BA CC6 International Trade and Agreement

Activity No. 4
Lesson 4 Easing World Trade Restrictions

Part 1 Topic: World Trade Organization

Make your own research about A) The History of World Trade Organization, B)
Functions of WTO and C) Member countries of WTO (Note: Do not forget to write the complete
link or URL for the source. Use different sources for each topic.)
D) Make a short reflection about your research. Use the format below. You may need additional
pages for you answer.

A. The History of World Trade Organization

Following World War II, nations throughout the world, led by the United States and several
other developed countries, sought to establish an open and non-discriminatory trading system
with the goal of raising the economic well-being of all countries. Aware of the role of trade
barriers in contributing to the economic depression in the 1930s, and the military aggression that
rose following the depression, the countries that met to discuss the new trading system saw open
trade as essential for economic stability and peace.
The intent of these negotiators was to establish an International Trade Organization (ITO), which
would address not only trade barriers but other issues indirectly related to trade, including
employment, investment, restrictive business practices, and commodity agreements. The ITO
was to be a United Nations specialized agency, but the ITO treaty was not approved by the
United States and a few other signatories and never went into effect. Instead, a provisional
agreement on tariffs and trade rules, called the General Agreement on Tariffs and Trade (GATT)
was reached and went into effect in 1948. This provisional GATT became the principal set of
rules governing international trade for the next 47 years.
The GATT established trade principles that continue to be applied today. Among the most
important of these principles was non-discrimination with regard to the treatment of trade in
goods among countries. The most-favoured-nation principle, Article I of the GATT, states that
any advantage given by a contracting party to a product of another country must be extended
unconditionally to a like product of all other contracting parties. A second rule of non-
discrimination is national treatment, the principle that imported and domestic goods should be
treated equally. Although non-discrimination is a cornerstone of the GATT, some exceptions are
allowed. For example, customs unions, free-trade areas, and special treatment for developing
countries are permitted.
Another principle is the open and fair application of any trade barriers. Tariffs were the most
common and visible form of trade barrier at the time the GATT was established. Tariffs are
"bound," or set at maximum levels, and not to increase above the negotiated level. In general,
quantitative restrictions such as quotas were not allowed, since tariffs were much easier to
identify and to eventually reduce.
The GATT also included a forum and process for countries to follow in trying to resolve
disputes. The dispute process allowed countries to consult with each other and if that was not
successful, a country could ask that a panel hear the complaint. Although the panel's decision
was not enforceable, the panel report carried some force of opinion and encouraged countries to
work toward an agreeable resolution.
One of the GATT's chief purposes was the reduction of barriers to trade. With this goal in mind,
GATT contracting parties met periodically to negotiate further reduction of tariffs and other
trade barriers and changes to GATT rules. These negotiations were called "rounds." Early rounds
dealt only with tariff reductions, but later rounds also included nontariff barriers to trade. The
most recent round, the Uruguay Round, lasted from 1986 to 1994 and included the most
encompassing set of negotiations in the history of the GATT. On the agenda was reform of the
existing GATT system, as well as expansion of rules to cover new areas such as services trade
and the trade aspects of intellectual property rights (copyrights, trademarks, and patents). The
agreements that resulted from the Uruguay Round also contained a built-in agenda requiring that
further negotiations on agriculture, services, intellectual property rights, and government
procurement begin by the year 2000.
One of the most important changes that came about from the Uruguay Round was the
establishment of a new trade structure, the World Trade Organization (WTO), which
incorporated the many changes reached during the Uruguay Round: the former GATT with its
newly negotiated reforms, bodies to oversee the new trade agreements, a stronger dispute
resolution procedure, a regular review of members' trade policies, and many other committees
and councils. In contrast to the GATT, the WTO was created as a permanent structure, with
"members" instead of "contracting parties." The WTO went into effect on January 1, 1995.
Source: https://www.everycrsreport.com/reports/98-928.html#_Toc215896138
B. Functions of World Trade Organization
The WTO’s overriding objective is to help trade flow smoothly, freely and predictably. It does
this by:
 administering trade agreements
 acting as a forum for trade negotiations
 settling trade disputes
 reviewing national trade policies
 building the trade capacity of developing economies
 cooperating with other international organizations
Source: https://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr_e.htm#:~:text=In
%20brief%2C%20the%20World%20Trade,predictably%20and%20freely%20as%20possible.
C. Member Countries of World Trade Organization
The WTO has 164 members, accounting for 98% of world trade.
Afghanistan Dominican Republic Lesotho Russian Federation
Albania Ecuador Liberia Rwanda
Angola Egypt Liechtenstein Saint Kitts and
Nevis
Antigua and Barbuda El Salvador Lithuania Saint Lucia
Argentina Estonia Luxembourg Saint Vincent and
the Grenadines
Armenia Eswatini Macao, China Samoa
 Australia European Union Madagascar Saudi Arabia,
(formerly EC) Kingdom of
Austria Fiji Malawi Senegal
Bahrain, Kingdom of Finland Malaysia Seychelles
Bangladesh France Maldives Sierra Leone
Barbados Gabon Mali Singapore
Belgium Gambia Malta Slovak Republic
Belize Georgia Mauritania Slovenia
Benin Germany Mauritius Solomon Islands
Bolivia, Plurinational Ghana Mexico South Africa
State of
Botswana Greece Moldova, Republic of Spain
Brazil Grenada Mongolia Sri Lanka
Brunei Darussalam Guatemala Montenegro Suriname
Bulgaria Guinea Morocco Sweden
Burkina Faso Guinea-Bissau Mozambique Switzerland
Burundi Guyana Myanmar Chinese Taipei
Cabo Verde Haiti Namibia Tajikistan
Cambodia Honduras Nepal Tanzania
Cameroon Hong Kong, China Netherlands Thailand
Canada Hungary New Zealand Togo
Central African Iceland Nicaragua Tonga
Republic
Chad India Niger Trinidad and
Tobago
Chile Indonesia Nigeria Tunisia
China Ireland North Macedonia Turkey
Colombia Israel Norway Uganda
Congo Italy Oman Ukraine
Costa Rica Jamaica Pakistan United Arab
Emirates
Côte d’Ivoire Japan Panama United Kingdom —
Croatia Jordan Papua New Guinea United States
Cuba Kazakhstan Paraguay Uruguay
Cyprus Kenya Peru Vanuatu
Czech Republic Korea, Republic of Philippines Venezuela,
Bolivarian Republic
of
Democratic Republic Kuwait, the State of Poland Viet Nam
of the Congo
Denmark Kyrgyz Republic Portugal Yemen
Djibouti Lao People’s Qatar Zambia
Democratic Republic
Dominica Latvia Romania Zimbabwe
Source: https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm
 D. Reaction/reflection (not less than 5 sentences)
The WTO has been beneficial to each member countries since it lowers trade barriers through
negotiating between countries and imposed the non-discrimination principle. The creation of the
WTO has changed a lot of things; it was a really beneficial creation. Because of it countries are
provided more choice of products to choose from. Also, lowering the trade barriers has made
incomes to increase and it was a great help in the economic growth. They have also developed a
lot starting from having 23 contracting parties in GATT and now they have hundreds of country
members after the creation of WTO and other countries are still seeking to join

Part 2 Topic: International Monetary Fund

Make your own research about A) The History of International Monetary Fund B)
Functions of International Monetary Fund and C) Member countries of International Monetary
Fund (Note: Do not forget to write the complete link or URL for the source)
D) Make a short reflection about your research. Use the format below. You may need additional
pages for you answer.

A. The History of International Monetary Fund

The IMF was originally created in 1945 as part of the Bretton Woods Agreement, which
attempted to encourage international financial cooperation by introducing a system of
convertible currencies at fixed exchange rates. The dollar was redeemable for gold at $35 per
ounce at the time. The IMF oversaw the system: for example, a country was free to readjust its
exchange rate by up to 10% in either direction, but larger changes required the IMF's permission.

The IMF also acted as a gatekeeper: Countries were not eligible for membership in the
International Bank for Reconstruction and Development (IBRD)—a World Bank forerunner that
the Bretton Woods agreement created in order to fund the reconstruction of Europe after World
War II—unless they were members of the IMF.

Since the Bretton Woods system collapsed in the 1970s, the IMF has promoted the system of
floating exchange rates, meaning that market forces determine the value of currencies relative to
one another. This system continues to be in place today.
Source: https://www.investopedia.com/terms/i/imf.asp
B. Functions of International Monetary Fund
The IMF functions in three main areas:
 Overseeing the economies of member countries
 Lending to countries with balance of payments issues
 Helping member countries modernize their economies
Source: https://www.investopedia.com/ask/answers/051415/how-does-international-monetary-
fund-function.asp
C. Member Countries of International Monetary Fund
Belgium Turkey Somalia (Yemen Arab Namibia
Republic)
Bolivia Italy Sierra Barbados Mongolia
 Leone
Canada Syrian Arab Tanzania Fiji Albania
Republic (Tanganyik
(Syria) a)
China Lebanon Kuwait Oman Lithuania
Colombia Australia Jamaica Samoa Georgia
(Western
Samoa)
(Czechoslovak Finland Côte Bangladesh Kyrgyz
ia) d'Ivoire Republic
(Ivory (Kyrgyzsta
Coast) n)
Egypt Austria Niger Bahrain Latvia
Ethiopia Thailand Burkina Qatar Marshall
(Siam) Faso Islands
(Upper
Volta)
France Pakistan Cameroon United Arab Estonia
Emirates
Greece Sri Lanka Central Romania Armenia
(Ceylon) African
Republic
Honduras Sweden Chad Bahamas, The Switzerland
Iceland Myanmar Congo, Grenada Russian
(Burma) Republic of Federation
India Japan Benin Papua New Belarus
(Dahomey) Guinea
Iraq Germany Gabon Comoros Kazakhstan
Luxembourg Jordan Mauritania Guinea-Bissau Moldova
Netherlands Haiti Trinidad Seychelles Ukraine
and
Tobago
Norway (Indonesia) Madagasca São Tomé and Azerbaijan
r Príncipe
(Malagasy
Republic)
Philippines Israel Algeria Maldives Uzbekistan
South Africa Afghanistan Mali Suriname Turkmenist
, Islamic an
Rep. of
(Afghanista
n)
United Korea Uganda Solomon San Marino
Kingdom Islands
United States Argentina Burundi Cape Verde Bosnia and
Herzegovin
 a
(Yugoslavia) Vietnam Congo, Dominica Croatia
(Viet Nam) Democratic
Republic of
the (Zaïre)
Dominican Ireland Guinea Djibouti Macedonia,
Republic former
Yugoslav
Republic of
Ecuador Saudi Rwanda St. Lucia Slovenia
Arabia
Guatemala Sudan Kenya St. Vincent and Serbia
the Grenadines
Paraguay Ghana Malawi Zimbabwe Czech
Republic
Iran, Islamic Malaysia Zambia Bhutan Slovak
Republic of (Malaya) Republic
(Iran)
Chile Tunisia Singapore Vanuatu Tajikistan
Mexico Morocco Guyana Antigua and Micronesia,
Barbuda Federated
States of
Peru Spain Indonesia Belize Eritrea
Costa Rica Libya Gambia, Hungary Brunei
The Darussalam
(Poland) Portugal Botswana St. Kitts and Palau
Nevis
Brazil Nigeria Lesotho Mozambique Timor-
Leste (East
Timor)
Uruguay Lao Malta Tonga Montenegro
People's
Democratic
Republic
(Laos)
(Cuba) New Mauritius Kiribati Kosovo
Zealand
El Salvador Nepal Swaziland Poland Tuvalu
Nicaragua Cyprus (Yemen, Angola South
People's Sudan
Democratic
Panama Liberia Republic of Yemen, Nauru
(Southern Republic of
Yemen))
Denmark Togo Equatorial (Czechoslovak Andorra,
Guinea ia) Principality
 of
Venezuela, Senegal Cambodia Bulgaria
República
Bolivariana de
The International Monetary Fund (IMF) is an organization of 190 countries, working to foster
global monetary cooperation, secure financial stability, facilitate international trade, promote
high employment and sustainable economic growth, and reduce poverty around the world.
Source: https://www.imf.org/external/np/sec/memdir/memdate.htm
D. Reaction/reflection (not less than 5 sentences)
The creation of IMF is the aftermath of the Great Depression that happened in the 1930’s, the
founding members created it so the same thing won’t happen ever again. They help the member
countries to ensure its economic stability by providing advices and promoting policies that will
foster it. IMF has been a great help to its member countries, they provide loans to countries that
are in need of financial support and they offered great facilities that will help in the economic
development of a country. Other than that they help a country that has a balance of payments
deficit and they step in to fill the gaps. I hope they keep growing and continue to help reduce the
poverty around the world.

Part 3 Topic: Trade Blocs

Make your own research about the following Trade Blocs A) Free Trade Area B)
Customs Union C) Common market and D) Full Economic Union (Note: Do not forget to write
the complete link or URL for the source)
E) Make a short reflection about your research. Use the format below. You may need additional
pages for you answer.

A. Free Trade Area

A free trade area (FTA) refers to a specific region wherein a group of countries signs a trade
agreement that seals the economic cooperation among them. The FTA’s main goals are to bring
down barriers in trading, specifically tariffs and import quotas, and encourage the free trade of
goods and services among its member countries.
Source: https://corporatefinanceinstitute.com/resources/knowledge/economics/free-trade-area/
B. Customs Union
A customs union involves the removal of tariff barriers between members, plus the acceptance of
a common (unified) external tariff against non-members. This means that members may
negotiate as a single bloc with 3rd parties, such as with other trading blocs, or with the WTO.
Source: https://www.economicsonline.co.uk/Global_economics/Trading_blocs.html?
fbclid=IwAR3JIWA1wQF9Z8s-iWCPeoPGAuA18xDwbkFQp29RAOhNRKysAet18nLPknI
C. Common Market
A ‘common market’ (or single market) is the first significant step towards full economic
integration, and occurs when member countries trade freely in all economic resources – not just
tangible goods. This means that all barriers to trade in goods, services, capital, and labour are
removed. In addition, as well as removing tariffs, non-tariff barriers are also reduced and
eliminated. For a common market to be successful there must also be a significant level of
harmonisation of micro-economic policies, and common rules regarding monopoly power and
other anti-competitive practices. There may also be common policies affecting key industries,
such as the Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP) of the
European Single Market (ESM).
Source: https://www.economicsonline.co.uk/Global_economics/Trading_blocs.html?
fbclid=IwAR3JIWA1wQF9Z8s-iWCPeoPGAuA18xDwbkFQp29RAOhNRKysAet18nLPknI
D. Full Economic Union
An economic union is an agreement between two or more nations to allow goods,
services, money and workers to move over borders freely. The countries may also
coordinate social and financial policies to support this common market.

The European Union (EU) is an example of an economic union. The countries of the EU
coordinate their respective economic policies, laws and regulations so they can work
together to address economic and financial issues. The EU also has a common
currency, the Euro, used by 19 EU members.

An economic union is different from a customs union. The members of a customs

union enjoy free movement of goods but do not typically share currency or allow
workers to move freely across borders.
Source: https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business
guides/glossary/economicunion#:~:text=An%20economic%20union%20is%20an,example%20of
%20an%20economic%20union.
E. Reaction/reflection (not less than 5 sentences)
The following trade blocs share the same goal which is the removal of such barriers so a much
freer trading can occur. Enabling a freer trade can lead to lower prices, economic growth and an
increase in the potential of exporting products and services. It brings so much great opportunities
for exporting countries. But removing the trade barriers has some disadvantages to it. For
example, socially – due to the free mobility of labour, intruders might think that it is extremely
easy to move around countries that have trade blocs which might cause issues.

Part 4 Topic: Entry Modes in International Marketing

Make your own research about the following Entry Modes in International Marketing.
Students need to describe each entry modes of international marketing and give example. A)
Franchising B) Licensing C) Manufacturing D) Management contracts E) Exporting (Note: Do
not forget to write the complete link or URL for the source)
F) Make a short reflection about your research. Use the format below. You may need additional
pages for you answer.
A. Franchising
Description
A franchise (or franchising) is a method of
distributing products or services involving a
franchisor, who establishes the brand’s
trademark or trade name and a business
system, and a franchisee, which pays a
royalty and often an initial fee for the right
to do business under the franchisor's name
and system. Technically, the contract
binding the two parties is the “franchise,”
but that term more commonly refers to the
actual business that the franchisee operates.
The practice of creating and distributing the
brand and franchise system is most often
referred to as franchising.
There are two different types of franchising
relationships. Business Format Franchising
is the type most identifiable. In a business
format franchise, the franchisor provides to
the franchisee not just its trade name,
products and services, but an entire system
for operating the business. The franchisee
generally receives site selection and
development support, operating manuals,
training, brand standards, quality control, a
marketing strategy and business advisory
support from the franchisor. While less
identified with franchising, traditional or
product distribution franchising is larger in
total sales than business format franchising.
Examples of traditional or product
distribution franchising can be found in the
bottling, gasoline, automotive and other
manufacturing industries.
Example
McDonald's
A company that has a global presence
because of its franchises is the fast-food
behemoth, McDonald’s. McDonald’s was
founded in 1940 by the McDonald brothers
in San Bernardino, California. However, Ray
Kroc opened the first official franchise for
the McDonald’s System, Inc.—a predecessor
of today's McDonald’s Corp. (MCD) —in
1955 in Des Plaines, Illinois (a suburb of
Chicago).
At fiscal year-end 2020, there were 39,198
McDonald's restaurants in 119 countries
around the world, 93.17% of which were
franchised. So, the company has 36,521
franchisees. The company’s long-term goal
is for 95% of McDonald’s restaurants to be
owned by franchisees.
McDonald’s either owns the land and
buildings used by the franchisees or secures
long-term leases for the franchised sites. As
part of the contractual agreement with the
company the franchisee provides a portion of
the capital required by making an initial
investment in the equipment, seating, décor,
and signs in the location that the company
will provide. For would-be franchisees,
McDonald's requires an initial down
payment of 25% (of the total cost) for the
purchase of an existing restaurant; and at
least 25% of the down payment must be in
cash.1
The legendary success of the McDonald's
franchise story is partly a result of the
company's commitment to maintaining
consistent standards in its menu that resonate
across its various chains. A Big Mac in Los
Angeles should and does have the same
quality as one in London. Franchisees
 manage their own pricing decisions and
staffing matters while benefiting from the
brand equity and global experience of
McDonald’s.
Source: https://www.franchise.org/faqs/basics/what-is-a-franchise
https://www.investopedia.com/terms/f/franchisee.asp
B. Licensing
Description Example
A business arrangement in which one Examples of licenses include a company
company gives another company permission using the design of a popular character, e.g.
to manufacture its product for a specified Mickey Mouse, on their products. Another
payment example would be a clothing manufacturer
like Life is Good licensing its designs and
brand in a certain country to a local
company. It can also apply to the use
of software, e.g. a company using Microsoft
Office on its computers.
Source: https://www.entrepreneur.com/encyclopedia/licensing
https://www.diffen.com/difference/Franchising_vs_Licensing
C. Manufacturing
Description Example
Manufacturing is the processing of raw Examples of manufacturing
materials or parts into finished goods include automotive companies, bakeries,
through the use of tools, human labor, shoemakers and tailors, as they all create
machinery, and chemical processing. Large- products, rather than providing services.
scale manufacturing allows for the mass However, for example, logging or mining
production of goods using assembly line are not manufacturing, as they do not change
processes and advanced technologies as core goods into new products. Construction,
assets. Efficient manufacturing techniques while seemingly a manufacturing process, is
enable manufacturers to take advantage of actually its own category and not considered
economies of scale, producing more units at a facet of manufacturing either.
a lower cost. Manufacturing jobs can cover a wide range
of skills, including assemblers, bakers,
Manufacturing is a value-adding process dental and medical appliance technicians,
allowing businesses to sell finished products food processors, jewellers, metal workers,
at a higher cost over the value of the raw machinists, printers, quality controllers,
materials used. It is often reported on by the tailors, upholsterers, welders, cutters and
conference board, and well examined by woodworkers.  
economists.
Source: https://www.investopedia.com/terms/m/manufacturing.asp
https://www.twi-global.com/technical-knowledge/faqs/faq-what-is-manufacturing
D. Management contracts
Description Example
A contract management is a management Heathrow Airport Holdings Limited of
agreement contract that enables operational Britain, for example, possesses general
command of an organization leading to a airport-management skills. In the EEUU,
 separate organization. The managerial group
performs the needed actions in trade for an
agreed price. Management agreement
contract can include the completion of the
organizational tasks as well as the
subcontracting of other tasks to freelancers.
These jobs may involve personnel
management, technical support, accounting,
marketing, and sales training.
There are several variants under the
management contract including:
 Supply or service contract
 Maintenance management
 Operational management
Source: https://www.contractexperience.com/kb/management-agreement-contract-examples/
https://www.unescap.org/ttdw/ppp/ppp_primer/2222_types_of_management_contracts.html
https://www.slideshare.net/alejandratovar2/management-contracts-17692426
E. Exporting
Description
Exports are goods and services that are
produced in one country and purchased by
the residents of another country. It doesn't  This gives their industries an edge in
Heathrow operates the Indianapolis Airport
under a 10 year management contract and
provides retails management at the Air Mall
in Pittsburgh Airport.
Some form of licensing or operating
agreement is used if the private sector is to
provide services directly to users of the
infrastructure facility. Examples of such an
arrangement include, licensing of
stevedoring companies for cargo handling
labour at ports and catering services for
passengers on railway systems (the Indian
Railways, for example). The main purpose
of such licensing is to ensure the supply of
the relevant service at the desired level of
quantity and quality.
Assets maintenance contracts are very
popular with transport operators. Sometimes
equipment vendors/suppliers can also be
engaged for the maintenance of assets
procured from them. For example, most
buses of the Bangkok Metropolitan
Transport Authority in Bangkok, Thailand
are maintained by the supplier companies.
Management contracts of major transport
facilities such as a port or airport may be
useful when local manpower or expertise in
running the facility is limited or when
inaugurating a new operation. Many airport
and port facilities in the region are managed
and operated by the private sector operators.
Examples include Delhi Airport Cargo
Terminal; Vientiane Airport Terminal; and
the New Container Terminal in Chittagong,
Bangladesh.
Example
For example, Kenya, Jamaica, and Colombia
have the right climate to grow coffee.2
 matter what the good or service is, or how exporting coffee.
it's sent. India's population is its comparative
advantage. Its workers speak English, which
A product can be shipped, sent by email, or gives them an edge as affordable call center
carried in personal luggage on a plane. It's an workers.3 China has a similar advantage in
export if it's produced domestically and sold manufacturing due to its lower standard of
to someone in a foreign country. The effects living.4 Its workers can live on lesser wages.
of this process can trickle down to
consumers.
Source: https://www.thebalance.com/exports-definition-examples-effect-on-economy-
3305838
F. Reaction/reflection (not less than 5 sentences)
It is natural for a company to decide expanding their business internationally specially if their
business has grown and gain competitiveness. They seize the opportunity of succeeding in the
foreign market as well. Thus, these entry modes are a great opportunity for them though it can
be risky at the same time rewarding. I think before they enter foreign markets they should
consider that factors to take into account so they won’t be facing lots of problems when they
are already there. They should also consider their approach once entering the foreign market
because what works in their domestic market might not work into foreign and developing
countries.