Student International Marketing 15th Edition Chapter 2 by 3Y4E6t


									  International Marketing
        15th edition

Philip R. Cateora, Mary C. Gilly, and John L. Graham
    Top Ten 2009 U.S. Trading Partners   2
      ($ billions, merchandise trade)
Exhibit 2.1

                    Roy Philip               2
  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
• Economies of the developing world expected on
  average to grow annually at 6% for the next 25 years
• As a result, economic power and influence will move
  away from industrialized nations to developing
  nations (Latin America, Asia, Eastern Europe, and
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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                                       2
              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?                              2

• 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
   – 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              2

•   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                                       2

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

                Inflationary pressures, special interests’ privileges,
 Increase       government control and political considerations in
                economic matters, and the number of tariffs

 Weaken         Balance-of-payment positions, supply and demand
                patterns, and international relations by starting trade

 Restrict       Manufacturer’s supply sources, choices available to
                consumers, and competition

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              Trade Barriers                                    2

• 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.
  – Japan’s VER on U.S. automobiles

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    The General Agreement on                                         2
     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                                               2
    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
     state’s 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                      2
         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                      2
• 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                                        2

• 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
   – Promoting increased flows of international investment

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   Anti-globalization Protests                                  2

• 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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