
e24115a3dc541b34113a5a7835c7e376.ppt
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MKTG 3231 Fall 2014 Mrs. Tamara L. Cohen Global Marketing Management Class #2 Global Trade Environment
KEY TERMS • • • Bo. P (Balance of Payments) Globalization Protectionism Trade barriers Tariff = government tax on goods entering at borders • Omnibus Trade and Competitiveness Act – designed to help US businesses be more competitive in world markets, & address perceived injustices in trade practices • GATT (General Agreement on Tariffs & Trade)
KEY ORGANIZATION WTO (World Trade Organization) • only global international organization dealing with rules of trade between nations • goal to help producers of goods & services, exporters, & importers conduct business • established 1995 • 159 member countries • HQ Geneva, Switzerland • currency Swiss francs (CHF)
KEY ORGANIZATION World Bank • vital source of financial & technical assistance to developing countries around world • mission to fight poverty; help people help themselves & environment by providing resources, sharing knowledge, building capacity & forging partnerships in public & private sectors • established 1944 • 188 member countries • HQ Washington DC
KEY ORGANIZATION IMF (International Monetary Fund) • oversees international monetary system by following macroeconomic policies of member countries • goal to stabilize international exchange rates & facilitate development by encouraging members to eliminate restrictions that hinder trade • offers highly leveraged loans, mainly to poorer countries • established 1944 • 188 member countries • HQ Washington, DC • currency SDR (Special Drawing Rights) = “paper gold” US$1 = SDR 0. 652217 as of Jan. 9, 2014
Protests against Global Institutions • basic complaints against WTO, IMF & others are unintended consequences of globalization – environmental concerns – worker exploitation & domestic job losses – cultural extinction – higher oil prices – diminished sovereignty of nations • “anti-sweatshop” campaigns
Country Exports Imports Total Trade in US$ billions 277. 0 305. 4 582. 4 2. China 108. 9 402. 9 511. 8 3. Mexico 208. 2 258. 3 466. 5 4. Japan 59. 9 127. 3 187. 1 5. Germany 43. 8 105. 1 148. 9 6. South Korea 37. 6 57. 5 95. 1 7. United Kingdom 44. 0 48. 3 92. 2 8. France 29. 2 41. 2 70. 4 9. Brazil Top 15 US trading partners in 2013 1. Canada 40. 4 25. 4 65. 8 10. Saudi Arabia 17. 0 47. 0 64. 0 11. India 20. 3 38. 8 59. 1 12. Taiwan 23. 2 34. 9 58. 1 13. Netherlands 39. 3 17. 8 57. 1 14. Switzerland 25. 5 26. 0 51. 4 15. Italy 15. 1 35. 3 50. 4
History of International Trade: th Century 20 • Last ½ of 20 th century marred by competing approaches to economic development – Socialist Marxist vs Democratic Capitalist vs • Rapid growth of war-torn economies & previously underdeveloped countries • Large-scale economic cooperation & assistance • Rising standards of living
Trade Barriers 1. 2. 3. 4. 5. 6. 7. 8. 9. Tariffs Quotas Voluntary Export Restraints Boycotts & Embargoes ? Monetary barriers Who Standards pays Anti-dumping penalties ? RED TAPE “Buy national’ campaigns (= localization barriers) 10. Bribery & corruption
Types of Nontariff Barriers
Protectionism Governmental Procurement Policies • Outsourcing & subcontracting are international phenomena. International Procurement Organizations (IPOs) are opening in developing countries like India, China, Mexico, Brazil. • 35 US states ban outsourcing of government contracts • US companies receiving government funding are likely to bar or restrict outsourcing. • World's total market for outsourcing business growing at 9% p. a. Indian market growth 54% p. a. e. g. It costs $60, 000 to fly an empty aircraft from US to Singapore for servicing / maintenance checks. Wage rates for skilled aircraft engineers in Singapore are so low compared to the US, that the flying cost is more than made up.
• • Protectionism in the cotton fields The US vs Brazil cotton war US cotton farmers get government subsidies. These subsidies are illegal, by WTO rules. Brazil filed complaint & won. US kept paying cotton farmers. Now US pays Brazilian farmers too.
Dumping In international trade, DUMPING occurs when one country exports a significant amount of goods to another country at prices much lower than in the domestic market. • effectively dumping is predatory pricing • seen as a form of protectionism in international trade, when endorsed by government
QUOTAS on Chinese tires • Leo W. Gerard, USW international president: “American workers are struggling to make it through the worst economic crisis in 80 years. Our tire industry is collapsing under the weight of 46 million Chinese tires entering our shrinking market annually. ” • U. S. Int’l Trade Commission supported this claim. Pres. Obama imposed quotas.
Subsidies & Special Favors? “For years, the US complained that other countries boosted their domestic auto industries through subsidies and special favors. ” “At the heart of the foreign auto makers’ concerns is the authority of regulators to set standards for individual car classes and companies. ”
Protectionist policies in police fleets Italy Germany Czech Republic Japan USA
US promotes international trade Omnibus Trade & Competitiveness Act (1988) • Designed to deal with trade deficits, protectionism, & overall fairness of US trading partners • Covers 3 critical areas in improving US trade 1. market access (openness of markets to US goods) 2. export expansion (incl. Foreign Corrupt Practices Act) 3. import relief (remedies for US co’s affected by imports) • 4 ongoing activities support growth of international trade 1. GATT 2. WTO 3. IMF 4. World Bank
General Agreement on Tariffs & Trade • • paved way for 1 st effective worldwide tariff agreement eliminating international trade barriers basic elements of GATT 1. Trade shall be conducted on a nondiscriminatory basis. 2. Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas. 3. Consultation shall be the primary method used to solve global trade problems.
Skirting the Spirit of GATT & WTO • Loopholes – tariffs + number & scope of technical standards & inspection requirements • Imposing antidumping duties • Negotiating bilateral trade agreements – may lead to multinational concessions – not necessarily consistent with WTO goals & aspirations
What do we know about the Global Trade Environment? • Benefits from absolute or comparative advantage can accrue to any nation • Pressure for protectionism from every region of globe; increased by economic constrictions • Consumers seldom benefit from protectionism • Free international markets help underdeveloped countries become self-sufficient • Freer trade will always be partially threatened by various government & market barriers that exist or are created for protection of local businesses • Future of open global markets lies with controlled & equitable reduction of trade barriers
Next class: Global Cultural Environment Read: Textbook (see below) Homework #1: Knife & Fork exercise