International Marketing
15th edition
Philip R. Cateora, Mary C. Gilly, and John L. Graham
Top Ten 2009 U.S. Trading Partners
($ billions, merchandise trade)
2
Exhibit 2.1
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Beyond the First Decade 2
of the 21st Century (1 of 2)
• Growth of the U.S. economy slowed dramatically in
the last few years especially in 2009
• Economies of the developed world expected on
average to grow annually at 3% for the next 25 years
(OECD)
• Economies of the developing world expected on
average to grow annually at 6% for the next 25 years
(OECD)
• As a result, economic power and influence will move
away from industrialized nations to developing
nations (Latin America, Asia, Eastern Europe, and
Africa)
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Beyond the First Decade 2
of the 21st Century (2 of 2)
• Companies are looking for ways to become more
efficient, improve productivity, and expand their
global reach while maintaining an ability to
respond quickly and deliver products that the
markets demand.
– Nestle, Samsung, Whirlpool
• Smaller companies also using novel approaches
to target global markets
– Nochar Inc. (fire retardant)
– Buztronics Inc. (promotional lapel buttons)
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Protection
Logic and Illogic
2
• Arguments for protectionism:
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Protection of infant industry
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
Industrialization of a low-wage nation
Maintenance of employment and reduction of unemployment
National defense
Increase of business size
Retaliation and bargaining
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Does Protectionism Help?
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• A recent study on 21 protected industries showed that
while jobs are protected, consumers pay much higher
prices because of protectionism:
– U.S. consumers pay about $70 billion per year in
higher prices because of tariffs and other protective
restrictions.
– At the same time, the average cost to consumers for
saving one job in these protected industries was
$170,000 per year.
• Protectionism is politically popular, particularly during
times of declining wages, and/or high employment, but it
rarely leads to renewed growth in a declining industry.
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Trade Barriers
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Tariffs
Quotas and Import Licenses
Voluntary Export Restraints (VER)
Boycotts and embargoes
Monetary barriers
– Blocked currency
– Government approval
• Standards
• Antidumping penalties
• Domestic subsidies and economic stimuli
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Trade Barriers
2
• Tariffs are taxes imposed by a government on goods
entering its borders.
Increase
Inflationary pressures, special interests’ privileges,
government control and political considerations in
economic matters, and the number of tariffs
Weaken
Balance-of-payment positions, supply and demand
patterns, and international relations by starting trade
wars
Restrict
Manufacturer’s supply sources, choices available to
consumers, and competition
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Trade Barriers
2
• Quotas and Import Licenses
– Quota is a specific unit or dollar limit applied to a
particular type of good (increases price of good)
– Import licenses limits quantities on a case-by-case basis
– Japan and foreign rice; Banana wars between the United
States and the EU
• Voluntary Export Restraints (VER)
– Often used in the 1980s is an agreement between the
importing country and the exporting country for a
restriction on the volume of exports.
– Japan’s VER on U.S. automobiles
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The General Agreement on
Tariffs and Trade (GATT)
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• Shortly after World War II, the U.S. and 22 other countries
signed GATT (1947) which paved the way for the first effective
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
• Eliminating international trade barriers – Uruguay Round
– The General Agreement on Trade in Services (GATS)
– Trade-Related Investment Measures (TRIMs)
– Trade-Related aspects of Intellectual Property Rights (TRIPs)
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The World
Trade Organization (WTO)
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• WTO which is an institution, not an agreement, was founded
in 1994.
– Sets many rules governing trade between its 148 members
– Provides a panel exports to hear and rule on trade disputes
between members
– Issues binding decisions
– All member countries will have equal representation
– Member countries have open their markets and to be bound by
the rules of the multilateral trading system
• U.S. ratification concerns
– Possible loss of sovereignty over its trade laws to WTO
– Lack of veto power
– Role U.S. would assume when a conflict arises over an individual
state’s laws that might be challenged by a WTO member
• China became member of the WTO (2001); Vietnam (2007)
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Skirting the spirit of
GATT and WTO
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• Loopholes
– China reduced tariffs while at the same time
increased number and scope of technical
standards and inspection requirements
• Imposing antidumping duties
• Negotiating bilateral trade agreements
– May lead to multinational concessions
– Not necessarily consistent with WTO goals
and aspirations
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International Monetary Fund
(IMF)
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• Because of inadequate money reserves
and unstable currencies, the IMF was
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
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World Bank Group
2
• By promoting sustainable growth and investment in people,
the World Bank Group is an institution created in 1944 to
reduce poverty and improve standard of living
• The World Bank has five institutions which perform the
following services:
– Lending money to the governments of developing countries
– Providing assistance to governments for developmental projects
to the poorest developing countries (per capital incomes of $925
or less)
– Lending directly to the private sector
– Providing investors with guarantees against “noncommercial
risk”
– Promoting increased flows of international investment
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Anti-globalization Protests
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• The unintended consequences of globalizing
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Environmental concerns
Worker exploitation and domestic job losses
Cultural extinction
Higher oil prices
Diminished sovereignty of nations
• Protests
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WTO meeting in Seattle (November 2009)
World Bank and IMF meetings in Washington D.C. (April 2010)
World Economic Forun meeting in Australia (September 2010)
IMF meeting in Prague (September 2010)
Terrorism in London (2005)
• “Antisweatshop” campaigns
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