Chapter 2 1. The basis for the reestablishment of world trade following World War II 2. The importance of balance-of-payment figures to a country’s economy 3. The effects of protectionism on world trade 4. The seven types of trade barriers

Chapter Learning Objectives 5. The provisions of the Omnibus Trade and Competitiveness Act 6. The importance of GATT and the World Trade Organization 7. The emergence of the International Monetary Fund and the World Bank Group

The International Marketing Environment 7 Foreign Environment (Uncontrollables) 1. Competition 7. Structure of Distribution Domestic environment (Uncontrollables) Environmental uncontrollables country market A (Controllables) 1. Competition Price Product 2. Technology Target Market 5. Political- Legal Environmental uncontrollables country market B 6. Geography and Infrastructure Place or Distribution 2 .Technology Promotion 4. Culture Environmental uncontrollables country market C 3. Economy 5. Political- Legal 3. ECONOMY 4. Culture

Introduction Proliferation of trade and emergence of the global economy Intensification of global competition More emerging markets Developments in technology allow communications with global consumers and movement of goods

The 20th to the 21st Century First World War Worldwide economic depression Second world war Cold war and divide between communist-socialist-capitalist approach to economic development The Marshall Plan for rebuilding Europe

The 20th to the 21st Century Financial and industrial development assistance to rebuild Japan Role of Agency for International Development to foster economic growth in the underdeveloped world Greater demand for U.S. goods and services Greater cooperation among trading nations GATT via reduction of tariffs and trade barriers GATT replaced by the World Trade Organization (WTO) and new era of free trade

World Trade and U.S. Multinationals Rising living standards have created marketing opportunities for U.S. firms In the Europe, U.S. multinationals were controlled tightly by protectionism laws Resurgence of competition from all over the world challenged the supremacy of American industry Newly industrialized countries (NICs) such as Brazil, Mexico, South Korea, Taiwan, Singapore, and Hong Kong experienced rapid industrialization

21st Century: The First Decade and Beyond With exception of China, slower economic growth in U.S. and other countries is currently evident. Faster growth rates expected in developing countries such as Brazil, China, India, Indonesia, and Russia. Greater growth in international sales expected by smaller firms.

Balance of Payments The BP is the difference between receipts and payments merchandise export sales. money spent by foreign tourists. transportation. payments of dividends and interest from FDI abroad. new foreign investments in the U.S. BP Receipts costs of goods imported. spending by U.S. tourists overseas. new overseas investments. cost of foreign military and economic aid. BP Payments

Balance of Payments The BP includes three accounts: (1) current account—a record of all merchandise exports, imports, and services plus unilateral transfers of funds; (2) the capital account—a record of direct investment, portfolio investment, and short-term capital movements to and from countries; (3) the official reserves account—a record of exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks;

United States Current Account Balance Percent +

Protectionism: Logic and Illogic Countries use protectionist measures to shield a country’s markets from intrusion by foreign competition and imports. Arguments for Protectionism include: maintain employment and reduce unemployment. increase of business size, and retaliation and bargaining. 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. protection of an infant industry industrialization of a low-wage nation national defense

Protectionism: Logic and Illogic Arguments 9-11 above are considered valid for protectionism In general, protectionism contributes to industrial inefficiency and makes a nation uncompetitive Protectionism is implemented through the imposition of trade barriers, which include tariff barriers and non-tariff barriers

Six Types of Non-Tariff Barriers (1) Specific Limitations on Trade: Quotas Import Licensing requirements (2) Customs and Administrative Entry Procedures: Antidumping practices

Six Types of Non-Tariff Barriers (3) Standards: Standard disparities Packaging, labeling, and marking (4) Government Participation in Trade: Export subsidies

Six Types of Non-Tariff Barriers (5) Charges on imports: Prior import deposit subsidies Administrative fees (6) Others: Voluntary export restraints

World Trade Organization (WTO) Unlike GATT, is an institution, not an agreement It sets many rules governing trade between its 132 members WTO provides a panel of experts to hear and rule on trade disputes between members, and, unlike GATT, issues binding decisions

The International Monetary Fund (IMF) Objectives of the IMF include: stabilization of foreign exchange rates establish convertible currencies to facilitate international trade lend money to members in financial trouble

Protests Against Global Institutions In 1999 “anti-capitalist protestors” complained against the WTO, and IMF, over the unintended consequences of globalization that include: environmental concerns worker exploitation and domestic job losses cultural extinction higher oil prices, and diminished sovereignty of nations