, the countries have reached the conclusion that it is favorable to them to negotiate when they want to make some exchanges. WTO was conceived to become a way of continuous negotiations, giving up to GATT negotiations. In order to function as a multilateral trade system the existence of a series of rules is not enough. We must add a mechanism which allows the punishment if they are violated and also the regulation of misunderstandings between partners.
Although the human being has started a new millennium, electronic trade is more a promise than a certainty at least concerning countries in development process. In order to evaluate the impact of electronic trade towards international trade and its socio- economic development, we must take into account these aspects: Which is the dimension and increase average of electronic trade? What’s the way in which countries can benefit of it? What strategies must adopt in this case? In what conditions they may succeed?
Electronic trade offers a series of obvious advantages as against international trade exchanges. According to the proportions and their implications we must observe the low costs and the degree of satisfaction of personal needs at a superior level. Besides the indisputable advantage that offers, electronic trade has some negative aspects, in particular of logistics and technique. Because of these compulsions, al least in B2C trade field, the analysts are talking about the rebirth of B2C.
The complexity of problems issued from orientation and directing the parts involved in negotiation and concluding a sale and purchase trade contract supposes good knowledge in negotiation sphere, law and customs of foreign trade, international discounts, of expeditions and international customs insurances. The moment of transferring the property of merchandise can be different of those transferring risks, being reflected by a sort of delivery modalities which have become later a source of trade right, facilitating negotiation and concluding contracts between the two sides.
The purpose on INCOTERMS rulesis to offer a series of international rules to explain the most used conditions in foreign trade. Therefore, the interpretation of these conditions in different countries may be avoided or reduced. Frequently, the contracted parts do not know the different trade applications of countries. This may cause misunderstandings, disputes and litigations with all the loss of money and time.
Due to the fact that in some countries in the world a lot of rules and customs are practiced, contract partners accept noting them in the contract in order to fulfill a business, in purpose of using them as against INCOTERMS rules, made by CIC, Paris, rules that represent the primary variant. But abusing of these rules may lead to modify some clauses of INCOTERMS rules, and affect one of the partners, because in case of a process, consequence of a conflict between seller and purchaser, the judges will have some difficulties in taking a decision. It is an example the use of American rules RAFTD (Revised American Foreign Trade Definitions), although INCOTERMS are much more widespread.
In the framework of a Unique Market there aren’t customs interferences concerning the exchange between countries, not some customs formalities of export or import, not paying customs taxes, except the obligation of declaring trade exchanges .In this case seems that INCOTERMS rules aren’t necessaries. The concept is wrong, there rules come into force and are also applied to transactions without any need of customs procedure.