chap002- international marketing

8/13/2019 chap002- international marketing

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I n t e r n a t i o n a l M a r k e t i n g

The DynamicEnvironment

of InternationalTrade

Chapter 2

1 4 t h E d i t i o n

P h i l i p R. C a t e o r a

M a r y C. G i l l y

J o h n L . G r a h a m

McGraw-Hill/IrwinInternational Marketing 14/e Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


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What Should You Learn?

The basis for the reestablishment of world tradefollowing World War II

The importance of balance-of-payment figures to

a countrys economy The effects of protectionism on world trade

The seven types of trade barriers


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What Should You Learn?

The provisions of the Omnibus Trade andCompetitiveness Act

The importance of GATT and the World Trade

Organization The emergence of the International Monetary

Fund and the World Bank Group


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Global PerspectiveTrade BarriersAn International Marketers Minefield

Countries take advantage of U.S. open marketswhile putting barriers in the way of U.S. exports

Tariff and nontariff barriers to trade are major

issues confronting international marketers To realize the benefits of the social, political, and

economic changes, free trade must prevailthroughout the global marketplace

WTO (World Trade Organization)


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The 20th to the 21stCentury

First Half of the Twentieth Century

Depression

WW I and WW II

Marshall Plan Move toward international cooperation among

trading nations

General Agreement on Tariffs an Trade, (GATT)


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Last half of the 20thcentury marred bycompeting approaches to economicdevelopment

Socialist Marxist

Democratic capitalist

Rapid growth of war-torn economies andpreviously underdeveloped countries

Large-scale economic cooperation andassistance

Rising standards of living

The 20th to the 21st Century


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World Tradeand U.S. Multinationals

New global marketing opportunities

1950sU.S. companies began to export andmake significant investments in overseas

marketing and production facilities 1960sU.S. multinational corporations (MNCs)

faced major challenges on two fronts

Resistance to direct investment

Increasing competition in export markets


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American MNCs confronted by a resurgence ofcompetition from all over the world

NIC (Newly Industrialized Countries)

SOE (State-Owned Enterprises)

The balance of merchandise trade U.S. trade deficit

U.S. dilemma of how to encourage trading partnersto reciprocate with open access to their markets

without provoking increased protectionism WTO (World Trade Organization)

NAFTA

AFTA (American Free Trade Area)

APEC (Asia-Pacific Economic Cooperation Conference)

World Tradeand U.S. Multinationals


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Worlds 100 Largest IndustrialCorporations (Annual Revenues)

Exhibit 2.2


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Beyond the First Decadeof the 21stCentury

U.S. economy has slowed dramatically

World growth (except China) also slowed

The Organization for Economic Cooperation and Development

(OECD) estimates 3% average annual growth for next 25 years

Developing countries will grow faster

From an annual rate of 4% in the past quarter to a rate of 6% forthe next 25 years

Share of world output will range from one-sixth to one-third


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Beyond the First Decadeof the 21stCentury

Level of intensity of competition will change ascompanies focus on gaining entry or maintainingtheir position

Emerging markets

Regional trade areas

Established markets in Europe, Japan, and the U.S.

Smaller companies also seeking new markets

Novel approaches Technological expertise


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Balance of Payments

Balance of payments

the system of accountsthat records a nations international financetransactions

Transactions recorded annually Must always be in balance

A record of condition, not determinant of

condition


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Balance of Payments

A balance of payments statement includes threeaccounts

Current account

Capital account

Reserves account


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U.S. Current Accountby Major Components, 2007 ($ billions)

Exhibit 2.3


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U.S. Current Account Balance(% of GDP)

Exhibit 2.4


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What Would One U.S. Dollar Buy?

Exhibit 2.5


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Protectionism

Tariffs, quotas, and nontariff barriers aredesigned to protect markets from intrusions byforeign countries

Nations utilize barriers to restrain entry ofunwanted goods

Legal

Exchange

Psychological Private market


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Protection Logic and Illogic

Arguments concerning protectionism on trade

Protection of infant industry

Protection of the home market

Need to keep money at home

Encouragement of capital accumulation

Maintenance of the standard of living and real wages

Conservation of natural resources

Industrialization of a low-wage nation

Maintenance of employment and reduction of unemployment National defense

Increase of business size

Retaliation and bargaining


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Trade Barriers

Tariffs

Quotas

Voluntary Export Restraints (VER)

Boycotts and embargoes

Monetary barriers Blocked currency Differential exchange

Government approval Standards

Antidumping penalties


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Types of Nontariff Barriers

Exhibit 2.6


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The Omnibus Tradeand Competitiveness Act

Designed to deal with trade deficits, protectionism,and overall fairness of our trading partners

Covers three critical areas in improving U.S. trade

Market access Export expansion Import relief

Four ongoing activities to support the growth ofinternational trade

GATT The associated World Trade Organization (WTO) International Monetary Fund (IMF) The World Bank Group


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General Agreementon Tariffs and Trade

Paved way for first effective worldwide tariff agreement

Basic elements of the GATT

Trade shall be conducted on a nondiscriminatory basis

Protection shall be afforded domestic industries through customs tariffs, notthrough such commercial measures as import quotas

Consultation shall be the primary method used to solve global tradeproblems

Eliminating international trade barriersUruguay

Round The General Agreement on Trade in Services (GATS)

Trade-Related Investment Measures (TRIMs)

Trade-Related aspects of Intellectual Property Rights (TRIPs)


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World Trade Organization

WTO is an institutionnot an agreement

Sets many rules governing trade between its 148 members

Provides a panel exports to hear and rule on trade disputes betweenmembers

Issues binding decisions

All member countries will have equal representation

Member countries have open their markets and to be bound by the rulesof the multilateral trading system

U.S. ratification concerns

Possible loss of sovereignty over its trade laws to WTO Lack of veto power

Role U.S. would assume when a conflict arises over an individualstates laws that might be challenged by a WTO member


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Skirting the Spirit of GATT and WTO

Loopholes

Reducing tariffs while at the same time increasing number andscope of technical standards and inspection requirements

Imposing antidumping duties Negotiating bilateral trade agreements

May lead to multinational concessions

Not necessarily consistent with WTO goals and aspirations


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The International Monetary Fund

Created to assist nations in becoming andremaining economically viable

Objectives of the IMF

Stabilization of foreign exchange rates Establishment of freely convertible currencies to facilitate the

expansion and balanced growth of international trade

Special Drawing Rights (SDRs)

Paper gold


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The World Bank Group

Institution created to reduce poverty and improvestandard of living

By promoting sustainable growth and investment in people

The World Bank has five institutions whichperform the following services:

Lending money to the governments of developing countries

Providing assistance to governments for developmental projects

to the poorest developing countries Lending directly to the private sector

Providing investors with guarantees against noncommercial risk

Promoting increased flows of international investment


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Protests against Global Institutions

The basic complaint against the WTO, IMF andothers is the amalgam of unintendedconsequences of globalizing

Environmental concerns

Worker exploitation and domestic job losses

Cultural extinction

Higher oil prices

Diminished sovereignty of nations

Terrorism in London (2005)

Antisweatshop campaigns


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Summary

The benefits from absolute or comparativeadvantage clearly can accrue to any nation

Increased pressure for protectionism from every

region of the globe The consumer seldom benefits from such

protection

Free international markets help underdevelopedcountries become self-sufficient


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Summary

Freer trade will always be partially threatened byvarious governmental and market barriers thatexist or are created for the protection of localbusinesses

The future of open global markets lies with thecontrolled and equitable reduction of tradebarriers

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chap002- international marketing