International Marketing

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Top Ten 2009 U.S. Trading Partners ($ billions, merchandise trade)

Exhibit 2.1

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Beyond the First Decade 2 of the 21st Century (1 of 2)

Growth of the U.S. economy slowed dramatically in the last few years especially in 2009 Economies of the developed world expected on average to grow annually at 3% for the next 25 years (OECD) Economies of the developing world expected on average to grow annually at 6% for the next 25 years (OECD) As a result, economic power and influence will move away from industrialized nations to developing nations (Latin America, Asia, Eastern Europe, and Africa)
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Beyond the First Decade 2 of the 21st Century (2 of 2)

Companies are looking for ways to become more efficient, improve productivity, and expand their global reach while maintaining an ability to respond quickly and deliver products that the markets demand.
Nestle, Samsung, Whirlpool

Smaller companies also using novel approaches to target global markets

Nochar Inc. (fire retardant) Buztronics Inc. (promotional lapel buttons)
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Protection Logic and Illogic

Arguments for protectionism:
Protection of infant industry Protection of the home market Need to keep money at home Encouragement of capital accumulation Maintenance of the standard of living and real wages Conservation of natural resources Industrialization of a low-wage nation Maintenance of employment and reduction of unemployment National defense Increase of business size Retaliation and bargaining

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Does Protectionism Help?

A recent study on 21 protected industries showed that while jobs are protected, consumers pay much higher prices because of protectionism: U.S. consumers pay about $70 billion per year in higher prices because of tariffs and other protective restrictions. At the same time, the average cost to consumers for saving one job in these protected industries was $170,000 per year. Protectionism is politically popular, particularly during times of declining wages, and/or high employment, but it rarely leads to renewed growth in a declining industry.
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Trade Barriers
Tariffs Quotas and Import Licenses Voluntary Export Restraints (VER) Boycotts and embargoes Monetary barriers
Blocked currency Government approval

Standards Antidumping penalties Domestic subsidies and economic stimuli

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Trade Barriers

Tariffs are taxes imposed by a government on goods entering its borders.

Increase
Inflationary pressures, special interests privileges, government control and political considerations in economic matters, and the number of tariffs Balance-of-payment positions, supply and demand patterns, and international relations by starting trade wars Manufacturers supply sources, choices available to consumers, and competition
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Weaken

Restrict

Trade Barriers
Quotas and Import Licenses
Quota is a specific unit or dollar limit applied to a particular type of good (increases price of good) Import licenses limits quantities on a case-by-case basis Japan and foreign rice; Banana wars between the United States and the EU

Voluntary Export Restraints (VER)

Often used in the 1980s is an agreement between the importing country and the exporting country for a restriction on the volume of exports. Japans VER on U.S. automobiles

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The General Agreement on Tariffs and Trade (GATT)

Shortly after World War II, the U.S. and 22 other countries signed GATT (1947) which paved the way for the first effective worldwide tariff agreement Basic elements of the GATT
Trade shall be conducted on a nondiscriminatory basis Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas Consultation shall be the primary method used to solve global trade problems

Eliminating international trade barriers Uruguay Round

The General Agreement on Trade in Services (GATS) Trade-Related Investment Measures (TRIMs) Trade-Related aspects of Intellectual Property Rights (TRIPs)
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The World Trade Organization (WTO)

WTO which is an institution, not an agreement, was founded in 1994.

Sets many rules governing trade between its 148 members Provides a panel exports to hear and rule on trade disputes between members Issues binding decisions All member countries will have equal representation Member countries have open their markets and to be bound by the rules of the multilateral trading system

U.S. ratification concerns

Possible loss of sovereignty over its trade laws to WTO Lack of veto power Role U.S. would assume when a conflict arises over an individual states laws that might be challenged by a WTO member

China became member of the WTO (2001); Vietnam (2007)

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Skirting the spirit of GATT and WTO

Loopholes
China reduced tariffs while at the same time increased number and scope of technical standards and inspection requirements

Imposing antidumping duties Negotiating bilateral trade agreements

May lead to multinational concessions Not necessarily consistent with WTO goals and aspirations
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International Monetary Fund (IMF)

Because of inadequate money reserves and unstable currencies, the IMF was created to assist nations in becoming and remaining economically viable Objectives of the IMF

Stabilization of foreign exchange rates Establishment of freely convertible currencies to facilitate the expansion and balanced growth of international trade
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World Bank Group

By promoting sustainable growth and investment in people, the World Bank Group is an institution created in 1944 to reduce poverty and improve standard of living The World Bank has five institutions which perform the following services:

Lending money to the governments of developing countries Providing assistance to governments for developmental projects to the poorest developing countries (per capital incomes of $925 or less) Lending directly to the private sector Providing investors with guarantees against noncommercial risk Promoting increased flows of international investment
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Anti-globalization Protests
The unintended consequences of globalizing
Environmental concerns Worker exploitation and domestic job losses Cultural extinction Higher oil prices Diminished sovereignty of nations

Protests
WTO meeting in Seattle (November 2009) World Bank and IMF meetings in Washington D.C. (April 2010) World Economic Forun meeting in Australia (September 2010) IMF meeting in Prague (September 2010) Terrorism in London (2005)

Antisweatshop campaigns
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