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International Marketing

15th edition

Philip R. Cateora, Mary C.AKJ


Gilly, and John L. Graham

Beyond the First Decade


st
of the 21 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:
The Organization for Economic Cooperation and
Development)
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)

AKJ

Beyond the First Decade


st
of the 21 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.
Samsung ($500 Million in Mexico)

Smaller companies also using novel approaches


to target global markets
Nochar Inc. (fire retardant in Indianapolis 500) 32%
sales in 29 Countries

AKJ

Protectionism
Protectionism is the economic policy
of restraining trade between
countries through methods such as
tariffs on imported goods, restrictive
quotas, and a variety of other
government regulations designed to
allow "fair competition" between
imports and goods and services
produced domestically.
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Protection
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?


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

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
AKJ

Trade Barriers
Tariffs are taxes imposed by a government on goods
entering its borders.
Inflationary pressures, special interests privileges,
government control and political considerations in
economic matters, and the number of tariffs
Balance-of-payment positions, supply and demand
patterns, and international relations by starting trade
wars
Manufacturers supply sources, choices available to
consumers, and competition
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Trade Barriers
Quotas
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)/Orderly Market


Agreements (OMA)
Often used in the 1980s is an agreement between the
importing country and the exporting country for a
restriction on the volume of exports.
Japans VER on U.S. automobiles
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Trade Barriers
Boycotts and Embargoes
Boycott is an absolute restriction
against the purchase and importation of
certain goods from other countries. Can
be from Government and also from
citizens. Ex: Nestle, Anti Israeli Products.
An embargo is a refusal to sell to a
specific country.

AKJ

Trade Barriers
Blocked Currency: refusing to allow
an importer to exchange its national
currency for the sellers currency; as a
political weapon/response to a difficult
balance of payments situation.
Differential Exchange Rate
Government Approval: Severe
shortage of foreign currency.
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Trade Barriers (Non Tarriff)


Standards: Nontariff barriers of this
category include standards to protect
health, safety and product quality.
Local Content
Anti Dumping Penalties:
Predatory Pricing

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The General Agreement on


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

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The World
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

China became member of the WTO (2001); Vietnam (2007)

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Skirting the spirit of


GATT and WTO
Loopholes
China reduced tariffs while at the same time
increased number and scope of technical
standards and inspection requirements

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International Monetary Fund


(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


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
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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