Unit 7: Socioeconomic Impact Study on Industries and Businesses
Lesson 7.3
Socioeconomic Impacts of Business
on International Trade
Contents
Introduction 1
Learning Objectives 2
Let’s Connect 2
Discover 3
Impact of Businesses on International Markets 3
Exports and Imports 4
Effect of International Trade on GDP 4
Effect of Businesses on Foreign Governments 5
Effect of Businesses on Foreign Industries 6
Effect of Businesses on Foreign Consumers 6
Wrap-Up 8
Try This! 9
Challenge Yourself 10
Bibliography 11
Unit 7: Socioeconomic Impact Study on Industries and Businesses
Lesson 7.3
Socioeconomic Impacts of
Business on International Trade
Introduction
In August 2020, the Philippine Statistics Authority (PSA) reported that the country
experienced a 24.7% decline in the total value of exports and imports. This downturn was
primarily the result of the effects of the coronavirus pandemic and the limited mobility
between countries that increased the barriers to international trade.
The performance of businesses over this period of time also impacted the country’s trade
with foreign nations. With all of these in mind, what are the effects that our local
businesses can have on international trade?
7.3. Socioeconomic Impacts of Business on International Trade 1
Unit 7: Socioeconomic Impact Study on Industries and Businesses
Learning Objectives DepEd Learning Competencies
At the end of this lesson, you should be able to do
In this lesson, you should be able to do the following:
the following: ● Identify and explain the various
socioeconomic factors affecting business and
● Discuss how domestic
industry (ABM_AE12II-e-g-11).
businesses can impact foreign ● Analyze and evaluate the viability of a
economies. business and its impact on the community
(ABM_AE12II-e-g-12).
● Apply the different concepts ● Formulate recommendations and strategies
of international trade in on how to minimize and maximize a
analyzing various economic business’s negative impact and positive
impact, respectively (ABM_AE12II-e-g-13).
situations.
Let’s Connect
Filipinos Worldwide 10 minutes
More and more Filipino-run businesses are expanding their markets beyond the 7,641
islands of the country. Some of these firms provide unique and quality services to their
customers, maximizing the hospitality our country has become so well-known for. Others
are looking toward introducing Filipino culture through the goods that have defined life here
in the country.
Instructions
1. Do research on one Filipino business that was founded in the country but has
expanded its operations or sales abroad.
2. Prepare a three-slide presentation on your chosen business. Make sure to provide a
brief history of the company, identify where they operate or sell outside of the
country, and what their signature products are.
7.3. Socioeconomic Impacts of Business on International Trade 2
Unit 7: Socioeconomic Impact Study on Industries and Businesses
Guide Questions
1. Which industry does your chosen business belong to?
__________________________________________________________________________________________
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2. Based on their history, did they expand internationally right away? Why or why not?
__________________________________________________________________________________________
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____________________________________________________________________________________
3. How did the firm’s expansion into the international markets benefit the country?
__________________________________________________________________________________________
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Discover
One of the stakeholders of private businesses that most individuals tend to overlook are the
markets that go beyond the jurisdiction of the home country. Expansion into international
markets is usually pursued by larger firms that have already maximized their domestic
sales. The decision to expand abroad is fueled primarily by the potential for higher profits
and increased brand awareness.
How do businesses impact stakeholders abroad?
Impact of Businesses on International Markets
When domestic firms enter the international market, they do this mainly through the export
of their goods and services. However, not all firms are sellers. Some businesses may instead
reach into international markets to import products from abroad. Through their
7.3. Socioeconomic Impacts of Business on International Trade 3
Unit 7: Socioeconomic Impact Study on Industries and Businesses
participation in these markets, businesses will inevitably impact the supply and demand for
both domestic and foreign economies. This, in turn, will impact world prices and eventually
affect other producers and consumers as well.
Exports and Imports
Exports refer to goods and services produced in the country but are sold to foreigners.
Firms typically export products unique to the international market or products they can
make at relatively lower costs. Being able to sell products in untapped markets opens up
new opportunities for sales and increased brand recognition for firms.
Imports are products produced abroad and are bought by and for domestic consumers.
While individual consumers are likely to import final products from abroad, businesses and
firms are more inclined toward the importation of raw materials that they need to continue
their operations.
Similar to how demand and supply work in an economy, the volume of both exports and
imports can impact the international market. Should an economy export a significant
volume of a certain product, this could cause a surplus in the global economy and drive its
price down. Alternatively, when global demand for a specific product overtakes its current
supply, a shortage will occur, which could lead to an increase in its price.
Effect of International Trade on GDP
Gross domestic product (GDP) is the measure of the value of all final goods and services
produced in a country over a given period of time. One of the ways that GDP is computed is
through the expenditure approach, which identifies consumption, investments, government
spending, and net exports as its components.
Net exports are the measure of the value of all exports subtracted from imports or the
country’s trade balance. If the value of exports is larger than imports, then the economy
will experience a trade surplus. On the other hand, if the value of imports exceeds exports,
then one can expect a trade deficit instead. As such, it can be said that higher levels of
exports positively affect the GDP of an economy, whilst higher imports negatively impact
7.3. Socioeconomic Impacts of Business on International Trade 4
Unit 7: Socioeconomic Impact Study on Industries and Businesses
it—the country benefits when it sells more than it buys.
The potential impact that international trade can have on an economy is part of the reason
why many governments focus on developing their domestic industries to the point where
they are able to compete internationally. This focus manifests in policies that encourage
local businesses to engage in international trade, either through the provision of subsidies
or market reforms that make the process easier for domestic firms.
The benefits of local business participation in international trade do not stop with the
increase in GDP. Their expansion into international markets also opens up increased
employment opportunities for the country’s citizens. Aiming to provide the necessary goods
to meet the demand both locally and across the world will require more manpower, which
could end up boosting the economy even further.
Effect of Businesses on Foreign Governments
Similar to how imports and exports impact domestic economies, local businesses
participating in the international market can also affect foreign governments through trade.
When local businesses are purchasing significant amounts of products or raw materials
from foreign sources, they are positively contributing to the economy of other countries.
However, if a local business can produce a product that is widely demanded all over the
globe, then one can expect the import levels of foreign countries to rise. These changes to
the GDP of other countries also impact the macroeconomic goals that their governments set
for them.
Foreign governments may levy taxes on foreign goods that enter their economies. Taxes
imposed upon foreign goods are called tariffs and are usually done to raise their prices.
This price increase discourages consumers from purchasing too many imported goods and
protects local industries that might not compete with larger, foreign firms yet. As imports
continue to persist despite these measures, governments will receive additional revenue
from these tariffs.
Apart from tariffs, foreign governments may also employ non-tariff barriers to protect their
7.3. Socioeconomic Impacts of Business on International Trade 5
Unit 7: Socioeconomic Impact Study on Industries and Businesses
domestic industries and discourage imports. While these non-tariff barriers might not
directly contribute to the government’s revenue, they may still be used to further the
interests of the country. Some examples of non-tariff barriers include bureaucratic and
administrative delays that may increase uncertainty and lead time needed to import goods,
the use of quotas and embargoes which aim to limit or completely restrict the entry of
certain goods, as well as the requiring of foreign firms to meet certain product standards
before being eligible to sell in their markets.
Check Your Progress
Discuss the different barriers to trade imposed by governments to
protect their industries from the effects of international trade.
________________________________________________________________________
________________________________________________________________________
__________________________________________________________________
Effect of Businesses on Foreign Industries
Another effect of local businesses participating in the international market is the inevitable
impact on competitors abroad. The presence of additional competition may push foreign
companies to innovate and improve upon their products to remain relevant and competitive
in the market. Should these foreign industries be unable to cope with the added
competition from local businesses, this may lead to their eventual failure.
Local businesses do not necessarily need to be competitors for foreign industries, as some
may choose to be buyers in the international market instead. When domestic firms choose
to import raw materials or capital goods from abroad, their transactions can help improve
the state of foreign industries.
Effect of Businesses on Foreign Consumers
Apart from the foreign government and industries, participation in the international market
also exposes firms to consumers from different countries. The goods and services that they
provide to the international market could have an impact on the lives of foreign consumers
7.3. Socioeconomic Impacts of Business on International Trade 6
Unit 7: Socioeconomic Impact Study on Industries and Businesses
who may be exposed to products that they have yet to experience from their markets.
Foreign consumers may also save more from purchasing imports. Even with added tariffs,
their products can still be competitively priced against local competition. If this is the case, it
encourages foreign customers to buy more from them.
Some of these goods and services may provide quality of life improvements to these
households, especially in instances where more technologically advanced products are
brought into a less advanced nation. However, other products may present undesirable
consequences that might negatively impact them and their communities. This could be
through the promotion of products that are detrimental to one’s health (such as tobacco
products, alcoholic beverages, and other addictive substances) or the introduction of goods
and services that might negatively impact society through environmental damage and other
negative externalities.
In Philippine Context
While the discussion of exports and imports essentially revolve around tangible goods, the
Philippines has become well-known for the export of a resource that has become severely
needed during the coronavirus pandemic—nurses.
Between the years 2012 and 2016, the country produced about 26,000 licensed nurses
annually. However, in that same period, about 18,500 nurses migrated each year to find
work abroad. This strong culture of exporting labor to more developed countries has
helped contribute to the economy through these OFWs’ remittances. However, it has also
crippled the country’s ability to respond to health crises like the ongoing COVID-19
pandemic.
Philippines paying the steep price of being largest nurse exporter
7.3. Socioeconomic Impacts of Business on International Trade 7
Unit 7: Socioeconomic Impact Study on Industries and Businesses
Raul Dancel, “Philippines paying the steep price of being largest nurse
exporter,” The Straits Times, May 19, 2020.
https://www.straitstimes.com/asia/se-asia/philippines-paying-the-steep-price-
of-being-largest-nurse-exporter, last accessed on January 19, 2021.
Wrap-Up
_____________________________________________________________________________________________
● Businesses, for the most part, impact the international market through the
export and import of goods and services.
● Exports are products made domestically and sold to foreign consumers, while
imports are goods produced abroad and consumed domestically.
● Exports and imports can impact the gross domestic product of both domestic and
foreign countries. A trade surplus positively impacts the local economy, while a
trade deficit negatively affects it.
● Businesses may also impact other foreign stakeholders through their participation
in the international market. These foreign stakeholders include:
○ Foreign governments
○ Foreign industries
○ Foreign consumers
_____________________________________________________________________________________________
7.3. Socioeconomic Impacts of Business on International Trade 8
Unit 7: Socioeconomic Impact Study on Industries and Businesses
Try This!
A. Fill in the Blanks. Fill in the blanks with the correct answer.
1. When imports exceed exports within a given period of time, the economy
experiences a _________________.
2. _________________ are taxes imposed by governments on imported goods and services.
3. _________________ is the component of GDP that takes international trade into account.
4. Trade surpluses happen when the total value of exports is _________________ than
imports.
5. While exports positively affect overall GDP, imports _________________ affect it.
B. True or False. Write true if the statement is correct. Otherwise, write false.
_______________ 1. Taxes are imposed on imported products to encourage their
consumption.
_______________ 2. Only tangible goods count towards exports and imports.
_______________ 3. Surpluses and shortages affect the international market, similar to
how they affect domestic markets.
_______________ 4. Businesses affect the international economy and foreign
stakeholders.
_______________ 5. The total value of exports and imports must always be equal.
_______________ 6. Consumers are more likely to import final products, while businesses
may import raw materials as well.
_______________ 7. Businesses may choose to expand their sales internationally in the
pursuit of higher profits and increased brand awareness.
_______________ 8. World prices are unaffected by the exports and imports of small
countries.
7.3. Socioeconomic Impacts of Business on International Trade 9
Unit 7: Socioeconomic Impact Study on Industries and Businesses
_______________ 9. Tariffs are an example of a protectionist measure governments
might adopt to aid local industries.
_______________ 10. Businesses only operate as sellers in the international market.
Challenge Yourself
Answer the following questions in no more than five sentences each.
1. Is the imposition of tariffs fair? Justify your answer by citing at least one advantage
and one disadvantage.
__________________________________________________________________________________________
__________________________________________________________________________________________
____________________________________________________________________________________
2. What are two possible reasons why more businesses do not tap into the
international market?
__________________________________________________________________________________________
__________________________________________________________________________________________
____________________________________________________________________________________
Suggested Rubric for Grading
The rubric below is a suggested one. Your teacher may modify the rubrics based on your
needs. Consult your teacher for the final rubric.
7.3. Socioeconomic Impacts of Business on International Trade 10
Unit 7: Socioeconomic Impact Study on Industries and Businesses
Performance Levels
1 2 3 Suggested
Criteria Score
Beginning Proficient Advanced Weight
Proficiency Proficiency
Correct The student does not The student provides The student gives a
provide an answer or a partially correct complete and
Answer
provides a wrong answer. correct answer.
×2
answer.
Use of There is minimal to Economic concepts Economic concepts
no use of economic are used in the are correctly used
Economic
concepts in the answer provided, with and are relevant to
×2
Concepts answer provided. some errors. the answer.
Logical The discussion has The discussion has The discussion is
Discussion
serious errors and minor errors and thorough and has no ×2
inconsistencies. inconsistencies. errors.
Total Possible Score 18
Bibliography
Blink, Jocelyn, and Ian Dorton. “The Foundations of Economics.” Essay. In Economics Course
Companion, 2nd ed., 2–8. Oxford: Oxford University Press, 2011.
Ferrell, O. C., Geoffrey A. Hirt, and Linda Ferrell. Business Foundations: A Changing World. New
York, NY: McGraw-Hill Education, 2020.
Lominé Loykie, Martin Mwenda Muchena, and Robert A. Pierce. Business Management:
Course Companion. Oxford: Oxford University Press, 2014.
Maley, Sean, and Jason Welker. “The Foundations of Economics.” In Economics: Supporting
Every Learner across the IB Continuum, 1–10. Pearson Education, 2011.
Mankiw, N. Gregory. Principles of Economics. Boston, MA: Cengage Learning, 2021.
7.3. Socioeconomic Impacts of Business on International Trade 11
Unit 7: Socioeconomic Impact Study on Industries and Businesses
7.3. Socioeconomic Impacts of Business on International
Trade
Let’s Connect
1. Which industry does your chosen business belong to?
Answers may vary. Companies may belong to the food, manufacturing, or services
industries.
2. Based on their history, did they expand internationally right away? Why?
Likely no, essentially because of the financial risks related to expansion. Newer
businesses may not be willing to take that risk so early on.
3. How did the firm’s expansion into international markets benefit the country?
It benefited the country by opening up more jobs to the community and increasing
the exposure of the Philippine economy to international markets.
Check Your Progress
Discuss the different barriers to trade imposed by governments to protect their industries
from the effects of international trade.
Answers may vary. The barriers to trade imposed by governments are set up to
discourage imports. They do this through various means (some involving taxes, others by
making the importation process much lengthier) but all centered around making the
process more difficult and increasing the overall cost of production of these imported
goods, driving their prices up.
Try This!
A. Fill in the Blanks. Fill in the blanks with the correct answer.
1. When imports exceed exports within a given period of time, the economy
experiences a trade deficit.
2. Tariffs are taxes imposed by governments on imported goods and services.
3. Net exports is the component of GDP that takes international trade into account.
7.3. Socioeconomic Impacts of Business on International Trade 12
Unit 7: Socioeconomic Impact Study on Industries and Businesses
4. Trade surpluses happen when the total value of exports is greater than imports.
5. While exports positively affect overall GDP, imports negatively affect it.
B. True or False. Write true if the statement is correct. Otherwise, write false.
False 1. Taxes are imposed on imported products to encourage their consumption.
False 2. Only tangible goods count towards exports and imports.
True 3. Surpluses and shortages affect the international market, similar to how
they affect domestic markets.
True 4. Businesses affect the international economy and foreign stakeholders.
False 5. The total value of exports and imports must always be equal.
True 6. Consumers are more likely to import final products, while businesses may
import raw materials as well.
True 7. Businesses may choose to expand their sales internationally in the pursuit
of higher profits and increased brand awareness.
False 8. World prices are unaffected by the exports and imports of small countries.
True 9. Tariffs are an example of a protectionist measure governments might
adopt to aid local industries.
False 10. Businesses only operate as sellers in the international market.
Challenge Yourself
1. Is the imposition of tariffs fair? Justify your answer by citing at least one advantage
and one disadvantage.
Answers may vary. Students may answer both fair or unfair. Possible advantages
of tariffs are to protect small domestic industries and provide an additional revenue
stream for the government. Possible disadvantages include higher prices for
7.3. Socioeconomic Impacts of Business on International Trade 13
Unit 7: Socioeconomic Impact Study on Industries and Businesses
consumers and low overall GDP.
2. What are two possible reasons why more businesses do not tap into the
international market?
Answers may vary. Smaller businesses might view the initial investment as too big
of a risk. Businesses may believe that their products are not competitive enough,
and others might just be unaware of the potential gains from international trade.
7.3. Socioeconomic Impacts of Business on International Trade 14
