1. Learning Objectives
The basis for the reestablishment of world trade following World War II
The effects of protectionism on world trade
The seven types of trade barriers
The provisions of the Omnibus Trade and Competitiveness Act
The importance of GATT and the World Trade Organization
The emergence of the International Monetary Fund and the World Bank Group

2. Global Perspective Trade Barriers – An International Marketer’s Minefield
Every country seems to take advantage of the open U.S. market while putting barriers in the way of U.S. exports.
Barriers to trade, both tariff and nontariff, are one of the major issues confronting international marketers.
If the benefits of the social, political, and economic changes now taking place are to be fully realized, free trade must prevail throughout the global marketplace.
WTO (World Trade Organization)

3. Top Ten 2004 U.S. Trading Parnters ($ billions, merchandise trade)
Insert Exhibit 2.1

4. The Twentieth to the Twenty-First Century
First Half of the Twentieth Century
Depression plus two World Wars
Last Half of the Twentieth Century
Marred by struggles between countries espousing the socialist Marxist approach and those following a democratic capitalist approach
Marshall Plan
Move toward international cooperation among trading nations was manifest in the negotiation of the General Agreement on Tariffs an Trade, (GATT).

5. World Trade and U.S. Multinationals
1950s, many U.S. companies that had never before marketed outside the U.S. began to export, others invested in production facilities overseas.
1960s, U.S. multinational corporations (MNCs) were facing major challenges on two fronts:
Resistance to direct investment
Increasing competition in export markets
American MNCs were confronted by a resurgence of competition from all over the world.
NIC (Newly Industrialized Countries)

6. World Trade and U.S. Multinationals (continued)
The Balance of Merchandise Trade
U.S. Trade Deficit
U.S. dilemma of how to encourage trading partners to reciprocate with open access to their markets without provoking increased protectionism.
WTO (World Trade Organization
APEC (Asia-Pacific Economic Cooperation Conference)
NAFTA

7. Protection Logic and Illogic
Protection of infant industry or 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
Industrialization of a low-wage nation
Maintenance of employment and reduction of
unemployment
National defense
Retaliation and bargaining

8. Trade Barriers Tariffs Quotas Voluntary Export Restraints
Boycotts and Embargoes
Monetary Barriers
Blocked currency
Differential exchange
Standards
Antidumping Penalties

9. The Omnibus Trade and Competitiveness Act
Designed to deal with trade deficits, protectionism, and the 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
Four ongoing activities to support the growth of international trade:
GATT
The World Trade Organization (WTO)
International Monetary Fund (IMF)
The World Bank Group

10. General Agreement on Tariffs and Trade
Paved the way for the first worldwide tariff agreement.
Basic Elements of the GATT:
Trade shall be conducted on a nondiscriminatory basis
Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas
Consultation shall be the primary method used to solve global trade problems.

11. World Trade Organization
An institution, not an agreement
Sets rules governing trade between its 148 members
Provides experts to rule on trade disputes
Issues binding decisions
All member countries will have equal representation
Trouble with U.S. ratification:
Concern for the possible loss of sovereignty over its trade laws to WTO
The lack of veto power
Skirting the Spirit of GATT and WTO

12. The International Monetary Fund
Created to assist nations in becoming and remaining economically viable.
Objectives of the IMF:
Stabilization of foreign exchange rates
Establishment of freely convertible currencies to facilitate the expansion and balanced growth of international trade
Special Drawing Rights (SDRs)
“paper gold”

13. The World Bank Group
The World Bank has five institutions performing the
following services -
Lending money to governments of developing countries.
Providing assistance to governments for developmental
projects to the poorest developing countries.
Lending directly to the private sector.
Providing investors with investment guarantees against
“noncommercial risk.”
Promoting increased flows of international investment.

14. Protests against Global Institutions
The basic complaint against the WTO, IMF and others is the amalgam of unintended consequences of globalizing:
Environmental concerns
Worker exploitation and domestic job losses
Cultural extinction
Higher oil prices
Diminished sovereignty of nations
Terrorism in London (2005)
“Antisweatshop” campaigns

15. Summary
The benefits from absolute or comparative advantage clearly can accrue to any nation.
Increased pressure for protectionism.
The consumer seldom benefits from such protection.
Free international markets help underdeveloped countries become self-sufficient.
Freer trade will always be partially threatened by various governmental and market barriers that exist or are created for the protection of local businesses.
The future of open global markets lies with the controlled and equitable reduction of trade barriers.