The Dynamic Environment of International Trade Chapter 2 Matakuliah: J0474 International Marketing Tahun: 2009

Bina Nusantara University 3 Learning Outcome The Twentieth to the Twenty- First Century Balance of Payments Protectionism Easing Trade Restrictions The International Monetary Fund and World Bank Group Protests against Global Institutions

Bina Nusantara University 4 The Twentieth to the Twenty- First Century The first half of the 20 th century was marred by a major worldwide economic depression that occurred between two world wars that all but destroyed most of the industrialized world. The last half of the century, while free of a world war, was marred by struggles between countries espousing the socialist Marxist approach and those following a democratic capitalist approach to economic development. After World War II, Marshall Plan The General Agreement on Tariffs and Trade (GATT) Newly Industrialized Countries ( N I Cs) State Owned Enterprises ( SO Es) By the last decade of the 20 th century: European Union, NAFTA, AFTA, APEC

Bina Nusantara University 5 The First Decade of the Twenty-First Century and Beyond In the 21 st century, How will these changes that are taking place in the global marketplace impact international business? Companies are looking for ways to become more efficient, improve productivity, expand their global reach while maintaining an ability to respond quickly to deliver a product that the market demands.

Bina Nusantara University 6 Balance of Payments Balance of Payments is The system of accounts that records a nation’s international financial transactions. A balance of payments represents the difference between receipts from foreign countries on one side and payments to them on the other. On the plus side, On the minus side.              A balance of payments statement includes three accounts: 1.The current account. 2.The capital account 3. The official reserves account

Bina Nusantara University 7 Protectionism I.Protection Logic and Illogic : 1.Protection of an infant industry, 2. Protection of the home market, 3. Need to keep money at home, 4. Encouragement of capital accumulation, 5. Maintenance of standard of living and real wages, 6. Conservation of natural resources, 7. Industrialization of a low-wage nation, 8. Maintenance of employment and reduction of unemployment, 9. National defense, 10. Increase of business size, 11. Retaliation and bargaining

Bina Nusantara University 8 Protectionism 2. Quotas is A specific unit or dollar limit applied to a particular type of good 4. Boycotts and Embargoes A government boycott is an absolute restriction against the purchase and importation of certain goods from other countries. An embargo is a refusal to sell to a specific country 1.Tariffs is a tax imposed by a government on goods entering at its borders. II. Trade Barriers: 3. Voluntary Export Restraints An agreement between the importing countries and exporting countries for a restriction on the volume of exports.

Bina Nusantara University 9 Protectionism II. Trade Barriers: 5. Monetary barriers : a.Blocked currency b. The differential exchange rate c. Government approval 6. Standards Non tariffs barriers include standards to protect health, safety and product quality. 7. Antidumping Penalties

Bina Nusantara University 10 Easing Trade Restrictions 1.The Omnibus Trade and Competitiveness Act The trade act was designed to deal with trade deficits, protectionism, and to overall fairness of our trading partners. The bill covers three areas considered critical in improving U.S. trade : Market access, export expansion and import relief. 2. General Agreement on Tariffs and Trade In general, GATT covers three basic elements : a.Trade shall be conducted on a nondiscriminatory basis, b. Protection shall be afforded domestic industries c. Consultation shall be the primary method used to solve global trade problems. GATS TRI Ms TRI Ps

Bina Nusantara University 11 Easing Trade Restrictions 3. World Trade Organization The WTO is an institution, not an agreement as was GATT. WTO sets many rules governing trade between its 148 members, provides A panel of experts to hear and rule on trade disputes between members.

Bina Nusantara University 12 The International Monetary Fund and World Bank Group IMF and WB group are two global institutions created to assist nations in becoming and remaining economically viable. IMF,originally 29 countries signed the agreement, Now 184 countries are members. The objectives of the IMF are the stabilization of foreign exchange rates and establishment of freely convertible currencies to facilitate the expansion and balanced growth of international trade. The IMF developed Special Drawing Rights (S D R )

Bina Nusantara University 13 The International Monetary Fund and World Bank Group The World Bank Group is a separate institution that has as its goal the reduction of poverty and the improvement of living standards by promoting sustainable growth and investment in people. The bank provides loans, technical assistance, and policy guidance to developing-countries members to achieve its objectives.

Bina Nusantara University 14 Summary Free international markets help underdeveloped countries become self- sufficient and because open markets provide new customers, most industrialized nations have, since World War II, cooperated in working toward freer trade. Such trade will always be partially threatened by various governmental and market barriers that exist or are created for the protection of local business. However, the trend has been toward freer trade. The future of open global markets lies with the controlled and equitable reduction of trade barriers.