International Marketing

15th edition

Philip R. Cateora, Mary C. Gilly, and John L. Graham

 Top Ten 2009 U.S. Trading Partners 2
($ billions, merchandise trade)
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 2
Logic and Illogic
• Arguments for protectionism:
– 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? 2

• 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 2

• 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.

Inflationary pressures, special interests’ privileges,

Increase 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 2
Tariffs and Trade (GATT)
• 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 2
Trade Organization (WTO)
• 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 2
GATT and WTO
• 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 2
(IMF)
• 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 2

• The unintended consequences of globalizing

– Environmental concerns
– Worker exploitation and domestic job losses
– Cultural extinction
– Higher oil prices
– Diminished sovereignty of nations
• Protests
– 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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