1. Introduction to Global Supply Chain Management Module One: Introduction to Global Trade
This project received $24.5M (100% of its total cost) from a grant awarded under TAACCCT, as implemented by the U.S. Department of Labor’s Employment and Training Administration. This is an equal opportunity program and auxiliary aids and services are available upon request to individuals with disabilities.

2. December 18
Class Agenda
The globalization of trade: What is it and how did it happen?
The main drivers of trade globalization
Removal of tariff & Non-tariff barriers to trade
Preferential duty programs
Free Trade Agreements
The ocean container
Outsourcing
Technology & The Internet
The role of Long Beach & Los Angeles in global trade

3. What is Globalization & Trade Liberalization?
In general commercial terms, globalization (trade liberalization) is the process through which countries have agreed to facilitate the movement of goods, services, funds, people and information across international borders. From a pure trade perspective, globalization has been driven by a series of agreements between governments around the world that remove both tariff and non-tariff barriers to trade. While governments have set the stage for globalization, its true impetus comes from the inventors, innovators, entrepreneurs and business people that buy and sell goods internationally, every day.

4. The Main Drivers Behind The Globalization of Trade (1945-Present)
Reductions in tariff and non-tariff barriers to trade
Preferential duty programs
Free Trade Agreements
The World Trade Organization
Global use of the ocean container
Outsourcing
Technology & The Internet

5. Drivers of Trade Globalization: Reductions in Tariff & Non-Tariff Barriers to Trade
A “tariff” is a tax that is charged by a country on imported goods entering its economy (a.k.a. “duty” or “customs duty”)
Tariffs are normally charged as a percentage of the value of the goods being imported (e.g. a 5% duty on cotton socks entering the U.S. from the Dominican Republic)
After WWII (1945), countries agreed to reduce customs duties to promote trade between nations
General Agreement on Tariffs & Trade (GATT)

6. Drivers of Trade Globalization: Reductions in Tariff & Non-Tariff Barriers to Trade
A “non-tariff barrier to trade” is an obstacle that a country creates to discourage imports
Import license requirements
Difficult Customs procedures
Currency controls
Countries sometimes create these barriers in an attempt to protect their own domestic industries and jobs
Through the GATT countries also agreed to begin reducing non-tariff barriers to trade

7. Drivers of Trade Globalization: Preferential Duty Programs
Used extensively by the U.S., a Preferential Duty Program (PDP) allows for the importation of goods from specific countries at a lower duty rate than other countries
The purpose of a PDP is to promote economic development and growth in selected countries
The U.S. implemented its first PDP in 1974 with the “Generalized System of Preferences”

8. List of U.S. Preferential Duty Programs
Generalized System of Preferences (106 countries)
Automotive Products Trade Act
Agreement on Trade in Civil Aircraft
African Growth & Opportunity Act (40 countries)
Caribbean Basin Economic Recovery Act (18 countries)
Agreement on Trade in Pharmaceutical Products
Uruguay Round Concessions on Intermediate Chemicals for Dyes
Products of the Freely Associated States (3)
U.S. Caribbean Trade Partnership Act (7 countries)
Source: HTSUS

9. Drivers of Global Trade: Free Trade Agreements
A Free Trade Agreement (FTA) is not the same as a Preferential Duty Program
Under an FTA, two (or more) countries agree to allow mutual access to their home markets
The goal is to eliminate tariff and non-tariff barriers to trade between the parties (countries)
The framework for FTA’s is provided by the World Trade Organization (WTO)

10. Drivers of Global Trade: Free Trade Agreements
As part of an FTA, countries negotiate how and when specific products will eventually have “duty free” access to their respective markets
Upwards of 80% of all products become duty free once an FTA in implemented
The rest are reduced to zero duty over a period of years
In order to qualify for duty free status, a product must be qualify under “country of origin” rules

11. Examples of Free Trade Agreement Around the World
There are literally dozens of FTA’s around the world
The North American Free Trade Agreement (NAFTA): Canada, Mexico and the U.S.
Mercosur: Argentina, Brazil, Paraguay & Uruguay (Bolivia, Chile & Venezuela are associates members)
The Association of South East Asian Nations: Brunei Darussalam, Cambodia, Lao PDR, Malaysia, Myanmar, Philippines, Indonesia, Singapore, Thailand & Vietnam

12. U.S. Free Trade Agreements Currently in Place
Australia
Bahrain
Canada
Chile
Colombia
Costa Rica
Dominican Republic
El Salvador
Guatemala
Honduras
Israel
Jordan
Korea
Mexico
Morocco
Nicaragua
Oman
Panama
Peru
Singapore

13. The Next Generation of FTA: The Trans-Pacific Partnership
The Trans-Pacific Partnership is a trade agreement that is currently being negotiated between 12 countries
Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, U.S. & Vietnam
U.S. announced participation in November of 2009
A “21st Century” FTA that contains multiple sections
Source: Office of USTR

14. Drivers of Global Trade: The Ocean Container
Before the U.S. invention of the ocean container in 1957, ocean transportation was for “bulk” cargo only (goods shipped “loose”)
The ocean container drove globalization for several reasons:
Dramatic reductions in shipping costs
Saved time by reducing the handling of bulk (loose) cargo
Allowed for the construction of “purpose built” ships and ports
The largest ships in the world now carry up to 20,000 TEU (Twenty Foot Equivalency Units)

15. Drivers of Global Trade: The Advent of Outsourcing
“Outsourcing” is a business practice whereby companies contract with third parties (in other countries) to providing a variety of services
Manufacturing
Information Technology
Logistics
Outsourcing began in the late eighties and early nineties, and has grown at very fast rates ever since
Criticized in the U.S. for “exporting jobs”

16. Drivers of Global Trade: The Advent of Outsourcing
Outsourced manufacturing started in China but has expanded to other countries and regions
This decades-long process is what created growth in “emerging economies” like Eastern Europe, Southeast Asia and Latin America
I.T. services have also been outsourced
India and other English speaking nations
Logistics services is also an area where outsourcing is very popular (more on that later)

17. Trade Globalization: How It All Came Together
Japan
Reconstruction
1945
Economic Reforms
In China 1980
GATT
1948
Nixon Visits
China in 1972
GSP in U.S.
1976
E.U. Single Market 1993
1945
1995
Deregulation of U.S. Transportation
1978
U.S. First FTA
1985
WTO
1995
Marshall Plan
1947
Containerized
Shipping
1966

18. Drivers of Global Trade: Technology
Technology has been a major contributor to the globalization of trade
Hardware & software
Telecommunication & Wireless
The Internet
For purposes of global trade, there are literally thousands of software packages that facilitate the movement of goods
Forecasting
Sales & Operations Planning
Transportation & Warehouse Management
Cargo tracking

19. Globalization & Southern California: LAX & The San Pedro Port Complexes

20. Globalization & Southern California: The Port of Long Beach

21. The Port of Long Beach: Facts & Figures
Source: Port of Long Beach Website

22. The Port of Long Beach: Facts & Figures
Source: Port of Long Beach Website

23. The Port of Long Beach: Facts & Figures
Source: Port of Long Beach Website

24. Globalization & Southern California: The Port of Los Angeles

25. The Port of Los Angeles: Facts & Figures
Source: Port of L.A. Website

26. The Port of Los Angeles: Facts & Figures
Source: Port of L.A. Website

27. The Port of Los Angeles: Facts & Figures
Source: Port of L.A. Website

28. End of Module One Congratulations!!!