1. Welcome to class of Fair/Unfair Trade Practices in Emerging Markets Dr
Welcome to class of Fair/Unfair Trade Practices in Emerging Markets Dr. Satyendra Singh Professor, Marketing and International Business University of Winnipeg Canada

2. Inequality is the issue.

3. Inequality is the issue.

4. Fair vs Unfair Int’l Business
The debate (developed vs emerging markets)
Colonial Pact
GM Foods
Subsidy
SAP (Structural Adjustment Program)
WB/IMF/WTO/UN

5. Developed countries say
Unfair competition from Ems
↓ labor cost and poorer working condition
Environmental
Due to EMs’ lax environmental standards
Financial services
Due to EMs’ low requirements of capital/assets ratio
Cultural
Due to cultural barriers, aiding local firms
Tax
Due to EMs’ differences in corporate tax rates

6. Emerging markets say Social Environmental
Wal-Mart?, Outsourcing? Call centers?
Environmental
Dump in the name of recycling in the EM. Why not recycle in the West? Because it costs $15/monitor here.
40-foot container costs $5000 to ship from US to EM
500 containers/month with e-waste in Lagos, Nigeria
World Reuse, Repair and Recycling Association (WR3A)
Financial services: ↓capital/assets ratio because no $
Cultural: West need to adapt– Int’l marketing
Tax: Being adjusted under SAP

7. E-waste

8. The foreign Relations

9. The Region in West Africa

10. How Long? Counter arguments Corruption Cannot handle economy
Not trained
We pay taxes
If we go, economy ↓
eg, Mozambique
Diseases
Ivory Coast: water, port
Electricity, security…
Who made Africa poor?
Import dependent

11. Same problem with GM Foods
USA  Yes
Europe  NO
Africa  Caught
in the politics
How?

12. Subsidies
Financial contribution, provided directly or indirectly by a government, which confers benefit.
$, grants, preferential tax treatment, government assumption of normal business expenses
Manufacturing  Airbus
75-100% development costs borne by the consortium
No profit in its first 30 years of operation
Agriculture  heavily subsidized in the West
$300b/yr in subsidy to agricultural producers in OECD
Government subsidies
20% Canada, 25% USA, 50% EU, 65% Japan…
US Cotton, Sugar…, EU Dairy farmers

13. Subsidy-based disputes

14. Effects of Subsidies on Africa
Subsidy  over production and dumping
Subsidy artificially depresses price  farmers cannot compete  keep Africa out of reach of EU
Local governments do not have $ to subsidize
Farmers out of business; labeled as urban refugees
So they become import dependent (cannot export)
The nation accrues debt (import > export)
US cotton subsidy suppressed West/Central Africa
Ethiopia, Malawi, Mozambique: ↓access to EU for sugar
Africa loses $2b/yr  fair/unfair trade practices
WTO: participate Structural Adjustment Program (SAP)

17. Why SAP? To get debt relief
Countries must follow WTO rules  free trade, lower tariff
Bolivia: WTO privatize essential services
Health, education, water supply…
British co. entered the market  ↑ the price of water
Water became more expensive than food
Poor people spent ½ their salary on water
Even illegal to collect rain water w/o permit
Mass protest  industry renationalized
Now
If no reform, no debt relief
Fair/Unfair trade practices

18. SAP Example – fair/unfair trade…
Mozambique: Cashew processing industry
Processed Cashew export was central to the govt’s SAP
To ensure regular supply of cashews, local govt imposed ban on export of raw cashew, but not on processed ones
World bank demanded the ban/export tax (60%) to be removed, and let the free market reign
All raw cashew markets were exported at low price
Now no raw cashews left for processing locally
Industry collapsed, people lost jobs
No free trade, no debt relief
If get aid, it is just enough to pay interest and import essential items
Debt continues  fair/unfair trade

19. SAP Example – fair/unfair trade
India: Motor car industry
EMs cannot protect their infant industries
Jt. venture and produce ½ parts locally, like Ford, GM
WTO  Indian motor policy violates agreement on Trade related Investment Measures (TRIM)
Local components, import of products, currency/export restrictions
It is unfair.
Firms in developing/EM are in a difficult position to
Sell in the West, Diversify, or say no to expensive imports
How do WB, IMF and WTO make decisions?

20. Decision-Making Process
World bank and IMF – decision process undemocratic!
Votes are based on shares  depends on income  so rich nations have more votes
It is reflected on the board of both institutions
US and UK have their own Executive Director (ED) – 2
Whereas African nations have to share their 2 EDs
Some countries are borrowers and some lenders
WTO – decision process a bit subtle
Each country has a vote and decision is by consensus
In reality -- US, EU, Canada and Japan
Some countries are in a better position to impose sanctions in case of trade dispute
Primary aim of WTO is to liberalize world trade!
Protest again globalization continues

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