The Dynamic Environment of International Trade by t8929128


									The Dynamic Environment of
International Trade

     Cateora and Graham
          Chapter 2

   Trade Agreements and Organizations
   Balance of Payments
   Protectionism
   Easing Trade Restrictions
   Opposition to Global Institutions
   The Internet and Global Business

Major Trade Agreements and
   General Agreement on Tariffs and Trade
   North American Free Trade Area (NAFTA)
   European Union (EU)
   ASEAN Free Trade Area (AFTA)
   Asia-Pacific Economic Cooperation (APEC)
   World Trade Organization (WTO)

Balance of Payments
   It represents the difference between
    receipts from foreign countries and
    payments made to them.
       The positive side is represented by exports.
       The negative side is represented by

Balance of Payments Cont.
   Current Account
       A record of all merchandise exports,
        imports, and services plus unilateral
        transfers of funds.
   Capital Account
       A record of direct investment, portfolio
        investment, and short-term capital
        movements to and from a country.

Balance of Payments Cont.
   Official Reserve Account
       A record of exports and imports of gold,
        increases and decreases of foreign
        exchange, or increases and decreases in
        liabilities to foreign central banks.

   Protectionism is the act of putting a
    trade barrier in place in order to protect
    a domestic industry or company.
   Cost to the consumer of protectionism:
       U.S. consumers pay $70 billion in higher
            This equates to $170,000 per job saved.

Arguments for Protectionism
   Protection of an infant industry
   Protection of the home market
   Need to keep money home
   Encouragement of capital accumulation
   Maintenance of standard of living and
    real wages
   Conservation of natural resources

Arguments for Protectionism
   Industrialization of a low wage nation
   Maintenance of employment and
    reduction of unemployment
   National defense
   Increase of business size
   Retaliation and bargaining

Types of Protectionism
   Tariffs
       A tax imposed by the government on goods
        coming in domestically.
   Quotas
       A specific unit or dollar amount allowed for a
        particular type of good.
   Voluntary Export Restraints
       This is where the two countries trading agree on a
        certain restriction on the volume of exports.

Types of Protectionism Cont.
   Boycotts
       A complete prohibition on the purchase
        and importation of certain goods from
        other countries.
   Monetary Barriers
       Blocked currency
       Differential exchange rates
       Government approval requirements for
        securing foreign exchange
Types of Protectionism Cont.
   Standards
       This is a nontariff barrier which requires
        the imported item to have a particular set
        of characteristics.
   Antidumping Penalties
       A penalty assessed on products that are
        sold below their cost of production.

General Agreements on Tariffs
and Trades (GATT)
   It was an agreement between the U.S. and
    22 other countries to set-up an agency to
    serve as an intermediary over world trade.
   Established after WWII.
   It offered nations a forum for negotiating
    trade and related issues.
   There have been eight rounds of
    intergovernmental tariff negotiations.

Basic Elements of GATT
   Trade was conducted on a nondiscriminatory
   Protection was afforded domestic industries
    through custom tariffs, not through such
    commercial measures as import quotas.
   Consultation was us used as the primary
    method used to solve trade problems.

World Trade Organization
   In 1995, the WTO was set-up as a
    successor of GATT.
   Whereas GATT was an agreement, the
    WTO is an institution.
   It has approximately 133 members.

World Trade Organization
(WTO) Cont.
   It provides a panel of experts that hear
    and rule on trade disputes.
   Decisions made by the WTO are
    binding, unlike what occurred with
   It meets at least every two years.
   It has no power to enforce its decisions
    accept through “peer pressure.”

Facilitators for Trade
   The International Monetary Fund (IMF)
    and the World Bank Group are global
    institutions that assist nations in
    becoming and remaining economically
       In essence, these are the banks for use by
        country governments.

Protest to Global Institutions
   Environmental concerns
   Worker exploitation
   Cultural extinction
   Higher oil prices
   Diminished sovereignty of nations
   Protection of domestic industries

Global Business and the
   Benefit
       It brings a global market to your business.
       It allows you to provide better customer
        service to your customers no matter where
        they are in the world.
   Challenge
       When marketing, you must consider that a
        marketing campaign potentially reaches
        the entire world.


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