1. 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

2. 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

3. The International Marketing Environment7
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

4. 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

6. 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

7. 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

8. 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

10. 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.

11. 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

12. 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;

13. United States Current Account Balance
Percent +

15. 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

16. 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

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

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

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

20. 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

21. 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

22. 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