Q.1 Explain the differences between a) Tariff and non-tariff barriers b) GATT and the WTO.

Trade barriers include tariff and trade blocks with international trade. The barriers can take many forms, including the following terms that include many restrictions in international trade within multiple countries that import and export any items of trade: y y Tariffs Non-tariff barriers to trade

All countries are dependent on other countries for some products and services as no country can ever hope to be self reliant in all respects. There are countries having abundance of natural resources like minerals and oil but are deficient in having technology to process them into finished goods. Then there are countries that are facing shortage of manpower and services. All such shortcomings can be overcome through international trade. Though it seems easy, in reality, importing goods from foreign countries at cheap prices hits domestic producers badly. As such, countries impose taxes on goods coming from abroad to make their cost comparable with domestic goods. These are called tariff barriers. Then there are non tariff barriers also that serve as impediments in free international trade. This article will try to find out differences between tariff and non tariff barriers. T AR I F F S Tariff refers to the tax imposed on imports. It is a duty or tax imposed on internationally traded commodities when they cross the national borders. The objectives of Tariffs are y y y y y y To protect domestic industries from foreign competition To guard against dumping To promote indigenous research and development To conserve foreign exchange resources of the country To make the balance of payments position more favorable and To discriminate against certain countries.

IMPACT OF T AR IFFS Tariff affect on economy in different ways. An import duty generally has the following effects:

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Protective effect: An import duty is likely to increase the price of imported goods. This increase in the price of imports is likely to reduce imports and increase the demand for domestic goods. Import duties may also enable domestic industries to absorb higher production costs. Thus, as a result of the protection by tariffs, domestic industries are able to expand their output. Consumption Effect: The increase in prices resulting from the levy of import duty usually reduces the consumption capacity of the people. Redistribution Effect; If the import duty causes an increase in the price of domestically produced goods, it amounts to redistribution of income between the consumers and producers in favor of the producers. Further a part of the consumer income is transferred to the exchequer by means of the tariff. Revenue Effect: As mentioned above, a tariff means increased revenue for the government. Income and Employment Effect; The tariff may cause a switch over from spending on foreign goods to spending on domestic goods. This higher spending within the country may cause an expansion in domestic income and employment. Competitive Effect: The competitive effect on the tariff is, in fact, an anti-competitive effect in the sense that the protection of domestic industries against foreign competition may enable the domestic industries to obtain monopoly power with all its associated evils. Terms of trade effect: In a bid to maintain the precious level of imports to the tariff imposing country, if the exporter reduces his prices, the tariff importing country is able to get imports to a lower price.

Tariff Barriers vs. Non Tariff Barriers Tariffs are taxes that are put in place not only to protect infant industries at home, but also to prevent unemployment because of shut down of domestic industries. This leads to unrest among the masses and an unhappy electorate which is not a favorable thing for any government. Secondly, tariffs provide a source of revenue to the government though consumers are denied their right to enjoy goods at a cheaper price. There are specific tariffs that are a onetime tax levied on goods. This is different for goods in different categories. There are Ad Valorem tariffs that are a ploy to keep imported goods pricier. This is done to protect domestic producers of similar products.

Non Tariff Barriers Placing tariff barriers are not enough to protect domestic industries, countries resort to non tariff barriers that prevent foreign goods from coming inside the country. One of these non tariff barriers is the creation of licenses. Companies are granted licenses so that they can import goods and services. But enough restrictions are imposed on new entrants so that there is less competition and very few companies actually are able to import goods in certain categories. This keeps the amount of goods imported under check and thus protects domestic producers. Import Quotas is another trick used by countries to place a barrier to the entry of foreign goods in certain categories. This allows a government to set a limit on the amount of goods imported in a particular category. As soon as this limit is crossed, no importer can import further quantities of the goods. Non tariff barriers are sometimes retaliatory in nature as when a country is antagonistic to a particular country and does not wish to allow goods from that country to be imported. There are instances where restrictions are placed on flimsy grounds such as when western countries cite reasons of human rights or child labor on goods imported from third world countries. They also place barriers to trade citing environmental reasons.

Difference between GATT and WTO GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) The General Agreement on Tariff and Trade is a multilateral treaty that lays down agreedrules for conducting international trade.It came into force in January 1948. 119governments which together account for 90 per cent of the world merchandise tradesubscribe it to. Its basic aim is to liberalize trade and for the last 45 years it has beenconcerned with negotiating the reduction of trade barriers and with international traderelations. The rapid and uninterrupted growth in the volume of international trade till1992 provides a good testimony for the success of the GATT. Basic Principles of GATT: 1.Trade without discrimination:Trade must be conducted on the basis of nondiscrimination.All contracting parties are bound to grant to each other treatmentas favourable as they would to any country (most favoured nation) in theapplication and

administration of import and export duties and charges.Expectations to this basic rule are allowed only in the case of regional tradingarrangements and the developing countries. 2.Protection only through tariff:Protection should be given to domestic industries only through customs tariffs and not through other commercial measures. The aim of this rule is to make the extent of protection clear and to Make competition possible.Exception is, however, made in the case ofdeveloping countries where the demand for imports by development may requirethem to maintain quantitative restrictions in order to prevent an excessive drain ontheir foreign exchange resources. 3.A Stable basis of trade:The binding of the tariff levels negotiated among the contracting countries provides a stable predictable basis for trade.Binding oftariffs means that these cannot be increased unilaterally.Although provision ismade for the renegotiation of bound tariffs, a return tariffs is discouraged by therequirement that any increase be compensated for. 4. Consultation:A basic principle of GATT is that member-countries should consult one another on trade matters and problems.They can call on GATT for a fair settlement of cases in which they feel that their rights under the GATT are being withheld or compromised by other members. The agreement consists of four parts: Part I: Main obligations of the contracting parties; Part II: A code of fait trade practices to guide members in their commercial policies; Part III: Conditions for membership and withdrawal; and Part IV: Expansion of trade of developing countries through special concessions. Trade Negotiations under GATT: Eight major trade negotiations took place under the GATT auspice as follows: 1.The first round in 1947 (Geneva) saw creation of the GATT. 2.The second round in 1949 (Annecy, France) involved negotiation with nationsthat desired GATT membership.The principal emphasis was on tariffnegotiations. 3.The third round in 1951 (Torquay, England) continued accession and tariff reduction negotiations. 4.The fourth round in 1956 (Geneva) proceeded along the same track as earlier rounds. 5.The fifth round in 1960-61 (Geneva, Dillon Round) involved further revision of the GATTand the addition of more countries.

6.The sixth round in 1964-67 (Geneva Kennedy Round) was hybrid of earlier product by product approach with across the board tariff reductions. 7.The seventh round in 1973-79 (Geneva, Tokya Round) centred on thenegotiation of additional tariff cuts and developed a series of agreementsgoverning the use of nontariff measures. 8.The eight round (UruguaryRound ) started in 1986 and was concluded in April 1994. As a result of these negotiations, the tariff rates for thousands of items entering into worldtrade were reduced or bound against increase. The average level of tariffs onmanufactured goods in industrial countries was bout 3 per cent now as compared to about 40 percent in the immediate second world was years.Developing countries weredisappointed with Kennedy round and the Tokyo Round.However, given its provisionalnature and the limited field of action, the success of GATT in promotion and securingliberalisation of much of world trade over 47 years was incontestable. WEAKNESS OF GATT: The weakness of GATT is that its benefits have mainly gone to the industrializedcountries. Under GATT, Most negotiations and tariff reductions have taken place inrespect of manufactured goods.So the trade gap for the developing countries has becomemore unfavourable. A search for a new institutionalarrangement, especially one whichone would tackle the problems of the global trade of developing countries, led to theformation of united Nations Committee on Trade and Development in 1946. WORLD TRADE ORGANISATION Established on January 1, 1995 WTO is the embodiment of the Uruguary Round resultsand the successor to GATT. T is not a simple extension of GATT; it completely replacesits predecessor and has a very different character.As on 6th November 2000, themembership of the WTO stood at 139. 76 Governments became members of the WTO onits first day.The present membership accounts for more than 90 per cent of world trade.Many more countries have requested to WTO. The WTO is based in Geneva,Switzerland.Its essential functions are as follows. 1.To administer the trade policy mechanism. 2. To achieve greater coherence in global economic-policy making in

cooperation with World Bank and IMF. 3.To provide a forum for negotiations among its members concerning their multilateral trade relations in matters dealt with in the agreements. 4.To administer the understandings on Rules on Procedures governing the settlement of disputes. 5.To introduce the idea of 'sustainable development' in relation to the optimaluse of the world resources and the need to protect and preserve theenvironment in a manner consistent with the various levels of nationaleconomic development.

The main difference: (1) the WTO is a permanent international legal personality, and only a temporary GATT Agreement. But the organizational structure also improved. The WTO is the highest authority in "the Council of Ministers" (by the members of the Foreign Trade and Economic Cooperation to attend) (equivalent to shareholders of the General Assembly), have legislative and judicial powers. The Council of Ministers during the recess, composed of representatives from all the members of the "General Council" (the Board) performing the duties of the Council of Ministers, by the Director-General (general manager) is responsible for handling day-to-day affairs and coordination. (2) The WTO provisions enacted by the GATT more than legal efficiency, the operation are more efficient. (3) The WTO trade-related content more widely than GATT, which has jurisdiction of a broader. GATT only involve trade in goods, the WTO is not only involved in the trade, including goods, services and intellectual property rights also include. (4) Members of the WTO obligations of unity. WTO members, regardless of size, to the jurisdiction of the multilateral agreements must be observed, "package" to accept the WTO agreement, the agreement cannot be selective in one or a number of agreements, not its jurisdiction agreement, the agreement of a reservation. However, many of the GATT agreement, the code is implemented by means of the Parties can accept, cannot accept.

Timeline of GATT and the WTO is different 1944: At the Bretton Woods Conference, which created the World Bank and International Monetary Fund (IMF), there is talk of a third organization, the International Trade Organization (ITO). 1947: As support for another international organization wanes in the U.S. Congress, the General Agreement on Tariffs and Trade (GATT) is created. The GATT treaty creates a set of rules to govern trade among 23 member countries rather than a formal institution.

1950: Formal U.S. withdrawal from the ITO concept as the U.S. administration abandons efforts to seek congressional ratification of the ITO. 195186: Periodic negotiating rounds occur, with occasional discussions of reforms of GATT. In the 1980s, serious problems with dispute resolutions arise. 198694: The Uruguay Round, a new round of trade negotiations, is launched. This culminates in a 1994 treaty that establishes the World Trade Organization (WTO). 1995: The WTO is created at the end of the Uruguay Round, replacing GATT.

Q.2. What are the differences between domestic and international marketing research? In your opinion, which is the most difficult step in conducting international marketing research and why?

Breadth and scope of international marketing research: A basic difference between domestic and international marketing research is the broader scope needed for foreign research. Research can be divided into three types based on information needs: general information about the country area and or market information necessary to forecast future marketing requirements by anticipating social, economic and consumer trends within specific markets or countries, and Specific market information used to make product, promotion, distribution and price decisions and develop marketing plans. In domestic operations, most emphasis is placed on the third type, gathering specific market information, because the other data are often available from secondary sources. A countrys political stability, cultural attributes and geographical characteristics are some of the kinds of information not ordinarily gathered by domestic company marketing research departments but which are required for a sound assessment of a foreign country market. This broader scope of international marketing research entails collecting and assessing information that includes the following:
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Economic: general data on growth of the economy, inflation, business cycle trends and the like, profitability analysis for the divisions products, specific

industry economic studies, analysis of overseas economies and key economic indicators for the home country and foreign countries.
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Sociological and political climate: a general non-economic review of conditions affecting the divisions business. In addition to the more obvious subjects such as cultural differences, it also covers ecology, safety, leisure time and their potential impact on the divisions business.

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Overview of market conditions: a detailed analysis of market conditions the division faces, by market segment, including international. Summary of the technological environment: a summary of the state-of-the-art technology as it relates to the divisions business, carefully broken down by product segments.

Competitors: a review of competitors market shares, methods of market segmentation, products and apparent strategies on an international scale.(Samuel and Craig, 1997)

The marketing research process and the international dimension

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Topic and research problem Research design and plan Data collection and measurement Data analysis and interpretation Presentation of the findings and report

The main additional complexities faced by the International marketing Researcher: Complexity of research Design: Designing research for International marketing decisions is more complex than where a single country is concerned. The conduct of Research in different countries implies that much greater attention is required to define the relevant unit and level of

analysis that is, countries versus groups of countries or regions or national markets versus global market segments as well as the scope of the research. In addition the definition of the problem needs to be assessed and whether this is similar in structure and relevant parameters for example, whether products are the same across countries. (Samuel and Craig, 1997) While countries are convenient and the most commonly used units of analysis due to the existence of political and Organizational boundaries, as well as because much secondary data are available on a country-by-country basis, these may not be the most appropriate units from a marketing stand point ( Douglas and Craig 1997)

The relevant respondent may differ country to country. Example: the role of women in financial and insurance decisions or traditional male purchases, such as automobiles may vary from country to country.

Difficulties in establishing comparability and equivalence Considerable difficulties are likely to be encountered in establishing equivalence and comparability of research in different countries, both with secondary and primary data and with methods of data collection. For example: secondary data on motor vehicle registration may not provide equivalent data between companies. Similarly many of the concepts, measurement instruments and procedures for primary data collection have been developed and tested in the US and Western Europe. Their relevance and applicability in other countries are far from clear. Concern with equivalence and comparability as well as accuracy may be particularly critical where secondary data are collected from the internet. (Wind and Douglas, 1982) Establishing the comparability of data administration procedures posses further difficulties. In one country certain method of data collection, for example: mail questionnaires, may be known to have a given level of reliability, in another country, personal interview rather than mail questionnaire may have an equivalence level of reliability. Complexity of Coordination of research and data collection across countries: The conduct of research in the international environment adds considerably to the complexity of research design and data collection. The research instruments and

data collection procedures also have to be harmonized. This can result in substantial difficulties and coordination problems. These can add considerably to research costs and also lead to considerable time delays (Samuel and Craig, 1997). Complexity of Intra-functional character of international marketing decisions There are some complexity are likely to be encountered in coordinating intrafunctional research. For example: The accounting or finance department might want to focus on measures of profitability such as cash flow and return on investment (ROI) while marketing and sales dept. are more concerned with market share and sales. Complexity of Economics of International Investment & Marketing Decisions: The lack of familiarity with foreign environments and with operations within these environments implies that much research, especially in the initial entry stages, should be viewed as an investment rather than a current expense (Samuel and Craig, 1997).

How International marketing different from Domestic Marketing? (PEST ANALYSIS) The process of international marketing research though involves the same disciplines as domestic research, has some differences compared to its domestic version. The major differences are
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The national differences between countries arising out of political, legal, economic, social and cultural differences and, The comparability of research results due to these differences.

National Differences The main factors that affect the way in which people from different cultures behave are:

A. Cultural Differences: Culture refers to widely shared norms or patterns of behaviour of a large group of people. It is defined as the values, attitudes, beliefs, artefacts and other meaningful symbols represented in the pattern of life adopted by people that help them interpret, evaluate and communicate as members of society. The need for greater cross cultural awareness is heightened in our global economies. Cross cultural differences in matters such as language, etiquette, nonverbal communication, norms and values can lead to cross cultural blunders as illustrated by the following marketing mix:  Product: A soft drink was introduced into Arab countries with an attractive label that had six-pointed stars on it. The Arabs interpreted this as pro-Israeli and refused to buy it. Another label was printed in ten languages, one of which was in Hebrew again the Arabs did not buy it (Payne, website).  Price: An American firm was trying to get an acceptable price for their product from a Japanese buyer. The Americans presented a very detailed presentation and offered what they felt was a reasonable price. After a few moments of silence, the Americans thought the Japanese were going to reject the offer so they lowered the price. There was more silence by the Japanese. The Americans then said they would lower their price one last time and that this was the lowest they could go. The Japanese accepted this offer after a brief silence. The Japanese later said the first price was within an acceptable range, but it was their custom to consider the proposal silently before giving their decision. The Americans lost a lot of profit by jumping the gun and believing that Japanese respond just like the Americans do(InternationalBusinessCommunication,(http://www.cba.uni.edu/buscomm/In ternationalBusComm/blunders.htm).  Place: A well known drinks company tried to introduce a two litre drinks bottle into Spain, but found it hard to enter the market they soon discovered this was because few Spaniards had fridge doors large enough to accommodate the large size bottle (Payne, website).

 Promotion: When Pepsi co advertised Pepsi in Taiwan with the ad Come Alive with Pepsi they had no idea that it would be translated into Chinese as Pepsi brings your ancestors back from the dead. B. Racial Differences: This would refer to the differences in physical features of people in different countries. For example, the types of hair care and cosmetic products needed in U.S would differ from those needed in South East Asia. C. Climatic Differences: This would include the meteorological conditions like degree of rain and temperature range in the targeted foreign market. For instance, Bosch-Siemens had to alter their washing machines with a minimum spin cycle of 1,000 rpm and a maximum of 1,600 rpm in Scandinavia, owing to irregular sunshine. In Italy and Spain, on the other hand, it is sufficient to have a spin cycle of 500 rpm as there is abundant sunshine (Stevens & Davis, 1997). D. Economic Differences: The level of economic development in a market can affect the desired properties of a product and in this way can inspire a company to adapt its products in order to meet the needs of the local market. The level of economic progress in a market can be assessed by a series of indications:  The level of revenue and buying power of local consumers: This will have an influence on the technical conception and marketing of exported products. In richer countries where the state of economic progress is more advanced, consumers generally having a higher purchasing power and tend to prefer purchase of more sophisticated products with advanced functions, while people in poorer markets would be interested in a simplified version of the product.  The state of infrastructure in the market: The general level of the quality of infrastructure in the country consisting of elements such as transport, energy communication systems, etc. can affect how the product is constituted as it can bring about different conditions of use. For instance when car manufacturer Suzuki entered India, it had to reinforce the suspension or the road clearance level of the cars as the state of the roads were poor.

E. Religious Differences: Religion has many impacts on products, more particularly on the ingredients, that constitute them. For example, in Islamic countries, companies, exporting grocery products based on beef have to furnish a certificate declaring that the animals have been slaughtered respecting Halal methods. Alcoholic drinks are equally banned in Middle Eastern countries. Religious restrictions can therefore require product adaptation (Kumar, 2000). F. Historical Differences: Historical differences help explain facts such as the playing of cricket in England, as opposed to game of boules in France. These differences have slowly evolved over time but have a profound effect on consumer behaviour. For example, drinking Scotch whiskey is considered prestigious and trendy in Italy, but old-fashioned and almost boring in Scotland (Kumar, 2000). G. Language Differences: Language is an important aspect of international marketing research. Inappropriate use of language could result in loss of market apart from turning out to be a cross cultural gaffe. For instance, U.S. and British negotiators found themselves at a standstill when the American company proposed that they table particular key points. In the U.S. Tabling a motion means to not discuss it, while the same phrase in Great Britain means to bring it to the table for discussion (Ricks, 1999). H. Differences in Actual and Potential Target Groups: In countries like England and Germany it is possible to do national samples. Small towns and villages can be included because distances are not great. In Spain, interviews can be conducted only in cities with populations of over 100,000 people, as the cost of interviewing people in small towns and villages is prohibitively high (Kumar, 2000). In addition, the international marketing researcher may also have to deal with other factors such as differences in the way that products or services are used, differences in the criteria for assessing products or services across various markets and differences in market research facilities and capabilities.

The negative aspects of standardization

Despite the benefits of standardization, there are a number of potential drawbacks associated with a standardization strategy. As Douglas and Wind (1987) pointed out, global marketing standardization is feasible only under certain conditions. These include the existence of a global market segment, potential synergies from standardization, and availability of a communication and distribution infrastructure to deliver the firms offerings to target customers worldwide. One key drawback of a standardization approach is that it implies a product orientation, rather than a customer and competitor orientation (Douglas and Wind, 1987). A product orientation is myopic and pres byopic and is likely to lead to failure (Cateora, 1993; Laughlin et al., 1994). More importantly, cultural differences and competitor strategy are external factors related to standardization. Marketers must be aware of and sensitive to the diverse cultures in foreign countries to survive and prosper in international markets (Cateora, 1993; Ricks, 1983). Personal Interviews: Tend to be the dominant mode of data collection outside the United States and Canada (Monk, 1987). Lower wage costs imply that personal procedures are cheaper than in the United States. In Latin countries, and particularly in the Middle East, interviewers are regarded with considerable suspicion. In Latin countries, where tax evasion is more prevalent, interviewers are often suspected of being tax inspectors. In the Middle East, where interviewers are invariably male, interviews with housewives often have to be conducted in the evenings when husbands are at home. Mall Intercept Surveys are very popular in the United States and Canada, though not commonly used either in the European countries or in developing countries. Telephone Interviews are not as advantageous in international marketing research as low levels of telephone ownership and poor communications in certain countries limit the coverage provided by telephone surveys. In countries such as India, which is predominantly rural, the telephone penetration is only 1 percent, and hence telephone surveys may not be the ideal method to adopt (Sopariwala, 1987). Even in relatively affluent societies such as Great Britain, telephone penetration is only 80 percent, and telephone interviewing is not widely used because many practitioners are still skeptical about it. In Britain and France, there are substantial declines in telephone response rates in large cities. The Eastern European countries and countries in the newly formed Commonwealth of Independent States have a poor

telecommunication system. In such countries, conducting telephone surveys may not be a good idea. Conclusion: In the complex diverse and continually changing international environment International marketing research assume a vital role in helping management keep abreast and in touch with development in fluctuating in market throughout the world.
Q.3 What are the pros and cons of direct entry into international markets through joint ventures, as compared to direct foreign investment?

Whether you're new in the art of business or have been an entrepeneur for some time, you'll eventually come across the idea of becoming part of a joint venture. It may sound like a bit of complicated business talk but a joint venture is a variation on the age-old idea of a business partnership. Though, of course, it's a lot more complicated than that. Joint ventures are legal entities created when two or more companies pool their resources for a single goal. As legal entities, they are similar to corporations, able to operate independently of its founding companies and has the corresponding rights as a business operation this means it can acquire properties, has separate liabilities and assets and can sue and be sued in court. Joint ventures usually come about in the way that all partnerships usually come about one party has something that the other wants and the other party is willing to share its resources to the benefit of both. Joint ventures are formed by small companies hoping to expand, while global companies usually does them so that they can enter a particular country's market. There are several advantages to joining a joint venture. The primary one is that a joint venture is a shared business liabilities and assets are divided evenly between two or more partners. This can enable the participants to have higher profit margin for a lower amount of risk. Usually, when a business enters a new market, the risks involved can be terrifying for a new company even larger corporations tread lightly when they enter a market. Going into a joint venture with partners can make sure that the price of failure is not devastating for the company. Another advantage is that partnering with someone who already has the infrastructure ready for your product enables you to deliver the product faster than other businesses. Trying to build up a distribution channel is a difficult proposition. It costs money and can

be subject to delays having ready-made distribution points provided by your partner can make it easier for a company to deliver the product and helps them focus on one part of the operation. Joint ventures also carry with them the weight of the partners' reputations having a well-known and trusted brand backing you will often help you sell your product more. There are, of course, disadvantages. The primary one is that all of this profitability depends on your partners' dependability. Having unscrupulous or less-than-stellar business partners can cost you a whole lot of money. Another one is that a joint venture often involves integration and this can be difficult for both parties culture clash and integration problems will crop up, if you're not careful. It sounds all complicated but the process of going into a joint venture is actually very easy. The formulation of a joint business plan is almost always the first step; it assures that all the participants are on the same page and assures them about the efficient division of work. After that, legal and binding agreements are signed to confirm the partnership and it goes forward from there. Joint ventures are a great way to penetrate a market and I hope this brief introduction gives you the bare bones of what you need to get into one.

There are just more than enough accounting and business reasons to get into a joint venture. Your company could truly benefit from partnering with other firms with complementary resources and abilities like distribution channels, technology, and finance, among others. It is not surprising that these days, almost all companies are getting into or at least considering participating into joint ventures. Take note that not all joint ventures succeed. Experts assert that only about 40% of such business endeavors last and achieve goals. Getting into a joint venture is like getting into a give and take relationship. In such a business effort, you should also contribute to the alliance instead of just reaping benefits from it. Your contribution could also be in the form of capital or expertise/technical share. Just like any other business strategies and measures, joint ventures have their own sets of general advantages and disadvantages. First on the list of pros, a joint venture could bring about opportunities to gain or learn new expertise or capacity. Even major or huge companies decide to get into such initiatives especially when they lack specific technical capability or expertise. Through a joint venture, they could learn the skills and technical capacity they need by the end of the partnership.

Second, a joint venture could enable companies to enter into related business activities, reach new geographic markets, or attain new technological skills or knowledge. The businesses could access greater resources, including new technology and specialized staff. Of course, a joint venture would force companies to share risks. If your business could not gather the guts to try out a new initiative or project because of the risks involved, you could still pursue the endeavor by making it a joint venture with other firms. This way, the chances of success are made bigger and more achievable. Joint ventures are naturally flexible. It could exist in a limited, specified period or just cease to operate once common objectives and business goals are met. For the list of cons, joint ventures could be taken as mere strategies of opportunistic partners to gain exposure to a new business segment. In many cases, some companies also use the effort just to poach technical experts and professionals from other companies. Joint ventures could also end up in disaster. According to market analyses, up to 60% of all joint businesses worldwide end up in failure. It could take too much effort and time to establish the right and healthy relationship between joint venture partners. There could be inevitable problems. The joint venture objectives and goals may not be fully clear and well communicated to all participants. There could be imbalance in the level of investments, expertise, and assets infused into the project by the partners. Then, there could be less cooperation and poor integration because of varying management styles and cultures of joint venture partners. Remember that is always imperative to review your current business strategies and objectives prior to committing into any joint venture. It is important that you first choose the right partners and re-assess your need to actually partner with anyone or any other business for a project of endeavor. The Cons Of A Joint Venture No doubt, more people want to go into a joint venture than go off to a business on their own. And who can really blame them? A joint venture gives you benefits that you will not get from having a single proprietorship business. With a joint venture, the risk is less, the work is less and of course, the number of ideas that you can come up with are doubled, tripled depending on the number of partners that you have in the business. But as most people who have gone to business with other people have realized, a joint venture is not all sweetness and light. It can turn into a nightmare if you do not take care it. Here are some of the downsides of getting into a joint venture and how to avoid or prevent it:

1. Slow management of business Decision-making will be slower because the opinions of the other partners are needed before one can make a decision. This can slow down the operations and may result to lost opportunity. If all the opinions are not sought, discord among the partners can start. How to solve: One can avoid this by making sure that one or two member of the company will be given the power of attorney to make decisions for the group. That way, the company can keep up with suppliers and the operations. Only the big decisions that can affect the company long term will be consulted with each partner. 2. Too many ideas, no agreement Although it is good to have more than one thinking heads, it can also be a problem when no agreements are reached. Just imagine having a lot of ideas on the table but nothing concrete to work on. Too many people who want to get their voices heard can create problems within the company. How to solve: The best thing to do about this is to devise a system wherein partners will have limit on the number of ideas that they will come up with and to have a deadline for narrowing down the ideas into something that everyone can work on and deal with. 3. Inequality with the brunt of work Knowing that there are partners who can take over for them, some people slack off and do not do the job. They pass their responsibilities to their partners and just give a variety of excuse. Also, in any kind of group, there will be people who will be doing most of the work while others will just be sitting on the sidelines. Its natural for a group to have inequality of workload even when there is a clear division of labor. How to solve: To make sure that at the very least you will have more or less the same workload, you need to define the job of each one and to make it clear from the start that slacking off is not to be tolerated and if they dont take care of their end of the business, they can lose some percentage in the final profit sharing.

The Pros Of A Joint Venture A joint venture refers to a partnership between two or more people for a business. It differs from the word partnership in the sense that it is more formal and in more legal terms. In a joint venture, the two parties sign a legal agreement that they will be sharing the tasks and the risks of the business or the new venture. Most start-up businesspeople opt for a joint venture as opposed to single proprietorship or multi-partners or corporation. Here is a brief rundown of the reasons why a joint venture is a good choice. y Less risk For people who are just starting their business or are virtually novices in the business arena, it can be frightening to just plunge head first and not have someone with you to cushion the risk. Having a partner or partners will make your investment smaller and therefore, lesser risk for you should the business fail. This is ideal for young entrepreneurs who are just testing the market and are not yet sure of their business ideas yet or those who are going into a field they do not know. Having a go-to guy When you have partners, there will be division of labor. Thus, you dont need to do all the work yourself. You can divide the work among the partners where each one will handle one aspect of the business. This set-up is ideal for those who are doing the business part-time and would not be able to look into the business 24/7. If you cant make it for instance to look at materials or check the quality control, at least, you have someone who can take over the reins for you. This does not mean however that you have the right to slack off. Single proprietors hire people to this for them but sometimes, it is better to have someone who you can trust. Employees are also seen as not having the same kind of passion and commitment to the business as perhaps a partner because they do not have a personal stake on it. Thus, they cannot be relied on the same way as you can rely on a partner.

Having someone by your side For some people, they do not really care about the investment or the risk, they just want someone to be there should the business fail or have problems. Having somebody to rely on in times of trouble is vastly reassuring. Besides, although you can hire people to be there for you, there is nothing better than having a friend or someone you trust by your side.

More ideas Two heads are better than one or so the saying goes. Having many partners means that you will also have a lot of ideas to choose from. These can be good for the business especially when you are strategizing on marketing your products or thinking of a product idea or an additional service. The more people you have on your side, thinking for the business, the better.

Q.4 Select a currently existing product in the Indian market to be launched in the US market. Explain three aspects of marketing strategy that need to be adapted for the US market.
Kraft Foods' recent move to launch its Oreo biscuit brand into India has drawn attention to what is a growing sector in the country. India's biscuit market is attracting growing multinational interest but powerful domestic players already dominate the market and the jury is out over whether foreign companies can easily grab market share. India's US$2.4bn biscuit market is drawing multinational companies to its shores. According to Euromonitor data, the sector is growing at 14% annually, so the channel holds much promise, but will the world's food giants have the nous to turn this local demand into significant profits? Oreo, from US giant Kraft Foods, is the most recent international arrival to this multibillion dollar biscuit party. Last year, GlaxoSmithKline Consumer Healthcare launched high-end cookies and cream biscuits under its Horlicks brand, to join its existing value lines and a Junior Horlicks biscuit for young children. The UK's United Biscuits, meanwhile, brought its McVitie's digestive biscuits to India. PepsiCo is set to soon follow up its 2009 offering of Aliva, a baked-savoury cracker, with a healthy oat-based cookie. And there have also been rumours that Hindustan Unilever is developing plans to re-enter the Indian biscuit market it left in 2005.

Methods of entry.:With rare exceptions, products just dont emerge in foreign markets overnighta firm has to build up a market over time. Several strategies, which differ in aggressiveness, risk, and the amount of control that the firm is able to maintain, are available:

Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential. Further, the firm, by not operating in the country, learns less about the market (What do consumers really want? Which kinds of advertising campaigns are most successful? What are the most effective methods of distribution?) If an importer is willing to do a good job of marketing, this arrangement may represent a "win-win" situation, but it may be more difficult for the firm to enter on its own later if it decides that larger profits can be made within the country. Licensing and franchising are also low exposure methods of entryyou allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk. Problems here involve the fact that you are training a potential competitor and that you have little control over how the business is operated. For example, American fast food restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness. Similarly, a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in the home country. Turnkey Projects. A firm uses knowledge and expertise it has gained in one or more markets to provide a working projecte.g., a factory, building, bridge, or other structureto a buyer in a new country. The firm can take advantage of investments already made in technology and/or development and may be able to receive greater profits since these investments do not have to be started from scratch again. However, getting the technology to work in a new country may be challenging for a firm that does not have experience with the infrastructure, culture, and legal environment. Management Contracts. A firm agrees to manage a facilitye.g., a factory, port, or airportin a foreign country, using knowledge gained in other markets. Again, one thing is to be able to transfer technologyanother is to be able to work in a new country with a different infrastructure, culture, and political/legal environment. Contract manufacturing involves having someone else manufacture products while you take on some of the marketing efforts yourself. This saves investment, but again you may be training a competitor. Direct entry strategies, where the firm either acquires a firm or builds operations "from scratch" involve the highest exposure, but also the greatest opportunities for profits. The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment. In some countries, the

government may expropriate assets without compensation, so direct investment entails an additional risk. A variation involves a joint venture, where a local firm puts up some of the money and knowledge about the local market.

Product Issues in International Marketing Products and Services.: Some marketing scholars and professionals tend to draw a strong distinction between conventional products and services, emphasizing service characteristics such as heterogeneity (variation in standards among providers, frequently even among different locations of the same firm), inseparability from consumption, intangibility, and, in some cases, perish abilitythe idea that a service cannot generally be created during times of slack and be stored for use later. However, almost all products have at least some service componente.g., a warranty, documentation, and distributionand this service component is an integral part of the product and its positioning. Thus, it may be more useful to look at the product-service continuum as one between very low and very high levels of tangibility of the service. Income tax preparation, for example, is almost entirely intangiblethe client may receive a few printouts, but most of the value is in the service. On the other hand, a customer who picks up rocks for construction from a landowner gets a tangible product with very little value added for service. Firms that offer highly tangible products often seek to add an intangible component to improve perception. Conversely, adding a tangible element to a servicee.g., a binder with informationmay address many consumers psychological need to get something to show for their money. On the topic of services, cultural issues may be even more prominent than they are for tangible goods. There are large variations in willingness to pay for quality, and often very large differences in expectations. In some countries, it may be more difficult to entice employees to embrace a firms customer service philosophy. Labor regulations in some countries make it difficult to terminate employees whose treatment of customers is substandard. Speed of service is typically important in the U.S. and western countries but personal interaction may seem more important in other countries. Product Need Satisfaction: We often take for granted the obvious need that products seem to fill in our own culture; however, functions served may be very different in othersfor example, while cars have a large transportation role in the U.S., they are impractical to drive in Japan, and thus cars there serve more of a role of being a status symbol or providing for individual indulgence. In the U.S., fast food and instant drinks such as Tang are intended for convenience; elsewhere, they may represent more of a

treat. Thus, it is important to examine through marketing research consumers true motives, desires, and expectations in buying a product. Approaches to Product Introduction: Firms face a choice of alternatives in marketing their products across markets. An extreme strategy involves customization, whereby the firm introduces a unique product in each country, usually with the belief tastes differ so much between countries that it is necessary more or less to start from scratch in creating a product for each market. On the other extreme, standardization involves making one global product in the belief the same product can be sold across markets without significant modificatione.g., Intel microprocessors are the same regardless of the country in which they are sold. Finally, in most cases firms will resort to some kind of adaptation, whereby a common product is modified to some extent when moved between some marketse.g., in the United States, where fuel is relatively less expensive, many cars have larger engines than their comparable models in Europe and Asia; however, much of the design is similar or identical, so some economies are achieved. Similarly, while Kentucky Fried Chicken serves much the same chicken with the eleven herbs and spices in Japan, a lesser amount of sugar is used in the potato salad, and fries are substituted for mashed potatoes. There are certain benefits to standardization. Firms that produce a global product can obtain economies of scale in manufacturing, and higher quantities produced also lead to a faster advancement along the experience curve. Further, it is more feasible to establish a global brand as less confusion will occur when consumers travel across countries and see the same product. On the down side, there may be significant differences in desires between cultures and physical environmentse.g., software sold in the U.S. and Europe will often utter a beep to alert the user when a mistake has been made; however, in Asia, where office workers are often seated closely together, this could cause embarrassment. Adaptations come in several forms. Mandatory adaptations involve changes that have to be made before the product can be usede.g., appliances made for the U.S. and Europe must run on different voltages, and a major problem was experienced in the European Union when hoses for restaurant frying machines could not simultaneously meet the legal requirements of different countries. Discretionary changes are changes that do not have to be made before a product can be introduced (e.g., there is nothing to prevent an American firm from introducing an overly sweet soft drink into the Japanese market), although products may face poor sales if such changes are not made. Discretionary changes may also involve cultural adaptationse.g., in Sesame Street, the Big Bird became the Big Camel in Saudi Arabia.

Another distinction involves physical product vs. communication adaptations. In order for gasoline to be effective in high altitude regions, its octane must be higher, but it can be promoted much the same way. On the other hand, while the same bicycle might be sold in China and the U.S., it might be positioned as a serious means of transportation in the former and as a recreational tool in the latter. In some cases, products may not need to be adapted in either way (e.g., industrial equipment), while in other cases, it might have to be adapted in both (e.g., greeting cards, where the occasions, language, and motivations for sending differ). Finally, a market may exist abroad for a product which has no analogue at homee.g., hand-powered washing machines. Branding: While Americans seem to be comfortable with category specific brands, this is not the case for Asian consumers. American firms observed that their products would be closely examined by Japanese consumers who could not find a major brand name on the packages, which was required as a sign of quality. Note that Japanese keiretsus span and use their brand name across multiple industriese.g., Mitsubishi, among other things, sells food, automobiles, electronics, and heavy construction equipment.

Q.5 what are the essential elements of an international marketing plan that distinguish it from a domestic marketing plan? Why is it important to update the international marketing plan regularly? In today's global economy, international marketing becomes more and more important. Companies may export products from the country of origin, or they may enter into joint ventures with foreign companies. They may license to companies abroad, or they may establish a manufacturing plant in another country. In any case, they will need to develop a marketing plan that targets people in foreign markets. International Marketing
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While some businesses get into the international marketplace as a result of unsolicited orders from consumers in a foreign country, many businesses choose to market internationally. They may want to establish new markets when domestic markets are saturated, or they may see an opportunity to turn a quick profit. In an economic downturn, some companies may want to spread their corporate risk and minimize the impact of a recession at home. Successful international marketing involves adapting, managing and coordinating a marketing plan in a foreign environment.

Cultural Values
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One of the essential elements of international marketing is to understand the culture of the target audience. Iconic multinational corporations like Coca-Cola, IBM and McDonald's were successful in selling their brands to worldwide markets by taking a universal approach based on the American model of assimilation. Going forward, companies may feel the need to target culturally diverse markets with marketing directed toward specific cultures. To accomplish this goal, the marketing plan must take into consideration the language of the native population, the educational level of the populace, the prevailing religions and other social conditions that determine how people will react to the product and its advertising.

Branding
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Companies use branding as a key element of their marketing strategy to position their businesses in relation to the competition. This is a valid strategy when marketing domestically, and it is also valid for international marketing. Consistency in the branding message informs the customer of the quality they can expect from a company's products and services. Branding is achieved by using logos, color, graphics and taglines that reflect the product. To use branding as an international marketing strategy, a template can be useful. Templates are

easy to control and resize, and they can be modified into different languages for different countries. Localization of Websites
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Localizing your website by translating the text into the language of the target market and registering the website in appropriate local directories is another important element of international marketing. You may have to modify icons, date and time formats, photographs and local holidays to fit the local culture, and make an international user feel comfortable using your website. While search engines such as Google are popular in the United States, there may be other search engine options that are more suitable for foreign countries. You might have the best possible website, but if it is hard to find, it is ineffective.

There should never be 'one marketing plan' in a company. The difference is between the target markets. There should never be a cookie cutter style marketing campaign. Any successful firm internationally, should first obtain success locally. Coca Cola does well at being a global brand. Proctor and Gamble is a global company - but one wouldn't know it per say. It's difficult to even judge which P&G products you have in your home currently. For a global/foreign market you could have a few approaches:
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Advertise as a foreign product - there is novelty in such for some countries. For example by default, many would assume a French wine has better quality. If it is something that the country perceives Americans to do better - stick with that approach. Joint Partnership with a Local Firm - that way it can be considered a 'local product' and try to find a firm that has already established credibility Licensing - you could just sell the rights to your product to a foreign firm. The problem lies that they aren't obligated to maintain the quality standards that you may perceive necessary, and therefore hurt brand image.

Consider your market - Can they afford it? Do they want it? Do they need it? One of the important thing that we need to take care of when we are marketing our product in the international market is the detailed redesign of your 4 ps in accordance with the global market. As we know from the contributions of G. Hofstede, the cultures of world differ on broadly defined five (5) dimensions 1. Individualism and collectivism. 2. Power distance.

3. Masculinity and Feminity. 4. Uncertainty avoidance. 5. Long term orientation and short term orientation. During marketing of a product in the global context, we should take into consideration these dimensions to respond positively to the opportunities in the foreign markets. to devise the 4ps we first concentrate on the PRODUCT. the product design should take various things into consideration like for example quality which you are going to offer, it should withstand the global competition of highly sophisticated goods of any public interest. Now a days the packaging and labeling of the products is one of the opportunity as well as threat to the exporting companies. the P&L is threat in the sense that various countries have and are still barring the products from entering their markets on packagging issues(Japan), it is also of the major tangible part of a product which it offers at the very begining of the customer-producer encounter, in this context it is going to be an opportunity for a producer to grab. PRICE, the pricing policy in the global context is another important thing which needs the maximum care, when we break the global market into fragments based on cultures we often face this situation that some low priced products are referred as of mediocre quality. PROMOTION, this part of the marketing strategy is the critical one. The ways and means of the promotion strategy should be acceptable in the global markets. This is a kind of promotion customization according to the markets of the world. Language is one of the important things in the promotion of any brand. Some countries often leave certain thing without even noticing because of the language. The product descriptions should be written on the product in the language of the country to which the product is dispatched or produced to suffice the needs. The English language has lost its grip on the minds of people now. PLACE, the product should be placed at a place in such a situation that people should feel that this product belongs to them. Find out the similarities in cultures and target them and where dissimilarities arise avoid them from cropping into your product otherwise it will lose the acceptance which no producer can afford.

Your marketing plan is an essential part of your overall business plan. When you start a business or introduce new products or concepts, the plan will help you:
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Assess the needs of your customers and develop a product or service to meet those needs Communicate the attributes of the product or service to the customer Establish distribution channels to get the products/services to the customer

Developing your marketing plan will, first and foremost, help you think of all aspects of marketing; aspects which you could otherwise overlook. To produce a sound business plan you will need to outline things such as the nature of your customers, and how and why they will buy your product or hire your services. Secondly, your banker or lender will want to see the marketing section of your business plan before considering lending you money.

You can purchase software to help you write your marketing plan and your business plan as a whole. Such software may include sample plans, marketing scenarios, and the ability to perform calculations. Equally, you can choose to write your plan in any word processor; even a pencil and paper can suffice for your first draft. Styles, markets, and goals change and so should your plan. Your marketing plan should be readily accessible to consult, revise, and update. You should update your plan regularly, adjusting it according to business activities and predictions of new trends.

Q.6 Your Company is importing fertilizer in bulk. On arrival there is a shortage compared to the Bill of Lading quantity. How would you deal with this situation for future consignments before shipment, on arrival of the vessel, at time of discharge and thereafter?

Eliminating Trade Distortion Policies in the United States

The corn bounty, it is to be observed, as well as every other bounty upon exportation, imposes two different taxes upon the people; first, the tax which they are obliged to contribute, in order to pay the bounty; and secondly, the tax which arises from the advanced price of the commodity in the home-market, and which, as the whole body of the people are purchasers of corn, must, in this particular commodity, be paid by the whole body of the people.

Introduction The export subsidy, or bounty as it is referred by Adam Smith, has existed for many centuries. Created to augment an industry in need of assistance to the market, the export subsidy has become an outdated tradeentity in the developed world. As stated above, export subsidies impose a greater hindrance to the exporting nation that must be compensated by their consumer population. As the United States prepares to host the next global round of negotiations for the World Trade Organization (WTO) in Seattle, Washington, it establishes the perfect opportunity to initiate the abolition of all export subsidies from domestic policy books worldwide by eliminating our own trade distorting programs. Export subsidies are tools used to supplement the producers profits from selling a commodity. They are efficient and positive when used to initiate commerce in a developing society. Adam

Smith realized their intentions by mentioning that, "bounties were given for the encouragement either of some beginning manufactures, or of such sorts of industry of other kinds as were supposed to deserve particular favor" (Smith, 1776: 450). However, their purpose of origin did not legitimize their existence to Smith. The problem begins when the society grows dependent upon these additional payments because the market has been so thoroughly distorted that prices are inflated beyond normally affordable means. Producers in other nations can no longer compete with the sale price of the commodity from the subsidized nations. The competition is thereby artificially defeated. Export subsidies have reached their expiration. It is time for world markets to convince their users of their inherent inefficiency and to proceed into the next millennium with an agenda calling for freer global trading practices. This process of opening markets and eliminating barriers to trade has already caused quite a stir throughout the WTOs member nations. In particular, the United States and the European Union (EU) will be at the forefront of the chopping block when it comes the time for discussions regarding agricultural trade. The U.S. position to the WTO expresses the desire to succeed to a world of freer trade and open markets. A communication from the United States to the WTO, regarding objectives for the 1999 agricultural negotiations, specifies the U.S. commitment to "completely eliminate, and prohibit in the future, all remaining export subsidies" (USTR, Preparations for 1999 Ministerial Conference). The United States cannot expect our competitors to remove their established policies, benefiting their agricultural sector, until we eliminate our own. History The battle over export subsidies has its roots in EU-United States history. The EU and the United States were originally two of the highest users of export subsidies on products such as grains, oilseeds and dairy products. The EU fell dependent upon these subsidies due to inflated internal pricing. The United States was obliged to retaliate against their policies with the subsidy war of 1985.

Export Enhancement Program The United States began a policy of retaliation by using the Export Enhancement Program (EEP) as a deterrent towards the European Unions (EU) exaggerated levels of export subsidies. The war began with the United States Department of Agriculture (USDA) development of the EEP on May 15, 1985, under the authority provided by the Commodity Credit Corporation (CCC) Charter Act of 1948. It was later specifically authorized by the Food Security Act of 1985 (Epstein, 1991: 1). The EEP utilized government-owned surplus agricultural commodities as bonuses to U.S. exporters to reduce the prices of U.S. agricultural commodities in order to compete with foreign subsidized commodities. The program was initiated as a negotiating tool to coerce our competitors, especially the EU, that their practices were distorting markets throughout the world (GAO, 1990: 2). The EEP meets it target by focusing upon nations which discriminate against U.S. sales with the use of export subsidies for their domestic commodities. The EEP does not promote any commodity that would not have a fair market-share without the use of export promotion. This keeps the lines of trade open although the United States is promoting a policy of exporter assistance. An exporter must apply to the USDA for payment in cash to be received upon approval of their bid for the exporting bonus. Although the CCC allocates final payments, all sales are performed by the private sector before addressing the U.S. government (FAS, 1997). Smith would have been in favor of the U.S. development of a combat policy to the EUs export subsidies. Smith was a supporter of trade retaliation. He believed that there had to be a limit to the allowance of a foreign nations distorting practices. When speaking of importations he mentioned that "revenge in this case naturally dictates retaliation, and that we should impose the like duties and prohibitions upon the importation of some or all of their manufactures into ours" (Smith, 1776: 467). The initial EEP program was continually expanding. It continued as a tool to determine the outcome of the approaching round of WTO negotiations. The Uruguay Round was launched under the auspices of the General Agreement on Tariffs and Trade (GATT) in September 1986. Major players in world trade all submitted proposals for the further liberalization of agricultural trade policies (GAO, 1990: 35).

End the Export Enhancement Program In 1989, the USDA produced an unpublished study of actual effectiveness of export subsidy programs. This study found that a program such as the EEP was likely to increase commodity sales because altered commodity prices would increase import demand (Epstein, 1991: 4). In 1991, leading economists Robert Chambers and Philip Paarlberg argued that export enhancement programs actually produce a negative affect upon real farm incomes. They found that If the excess demand for the agricultural commodity is inelastic, then farm income in the subsidizing country falls. Further, they contend that the presence of a nonrecourse loan program dampens any impacts either in-kind or cash subsidies might have (Chambers, 1991). Advocates of export subsidies see the benefits incurred by a theoretical targeted export assistance program. In a market free from outside pressures, bonuses may contribute to enhanced profitability by displacing program costs to the rest of the world. In a world filled with retaliatory measures, export subsidies run the risk of inflating all commodity prices thereby forcing the level of the subsidy well above the stages needed "to exploit differences between the substitution effects and the income effects" (Seitzinger, 1989). The Export Enhancement Program has run its course. The first objective of the EEP, as listed in the Federal Register on June 7, 1991, was "to discourage unfair trade practices by other countries" (Epstein, 1991: 2). This discouragement has not been successful. Other countries, especially the EU, continue to practice export enhancement programs of their own, assisting their producers to a much greater extreme than any U.S. domestic agricultural program. The United States must develop a new program that does not follow the same form of a policy the nation is trying to eliminate. Supporters may argue that the program is necessary in order to allow our farmers and exporters to compete with our global trading partners, who support their agricultural industry with export subsidy programs. There must be a limit to how far retaliation can continue. The EEP, originally created as a deterrent to the EUs domestic subsidy programs, has not accomplished its goal of export subsidy elimination. Adam Smith noted that even retaliatory measures sometimes run their course unsuccessfully. The enforcing nation must realize a failure of purpose and move to a different strategy to accomplish original goals. In continuing distorting trade practices, the U.S. only sustains the animosity felt between the competitor

nations. Smith noted that When there is no probability that any such repeal can be procured, it seems a bad method of compensating the injury done to certain classes of our people, to do another injury ourselves, not only to those classes, but to almost all the other classes of them (Smith, 1776: 468). The only manner in which to repair U.S. EU relations over trade policy is to negotiate on equal terms. Criteria for the EEP to review initiative proposals includes a clause which targets the initial purpose of the EEP, to counter competitors subsidies by displacing such countries subsidized exports in targeted countries (FAS, 1998: 1). This clause completely misses its aim of furthering freer trade policy and opening the worlds markets towards U.S. exports. The only thing it accomplishes is a tighter protectionist policy which inflames producers from abroad, heightening trade tensions. The United States cannot expect the EU to remove a policy which the U.S. follows; albeit in microscopic form.

Uruguay Round Commitments The previous round of WTO negotiations produced the Uruguay Round Agreement on Agriculture (URAA) which included provisions for the gradual reduction in volume and value of all export subsidies for agricultural commodities over the years 1995 to 2000 (Leetmaa, 1999). Flexibility exists within the URAA, allowing subsidy averaging over the period of implementation. If one year commodity prices escalate, causing a greater dependency upon export subsidy programs, the nation must use the other of the five years to reduce levels of allocations, equaling full compliance reduction averages for the realization period (Leetmaa, 1998: 23). During the last decade, both the EU and the United States have reduced their export subsidy levels though the EU continues to use this method at an exorbitant rate. The EUs Agenda 2000 addresses several concerns developed by the URAA. Finalized in March 1999, Agenda 2000 touches upon, but does not atone for, thedistortion created by their domestic subsidies. The program will reduce support prices on certain commodities while moving towards a policy of direct payments to compensate the producers for price declines (Kelch, 1999: 12). The EUs Agenda 2000 gives more priority to the upcoming WTO negotiations. The EU insists that the plan in final form will be their compromise toward the upcoming agricultural negotiations. They

believe that "any discussion about further cuts in export subsidies must also involve disciplining U.S. export credit guarantees" (Blumenthal, 1999: 1). Agenda 2000 gives the EU opportunity for bargaining over sensitive agricultural trade issues. The United States is prepared to meet its commitments within the WTO by the year 2000. Since 1985, the United States has progressively shifted its farm policy towards a stronger market orientated system that naturally reduced subsidy levels. The URAA outlined provisions for restricted domestic support practices, assisting the United States in developing policies independent of agricultural subsidies. The URAA defined export subsidies subject to reductions as Direct export payments by governments to firms, industries or producers of agricultural products contingent on export performance Sales or gifts of government stocks at prices lower than acquisition prices Export payments financed through government action, including payments financed by levies on producers Subsidies to reduce export marketing costs, and Subsidies on goods incorporated into export products (Leetmaa, 1998: 23). The United States was able to comply with these measures without much difficulty. There are contributing factors to the successful compliance of the United States. First, base levels set between the years 1986-88 were exceptionally inflated. Achieving a twenty- percent reduction in these rates was a reasonable objective. The gradual averaging took the brunt of the possible results from immediate support reductions (Nelson, 1997: 27). The Federal Agriculture Improvement and Reform Act of 1996 (FARM Act) further promoted the marketoriented agricultural policies. 1996 FARM Act The 1996 Act did make significant policy changes directed at filtering existing programs into those that more closely adhered to the global marketplace. The Act redesigned programs which dealt with income support and supply management for commodities such as wheat, corn, grain sorghum, barley, oats, rice and upland cotton (Young, 1996: 1). The FARM act modified the Agricultural Trade Act of 1978 by altering two main goals of agricultural trade strategy. Instead of

(1) Ensuring U.S. agricultural export growth, (2) efficiently using Federal agricultural export programs, (3) providing food aid and improving the commercial market potential for U.S. agricultural exports in developing countries, and (4) maintaining traditional U.S. markets; (Ackerman, 1996: 37). the goals now read Increasing the value of U.S. agricultural exports, (2) increasing the U.S. world market share for agricultural products, (3) increasing the value of U.S. exports of high-value and value-added agricultural products, (4) boosting the U.S. world market share of high-value and value-added products, (5) ensuring to the extent practicable that the United States implements all of its commitments under current trade agreements to increase access for U.S. agricultural commodities, and (6) requiring that, to the extent practicable, the United States use all applicable laws to secure U.S. rights under the Uruguay Round Agreement on Agriculture (Ackerman, 1996: 37). The United States will be unable to attain goals such as (1) and (2) of the revised act if endless trade disputes continue over principle facts. The more the EU wishes to hinder agricultural profitability in the United States, they are given more reason with programs mirroring their own. Less government intervention was visualized by downsizing budget allocations towards export subsidy programs, including the EEP. Funding levels allocated towards the EEP through 2002 are as follows: FY 1999, $550 million; FY 2000, $579 million; FY 2001, $478 million; and FY 2002, $478 million (FAS, 1999: 4). Although almost non-existent compared with the EUs expenditures of approximately $6.4 billion in 1995 towards export subsidies, EEP allocations still comprise a percentage of the U.S. yearly agricultural budget. The United States must realize that a small market-distortion is still a market-distortion. The important stake export subsidies claim in global trade disputes magnifies the minimal levels of U.S. funding. The United States began to move in the right direction but stopped without realizing their full purpose. The FARM Act attempted to direct domestic farming towards the price-competitive market. The USDA acknowledged that initially, producers may feel the brunt of restructured programs, but eventually the market would take to evening out profits. The United States had confidence in a strong agricultural commodity market to compensate for reductions in support programs.

Farmers were left more volatile to market conditions and took precautionary measures to insure their stocks. They moved towards methods such as Expanded use of futures and options markets, possibly using new instruments such as yield contracts, or will contract in advance for future sale of their commodities. Other alternatives to manage increased risk include diversification of production, integrated ownership, and crop insurance (Young, 1996: 2). U.S. agriculture was able to absorb market-oriented changes. It might be better policy to adhere completely to a market strategy rather than partially restructuring while maintaining certain market-distorting practices. The U.S. should have used the 1996 FARM Act to develop a U.S. agricultural policy void of trade-disputing methods such as the export subsidy program. While the United States is in compliance with WTO standards set by the URAA, we still practice unfair trading policies at a lesser extent. The only completely fair-trade agenda would include a phase out period for distortions such as export subsidies. Reduction is the key, but if the U.S. pledges total abolition, than elimination will accomplish the broader goal. Although the United States takes such a small percentage of total world export subsidies, the policy still remains. In principle, if the U.S. feels it needs to continue programs such as the EEP, it purges any incentive for the EU to eliminate their export subsidy programs.

Preparations for the New Round The United States of America The United States Trade Representative, Charlene Barshefsky, is preparing for negotiations to begin at the end of 1999. The launching of the new round in Seattle, Washington will be a window into the future of liberalizing global trade policies. Communication failure during the next month will negatively foreshadow any accomplishments, which the United States feels need to be met. There are conflicts arising from the manner in which countries want to approach the Seattle agenda. Too many specifics cannot hinder the progress of trade. There must be a compromise

in order to move forward towards broader goals. Agricultural discussion will prove to lend a directional force to the proceedings. The United States outlines sentiment against WTO members who have not achieved their reduction commitments. A communication addresses the issue of circumventing export subsidy commitments to avoid compliance with accepted measures. It expresses a complimentary view to Smiths opinion that export subsidies should only be used legitimately to enhance government revenue, not "restrict the availability of agricultural products on world markets, particularly in times of short supply" (USTR, Preparations for 1999 Ministerial Conference). Smith felt that remarkable levels of exportation, although profitable in the short run, would eventually return to injure the domestic economy. Upon expression of possible injury to the home, he remarked that, The extraordinary exportation of corn, therefore, occasioned by the bounty, not only, in every particular year, diminishes the home, just as much as it extends the foreign market and consumption, but, by restraining the population and industry of the country, its final tendency is to stunt and restrain the gradual extension of the home-market; and thereby, in the long run, rather to diminish, than to augment, the whole market and consumption of corn (Smith, 1776: 509). The United States continues to establish that export subsidies are not helping either the country who imposes them, or the country they are imposed upon. Prices created from market distortions must be compensated at some level. This coincides exactly with Smiths idea that, You do not increase the real wealth, the real revenue either of our farmers or country gentlemen. You do not encourage the growth of corn, because you do not enable them to maintain and employ more labourers in raising it. The nature of things has stamped upon corn a real value which cannot be altered by merely altering its money price (Smith, 1776: 515). According the to the United States, the EU would create a healthier market economy by the elimination of their export subsidy program. The U.S. Secretary of Agriculture, Dan Glickman, spoke before the Senate Committee on Finance on September 29, 1999 about the U.S. goals for the WTO. He expressed the desire for the total elimination of export subsidies in order to reverse depressed world commodity prices and distorted trade (Glickman, 1999). The Secretary hopes to dispel the myth felt by certain nations who see "agricultural trade not as a

win-win situation, but as a zero-sum game where the exporter wins and the importer loses" (Glickman, 1999).

The numbers support the idea that the EUs distorting policies are most directly inversely affecting the EU citizens. On food alone, the EU consumer spends upwards of 40 percent more than a consumer in the United States (http://www.econ.ag.gov/briefing/region/europe/polcap.htm, 1999). The United States must accept their claim in the stake of reducing distorted trade practices, thereby improving economic situations throughout the world. Ambassador Peter Scher, Special Trade Negotiator to the USTR, addressed the Senate Agriculture Committee on September 30, 1999 regarding the U.S. position entering the new round of trade negotiations. The U.S. policy included views which supported agricultural discussion as a top priority for the agenda, signaling the reform of the EUs Common Agricultural Policy (CAP). Ambassador Scher reiterated sentiments that the EU "is the worlds largest single distortion of agricultural trade (Scher, 1999). He called for the counsel and support of the U.S. government in formulating a solid U.S. position to lead the nation during the next round of negotiations. Scher explained the development of the U.S. objectives in Geneva, listing our goals for the next round. First and foremost, the U.S. proposes the "complete elimination, and prohibition for the future, all remaining export subsidies as defined in the Agreement on Agriculture" (Scher, 1999). The Ambassador also discussed methodology for building an international consensus, to promote greater efficiency and success throughout the next round. He expressed the U.S. desire to approach all items of agricultural trade in a single undertaking. Addressing agriculture as an indissoluble package will ensure negotiations to focus respectively upon our policy objectives. The United States recognizes the complexity of agricultural reform and is striving for cooperation in developing reasonable and binding timetables and goals. The United States prefers to build upon the precedents set by the Uruguay Round on such topics as market access, domestic support and export subsidies (Scher, 1999).

The European Union In the July 27, 1999 communication from the European Communities (EC) to the WTO on the ECs approach on agriculture, the main ideas are identified in a slightly different manner. The EC supports a mandate which provides for reductions over the long-term which would precede a fundamental change in agricultural policy, specifically referring to the commitments agreed to under the URAA, and a continual sweep towards fair and market-oriented agricultural trade (WTO, July 1999: 1). Although being of a similar opinion regarding the eventual adaptation of freer trade practices, the EU is not in concurrence with the desire of the United States to perform a major overhaul of any specific instruments. The EU prefers to retain major changes in agricultural policy in their Agenda 2000 package as it is fully implemented. The EU has communicated the reality of reforming their export subsidy programs though remains firm in requesting attention towards alternative plans and definitions limiting agricultural export credits and food aid credit programs (WTO, July 1999: 2). The United States sees the next round as essentially a restructuring forum for outdated or harmful trade practices. The reform process must begin immediately. The people of the EU are those being most severely affected by the grotesque imbalance in their trade policies. The consumers of the EU can not continue to be subject to inflated prices on food. The EU has the opportunity to remove or lessen the impact of the currently high tariffs and over sixty billion dollars per year in trade subsidies. Export subsidies alone comprise over six billion dollars annually; taking eighty-five percent of the worlds total (Scher, May 1999).

International Affairs
The International Affairs Department, within the Division of External Affairs, is primarily responsible for maintenance and strengthening of the South African sugar industry's relationship with other SADC (Southern Africa Development Community) countries with the aim of generating consensus positions in the SADC Technical Committee on Sugar on how to position the SADC sugar industries and non sugar producing countries globally in a context of trade distortions in the world sugar market. The Technical Committee on Sugar is a body responsible for the smooth implementation of the SADC Sugar Cooperation Agreement (Annex VII to the SADC Trade Protocol) which has been in force since April 2001. It

provides for (i) market access into Southern Africa Customs Union (SACU) in the form of duty-free sugar quotas allocated each year to nonSACU SADC surplus sugar producing countries and (ii) cooperation in areas of common interest between SADC sugar producing countries with the aim of developing efficient and competitive sugar industries in the region. The objectives of the SADC Sugar Cooperation Agreement are:
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To promote production and consumption of sugar and sugar-based products in SADC in accordance to fair trade and orderly marketing conditions, in anticipation of freer global trade; To facilitate sharing of information, research and training with a view to improving efficiency of growers, millers and refiners of sugar in SADC; To provide temporary measures that will prevent destructive competition in the region as long as there are global trade distortions; To facilitate development of small and medium sugar producers; To create stable market conditions that encourage rehabilitation; and development of all sugar industries with a view to facilitate foreign direct investment and create employment

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The Department further evaluates the impact to the industry of the government trade negotiating agenda which includes bilateral, regional and multilateral trade engagements, and then formulates and promotes industry positions that consider long-term benefits of the trade arrangements to the industry. As the industry is one of the major regional and global players, the Department is responsible for the promotion and protection of the image and trade interests of the industry abroad through participation in the International Sugar Organization (ISO) and facilitation of the industry's participation in the Global Sugar Alliance (GSA) activities.

Free trade makes a great deal of sense theoretically because it increases efficiency and economic welfare for all involved nations

and their citizens. South Korea s trade barriers, however, do not represent an isolated case. In practice, free trade is woefully ignored by virtually all countries. Despite the advantages, nations are inclined to discourage free trade. Why do nations impede free trade when the inhibition is irrational? One reason why governments interfere with free marketing is to protect local industries, often at the expense of local consumers as well as consumers worldwide. Regulations are created to keep out or hamper the entry of foreignmade products. Arguments for the protection of local industries usually take one of the following forms: (1) keeping money at home, (2) reducing unemployment, (3) equalizing cost and price, (4) enhancing national security, and (5) protecting infant industry. Trade unions and protectionists often argue that international trade will lead to an outflow of money, making foreigners richer and local people poorer. This argument is based on the fallacy of regarding money as the sole indicator of wealth. Other assets, even products, may also be indicators of wealth. For instance, it does not make sense to say that a man is poor just because he does not have much cash on hand when he owns many valuable assets such as land and jewelry. In addition, this protectionist argument assumes that foreigners receive money without having to give something of value in return. Whether local consumers buy locally made or foreign products, they will have to have money to pay for such products. In either case, they receive something of value for their money. The purposes are: Keeping money at home, Reducing unemployment, protect of local industries, Equalizing cost and price, Enhancing national security, and Protecting infant industry. So, these countries making marketing barriers and different types of TARIFFS, DUTIES, Combined rates, and Taxes. As there are many other requirements such as Product requirements, Products testing, documents, origin of products, Product specifications, and different types of Quotas. WORLD TRADE ORGANIZATION (WTO) Virtually all nations seek to pursue their best interests in international trade. The result is that sooner or later international trade and marketing can be disrupted.

To prevent or at least alleviate any problems, there is a world organization in Geneva known as the WTO (with General Agreement on Tariffs and Trade (GATT) as its predecessor). Created in January 1948, the objective of GATT is to achieve a broad, multilateral, and free worldwide system of trading. For example, its code requires international bidding on major projects. GATT provides the forum for tariff negotiations and the elimination of trade discrimination. The four basic principles of GATT are 1 Member countries will consult each other concerning trade problems. 2 The agreement provides a framework for negotiation and embodies results of negotiations in a legal instrument. 3 Countries should protect domestic industries only through tariffs, when needed and if permitted. There should be no other restrictive devices such as quotas prohibiting imports. 4 Trade should be conducted on a nondiscriminatory basis. Generalized system of preferences (GSP) Although the benefits derived from the creation of the WTO are rarely disputed, less developed countries do not necessarily embrace GATT because those countries believe that the benefits are not evenly distributed. Tariff reduction generally favors manufactured goods rather than primary goods. Less developed countries rely mainly on exports of primary products, which are then converted by advanced nations into manufactured products for export back to less developed countries. As a result, a less developed country s exports will usually be lower in value than its imports, thus exacerbating the country s poverty status. In response to less developed countries needs, the United Nations Conference on Trade and Development (UNCTAD) was created as a permanent organ of the UN General Assembly. Efforts by the UNCTAD led to the establishment of the New International Economic Order (NIEO) program. This program seeks to assist less developed countries through the stabilization of prices of primary products, the expansion of less developed countries manufacturing capabilities, and the acquisition by less developed countries of advanced technology.