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					                             MKTG 3215-001
                                 Spring 2012
                             Mrs. Tamara L. Cohen

           Global Marketing

Class #2
              Global Trade
              KEY TERMS
•   BoP (Balance-of-Payments)
•   Globalization
•   Protectionism
•   Trade barriers
•   Tariff = government tax on goods entering at borders
• Omnibus Trade and Competitiveness Act –
  designed to help US businesses be more competitive in
  world markets, & address perceived injustices in trade
• GATT (General Agreement on Tariffs & Trade)

Reading #1:
• Article by
  Stephen Spruiell:
  “Protectionism - Tariffs,
  Subsidies, and Trade Policy”
      WTO (World Trade Organization)
• only global international organization dealing with rules
  of trade between nations
• goal to help producers of goods & services, exporters, &
  importers conduct business
• established 1995
• 153 member countries
• HQ Geneva, Switzerland
• currency Swiss francs (CHF)

       World Bank
• vital source of financial & technical assistance to
  developing countries around world
• mission to fight poverty; help people help
  themselves & environment by providing resources,
  sharing knowledge, building capacity & forging
  partnerships in public & private sectors
• established 1944
• 187 member countries
• HQ Washington DC

IMF (International Monetary Fund)
• oversees international monetary system by following
  macroeconomic policies of member countries
• goal to stabilize international exchange rates & facilitate
  development by encouraging members to eliminate
  restrictions that hinder trade
• offers highly leveraged loans, mainly to poorer countries
• established 1944
• 187 member countries
• HQ Washington, DC
• currency SDR (Special Drawing Rights) = “paper gold”
  US$1 = SDR 0.656 as of January 11, 2012
Protests against Global
• basic complaint against WTO, IMF
  & others is bunch of unintended
  consequences of globalization
   –   environmental concerns
   –   worker exploitation & domestic job losses
   –   cultural extinction
   –   higher oil prices
   –   diminished sovereignty of nations
• terrorism in London (2005)
• “anti-sweatshop” campaigns
               Country             Exports     Imports     Total Trade

               1. Canada               248.8       276.5          525.3
 Top 15        2. China                 91.9       364.9          456.8

    US         3. Mexico
               4. Japan
 trading       5. Germany               48.2        82.7          130.9

partners       6. United Kingdom        48.5        49.8           98.3
               7. South Korea           38.8        48.9           87.7
 in 2010       8. France                27.0        38.6           65.6
               9. Taiwan                26.0        35.9           61.9
    in         10. Brazil               35.4        29.3           59.3
US$ billions   11. Netherlands          35.0        19.0           54.0
               12. India                19.2        29.5           48.8
               13. Singapore            29.1        17.5           46.6
               14. Venezuela            10.7        32.8           43.4
               15. Saudi Arabia         11.6        31.4           43.0
  History of International Trade:
       20 th - 21st Century

• Last ½ of 20th century marred by
  competing approaches to economic
  development                                    vs
  – Socialist Marxist vs Democratic Capitalist
                               • Rapid growth of war-torn
                                 economies & previously
                                 underdeveloped countries
                               • Large-scale economic
                                 cooperation & assistance
                               • Rising standards of living
            Trade Barriers

1.   Tariffs
2.   Quotas
3.   Voluntary Export Restraints
4.   Boycotts & Embargoes
5.   Monetary barriers
     – blocked currency
     – differential exchange
     – government approval
6. Standards
7. Anti-dumping penalties
Types of Nontariff Barriers
          Governmental Procurement Policies
   • Outsourcing & subcontracting have assumed international
     dimensions. International Procurement Organizations (IPOs)
     opening in developing countries like India, China, Mexico,
   • 35 US states ban outsourcing of government contracts.
   • US companies receiving government funding likely to bar
   • World's total market for outsourcing business growing at 9%
     p.a. Indian market growth 54% p.a.
e.g. It costs $60,000 to fly an empty
   aircraft from US to Singapore for
   servicing / maintenance check.
   Wage rates for skilled aircraft
   engineers in Singapore are so low
   compared to the US, that flying
   cost is more than made up.
    Government Standards

Google threatened to quit China
              2010                          2011
Google Inc threatened to quit   Under the new game plan,
  China, the world's biggest      Google is targeting Chinese
  Internet market, warning it     firms to advertise on its
  would no longer tolerate        dominant overseas search
  strict censorship of its        market ... Google is betting search engine.
                                  that rapidly-growing
Google issued its warning         Chinese exporters, keen to
  after discovering what it       reach out to overseas
  called "a sophisticated and
  targeted" cyber attack on       customers, will make use
  its email service. Google       of the company's global
  said it believed hackers        reach through its
  were targeting Chinese          international search sites.
  human rights activists.
                 in the cotton fields
            The US vs Brazil cotton war

•   US cotton farmers get government subsidies.
•   These subsidies are illegal, by WTO rules.
•   Brazil filed complaint & won.
•   US kept paying cotton farmers.

                      Now US pays
                       farmers too.
In international trade, DUMPING occurs when
  one country exports a significant amount of
  goods to another country at prices much
  lower than in the domestic market.
• effectively dumping is predatory pricing
• seen as a form of protectionism in
  international trade, when endorsed by
“Indonesia has gained a victory against
  antidumping measures imposed by the
  Australian Customs on Indonesian toilet
  paper after an Australian review revealed
  that no indications of dumping were found.”
on Chinese tires

• Leo W. Gerard, USW international
  president: “American workers are struggling
  to make it through the worst economic
  crisis in 80 years. Our tire industry is
  collapsing under the weight of 46 million
  Chinese tires entering our shrinking market
• U.S. Int’l Trade Commission supported this
  claim. Pres. Obama imposed quotas.
               Subsidies &
             Special Favors?

     “For years, the US complained that other
       countries boosted their domestic auto
       industries through subsidies and
       special favors.”

“At the heart of the foreign auto makers’ concerns is
  the authority of regulators to set standards for
  individual car classes and companies.”
Protectionist policies
   in police fleets
      Italy           Germany


                     The Omnibus Trade
                    & Competitiveness Act
• Designed to deal with trade deficits,
  protectionism, & overall fairness of US trading
• Covers 3 critical areas in improving US trade
  – market access (openness of markets to US goods)
  – export expansion (incl. Foreign Corrupt Practices Act)
  – import relief (remedies for US co’s affected by imports)
• 4 ongoing activities support growth of int’l trade
  –   GATT
  –   WTO
  –   IMF
  –   World Bank
                     General Agreement
                      on Tariffs & Trade

•    paved way for 1st effective worldwide tariff
     agreement            eliminating international
     trade barriers
•    basic elements of GATT
    1. Trade shall be conducted on a nondiscriminatory basis.
    2. Protection shall be afforded domestic industries through
       customs tariffs, not through such commercial measures
       as import quotas.
    3. Consultation shall be the primary method used to solve
       global trade problems.
       Skirting the Spirit
        of GATT & WTO
• Loopholes
  –       tariffs +  number & scope of technical
      standards & inspection requirements
• Imposing antidumping duties
• Negotiating bilateral trade agreements
  – may lead to multinational concessions
  – not necessarily consistent with WTO goals &
 What do we know about the
 Global Trade Environment?
• Benefits from absolute or comparative advantage
  clearly can accrue to any nation
• Increased pressure for protectionism from every
  region of globe
• Consumers seldom benefit from protectionism
• Free international markets help underdeveloped
  countries become self-sufficient
• Freer trade will always be partially threatened by
  various government & market barriers that exist or
  are created for protection of local businesses
• Future of open global markets lies with controlled &
  equitable reduction of trade barriers
Next class:   Global Cultural Environment
Preparation: Course Pack, reading #5
Homework:     Knife & Fork exercise

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