Chapter

The Dynamic Environment

of International Trade

Top Ten 2000 U.S. Trading

Partners ($ billions)
Country

2-2

U.S. Exports

Canada
Mexico
Japan
China
Germany
United Kingdom
South Korea
Taiwan
France
Singapore

Irwin/McGraw-Hill

$176.4
111.7
65.3
16.3
29.3
41.5
27.9
24.4
21.0
17.4

U.S. Imports

Total

Surplus/
Deficit

$229.2
135.9
146.5
100.0
558.7
43.5
40.3
40.5
29.0
19.6

$405.6
247.6
211.8
116.3
88.0
85.0
68.2
64.9
50.0
37.0

-$52.8
-24.2
-81.3
-83.8
-29.5
-1.9
-12.4
-16.1
-8.0
-2.2

Copyright2002 by The McGraw-Hill Companies, Inc. All rights reserved.

U.S. Multinational in Europe - 1960s

2-3

Fifteen years from now the

worlds third greatest industrial
power, just after the United States
and Russia, may not be Europe, but
American industry in Europe.
What Happened?
Irwin/McGraw-Hill

J.S. Servan Schreiber:

Le Defi American, 1967

Copyright2002 by The McGraw-Hill Companies, Inc. All rights reserve.

The Nationality of the Worlds 100 Largest

Industrial Corporations (by country of origin)
United States
Germany
Britain
France
Japan
2-4
Italy
Netherlands-United Kingdom
Netherlands
Switzerland
Argentina
Belgium
Brazil
Canada
India
Kuwait
Mexico
Venezuela
South Korea
Sweden
South Africa
Spain
Turkey
China
Irwin/McGraw-Hill

1963

1979

1984

1990

1993

1995

1996

2000

67

47

47

33

32

24

24

36

13
7
4
3
2
2
1
1
---------------

13
7
11
7
3
2
3
1
-1
1
2
--1
1
-------

8
5
5
12
3
2
1
2
1
1
-3
1
1
1
1
4
1
1
----

12
6
10
18
4
2
1
3
--1
---1
1
2
2
1
2
---

14
4
6
23
4
2
1
3
--1
---1
1
4
1
-2
1
--

14
1
12
37
3
2
2
3
--------2
------

13
2
13
29
4
2
2
5
------1
1
4
------

12
5
11
22
3
-5
3
-1
-----------2

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

U.S. Current Account by Major

Components, 1990-1999 ($ billions)
1983

2-5

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

Merchandise Trade
a. Exports

$201.8 $219.9 $215.9 $224.0 $246.6 $319.9 $362.1 $389.3 $416.9 $440.4
338.1

368.5

409.9

446.4

477.4

$456.9

b. Imports

268.9

332.4

498.3

491.0

536.5

589.4

c. Balance

-67.1

-112.5 -122.2 -144.5 -160.3 -126.5 -115.2 -109.0

-74.1

-96.1

-132.5

Business Services
a. Exports

42.3

44.3

46.2

51.8

59.4

69.1

116.5

136.6

153.7

164.4

174.5

b. Imports

35.8

42.3

47.2

51.0

58.0

63.2

86.9

98.7

101.6

104.4

112.7

c. Balance

+6.6

+2.0

-1.0

+0.8

+1.4

+5.9

+29.6

+37.9

+52.1

+60.0

+61.8

Irwin/McGraw-Hill

SOURCES: Survey of Current Business, U.S. Department of Commerce,

Bureau of Economic Analysis. http://www.stat-usa.gov/BEN/heal/sch.html.
Februarly 1998

U.S. Current Account by Major

Components, 1983-96 ($ billions)
1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

88.8
62.9
+25.9

90.1
67.0
+23.1

103.8
83.4
+20.4

108.2
105.6
+2.6

152.5
138.9
+13.6

160.3
139.6
+20.7

136.9
122.1
+14.8

114.4
109.9
+4.5

113.9
109.0
+4.0

375.0 424.8
498.6 565.3
-123.6 -140.5

507.8
629.6
-121.8

641.4
718.2
-76.7

696.8
754.9
-58.1

717.0
730.7
-13.7

731.4
767.3
-35.9

755.6
827.3
-71.7

-13.4

-13.6

-26.1

-33.7

+6.7

-31.9

-32.0

-138.9 -153.9

-135.4

-102.8

-91.8

-7.0

-67.8 -103.7

International Investment Income

2-6

a. Receipts
b. Payments
c. Balance

77.3
52.4
+24.9

85.9
67.4
+18.5

Total Goods and Services

a. Exports
b. Imports
c. Balance

Net unilateral
transfers
Current account
balance

Irwin/McGraw-Hill

334.4
371.2
-36.8

-9.5

-46.2

360.8 360.6
455.6 460.7
-94.8 -100.1

-12.2

-15.0

-107.0 -115.1

-15.3

SOURCES: Survey of Current Business, U.S. Department of Commerce,

Bureau of Economic Analysis. http://www.stat-usa.gov/BEN/heal/sch.html.
February 1998.

Buying Boom for Asia, 1995-2000

2-7

What the added

middle class will
buy (In million)

Between 1993 and

1995
2000

Bedrooms

32

116

Living Rooms

16

58

Kitchens

16

58

Bathrooms

32

116

1,200

4,350

Large appliances

16

58

Televisions

24

87

Telephones

24

87

Cars

16

58

Living space (sq.m.)

Irwin/McGraw-Hill

73.3
Millions of
households
approaching
$18,000 per year
buying power
Indexed to
Singapore prices

32.5
14.4
1991

1995

2000

SOURCE: Bill Saporito, Where the Global Action Is.

Fortune, Autumn-Winter 1993, p.64.

What Would One U.S. Dollar Buy?

(Selected Years)
1985

1987

1988

1992

1993

1994

1995

1996

1997

1999

2000

2-8 British Pound

0.86

0.67

0.54

0.56

0.66

0.68

0.63

0.64

0.59

0.62

0.68

French Franc

9.6

7.55

5.4

5.29

5.67

5.55

4.95

5.12

5.94

6.49

7.28

Japanese Yen 250.23 123.32 123.70 126.70 111.08 102.18 93.96 108.78 129.15 102.58 112.21
Swiss Franc

2.25

2.07

1.29

1.41

1.48

1.37

1.18

1.24

1.43

EURO
Mexico Peso

0.37

2.21

2.28

3.12

3.11

5.31

6.45

7.60

7.92

1.58

1.68

0.99

1.11

9.43

9.47

* Foreign Exchange Rates for 1999 and 2000 are the average rate pf
exchange in December.

Irwin/McGraw-Hill

Source: Adapted from www.stat-usa.gov

The Price of Protectionism

Industry

2-9

Textiles and
apparel

Total Costs to
Consumers
(in $ millions)

Number of
Jobs Saved

Cost per
Job Saved

$27,000

640,000

Carbon Steel

6,800

9,000

$ 750,000

Autos

5,800

55,000

$ 105,000

Dairy products

5,500

25,000

$ 220,000

Shipping

3,000

11,000

$ 270,000

Meat

1,800

11,000

$ 160,000

Irwin/McGraw-Hill

42,000

SOURCE: Michael McFadden, Protectionism Cant Protect Jobs,

Fortune, May11, 1987, pp. 125.

The Effects of Tariffs

2-10

Increase Inflationary pressures.

Special interests privileges.
Government control and political
considerations
in economic matters.
The number of tariffs they beget via
reciprocity.
Weaken Balance-of-payments positions.
Supply-and-demand patterns.
International understanding (they can start trade
wars).

Restrict Manufacturer supply sources.

Choices available to consumers
Competition.
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Irwin/McGraw-Hill

Types of Non-tariff Barriers

Specific Limitations on Trade:
Quotas
Import Licensing requirements
Proportion restrictions of foreign to domestic goods

2-11

(local content requirements)

Minimum import price limits
Embargoes

Customs and Administrative Entry Procedures:

Valuation systems

Antidumping practices
Tariff classifications
Documentation requirements
Fees

Irwin/McGraw-Hill

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Types of Non-tariff Barriers

Standards:
Standard disparities

2-12

Intergovernmental acceptances of testing methods

and standards
Packaging, labeling, marking and safety standards

Government Participation in Trade:

Government procurement policies

Export subsidies
Countervailing duties
Domestic assistance programs

Irwin/McGraw-Hill

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Types of Non-tariff Barriers

Charges on imports:
2-13

Prior import deposit subsidies

Administrative fees
Special supplementary duties
Import credit discriminations
Variable levies
Border taxes

Others:

Voluntary export restraints

Orderly marketing agreements

Irwin/McGraw-Hill

SOURCE: A.D. Cao, Nontariff Barriers to U.S. Manufactured Exports,

The Columbia Journal of World Business, Summer 1980, P.94.

Monetary Barriers

2-14

Blocked
BlockedCurrency
Currency
Differential
DifferentialExchange
ExchangeRate
Rate
Government
GovernmentApproval
Approvalto
toSecure
SecureForeign
ForeignExchange
Exchange
Exchange
ExchangePermit
Permit

Irwin/McGraw-Hill

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

World Trade Regulation

2-15

General
GeneralAgreement
Agreementon
onTariffs
Tariffsand
andTrade
Trade(GATT)
(GATT)
World
WorldTrade
TradeOrganization
Organization(WTO)
(WTO)

Irwin/McGraw-Hill

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

What WTO Means to Different Industries

Gainers
Gainers
2-16

Banks will be allowed to compete freely in South Korea and

other places where they are restricted.

Insurance companies will be able to sell policies in India, one

of the Worlds most tightly closed markets.

Movies will have better protection from Thai film

counterfeiters.

Pharmaceuticals will have better protection from

Argentine imitators.

Computer software makers will have better protection from

Brazilians who rip off copyrighted programs.

Irwin/McGraw-Hill

SOURCE: Adapted from What free trade will mean to different Industries,
Fortune, August 26, 1991, P.92

What WTO Means to Different Industries

Losers
Losers
2-17

Glassware tariffs as high as 30 percent on inexpensive

drinking glasses will be reduced, threatening some
40,000 jobs.

Textiles will gradually lose quotas and tariffs that protect 1.1
million U.S. workers - and add 50 percent to wholesale prices
of clothing.

Peanuts will lose quotas that limit imports to a handful and

that protect 19,000 American farmers.

Dairy imports of foreign cheese, now limited to 19,000 tons a

year, will go up, hurting 240,000 U.S. farmers.

Sugar import ceilings, now 25 percent of the nine million tons

the United States uses each year, will go, threatening 11,000
sugar beet and cane growers.

Irwin/McGraw-Hill

SOURCE: Adapted from What free trade will mean to different Industries,
Fortune, August 26, 1991, P.92.

Global Financial Institutions

2-18

International
InternationalMonetary
MonetaryFund
Fund(IMF)
(IMF)
World
WorldBank
BankGroup
Group

Irwin/McGraw-Hill

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Nontariff Barriers

2-18

Quotas
Discriminatory Procurement Policies must buy
American unless not available.
Restrictive Customs Procedures rules for
classifying products and levying import duties.
Selective Monetary Controls & Discriminatory
Exchange Rate Policies may require importers
to place on deposit (no interest) and amount
equal to the value of the goods.
Restrictive Administrative & Technical
Regulations antidumping, safety & health

Irwin/McGraw-Hill

Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.