Export Trading Company

An export trading company (ETC) is a business entity engaged in export trade. It provides export-related services for industries or other economic operators aiming at selling products in foreign markets. An export trading company may warehouse, ship, and insure goods; in addition, it can supply customers with market information. An export trading company can be simply a commercial intermediary or also take title to the product and export for its own account. A special type of export trading company are those organized and operated by producers. These ETCs are structured along multiple- or single-industry lines and can represent producers of competing products. The role of ETCs in world trade is particularly relevant as in a high variety of cases the services of a specialized commercial intermediary reduce the costs of commercial transactions for both buyers and sellers.

In general, ETCs tend to specialize by products in order to better meet the needs of their domestic customers. However, there are also certain types of ETCs that organize themselves and their activities according to the needs of the host countries; in other words, they specialize in countries rather than in products. The patterns of development of the export trading companies may follow rather different trajectories, and greatly vary from country to country. Such diversity is mostly due to the origin of the export trading company [Page 649]as a form of commercial organization that was created and evolved as a response to the needs that each country had in organizing, and handling foreign trade, especially export trade. Conditions and needs of the domestic market, therefore, influenced the development and structure of ETCs. Different legal frameworks (company law), however, are also responsible for the diversity in the organizational structure of ETCs. In the United States, for instance, ETCs operate in accordance with the Export Trading Company Act enacted in 1982. In the same year, also, U.S. banks were permitted to own and operate export trading companies under the Bank Export Services Act.

In functioning as a provider of a wide range of export-related services, an export trading company operates as a bridgehead facilitating trading relations across countries. The origins of the export trading company can be traced back to the early modern period. The direct predecessors of present-day ETCs were the chartered trading companies of the 16th and 17th centuries, such as the British East India Company (EIC) and the Dutch East India Company (Vereenigde Oost-Indische Compagnie or VOC), just to name the most important ones. Organized as joint-stock companies, these trading companies received a royal charter that allowed them to trade in several products, usually spices, silk, and other luxury goods, between their mother countries and India and Asia as monopolies. The trading companies of the early modern period broadened the commercial horizons of European trade, and opened new areas for economic and commercial interaction in extra-European regions.

More recently Japan has offered one of the most interesting and altogether successful examples of export trading companies. The Sogo Shosha, vertically integrated trading companies, have been an efficient tool to serve the Japanese export trade. The specificity of the Japanese export trading companies lies in the close links they established with industries. Conceived as a device to favor the exportation and sale of certain categories of Japanese products, the Sogo Shosha are highly integrated with the industries they serve. In some remarkable cases they originated from the very same industry with which they were expected to cooperate. Mitsui is a case in point. The organization typical to these Japanese trading companies is usually not permitted in the United States or in Europe because of antitrust laws.

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