Presentation on theme: "Learning Objectives The basis for the reestablishment of world trade following World War II The effects of protectionism on world trade The seven types."— Presentation transcript:
1 Learning ObjectivesThe basis for the reestablishment of world trade following World War IIThe effects of protectionism on world tradeThe seven types of trade barriersThe provisions of the Omnibus Trade and Competitiveness ActThe importance of GATT and the World Trade OrganizationThe emergence of the International Monetary Fund and the World Bank Group
2 Global Perspective Trade Barriers – An International Marketer’s Minefield Every country seems to take advantage of the open U.S. market while putting barriers in the way of U.S. exports.Barriers to trade, both tariff and nontariff, are one of the major issues confronting international marketers.If the benefits of the social, political, and economic changes now taking place are to be fully realized, free trade must prevail throughout the global marketplace.WTO (World Trade Organization)
3 Top Ten 2004 U.S. Trading Parnters ($ billions, merchandise trade) Insert Exhibit 2.1
4 The Twentieth to the Twenty-First Century First Half of the Twentieth CenturyDepression plus two World WarsLast Half of the Twentieth CenturyMarred by struggles between countries espousing the socialist Marxist approach and those following a democratic capitalist approachMarshall PlanMove toward international cooperation among trading nations was manifest in the negotiation of the General Agreement on Tariffs an Trade, (GATT).
5 World Trade and U.S. Multinationals 1950s, many U.S. companies that had never before marketed outside the U.S. began to export, others invested in production facilities overseas.1960s, U.S. multinational corporations (MNCs) were facing major challenges on two fronts:Resistance to direct investmentIncreasing competition in export marketsAmerican MNCs were confronted by a resurgence of competition from all over the world.NIC (Newly Industrialized Countries)
6 World Trade and U.S. Multinationals (continued) The Balance of Merchandise TradeU.S. Trade DeficitU.S. dilemma of how to encourage trading partners to reciprocate with open access to their markets without provoking increased protectionism.WTO (World Trade OrganizationAPEC (Asia-Pacific Economic Cooperation Conference)NAFTA
7 Protection Logic and Illogic Protection of infant industry or home marketNeed to keep money at homeEncouragement of capital accumulationMaintenance of the standard of living and real wagesConservation of natural resourcesIndustrialization of a low-wage nationMaintenance of employment and reduction ofunemploymentNational defenseRetaliation and bargaining
9 The Omnibus Trade and Competitiveness Act Designed to deal with trade deficits, protectionism, and the overall fairness of our trading partners.The bill covers three areas considered critical in improving U.S. trade:Market access, Export expansion and Import reliefFour ongoing activities to support the growth of international trade:GATTThe World Trade Organization (WTO)International Monetary Fund (IMF)The World Bank Group
10 General Agreement on Tariffs and Trade Paved the way for the first worldwide tariff agreement.Basic Elements of the GATT:Trade shall be conducted on a nondiscriminatory basisProtection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotasConsultation shall be the primary method used to solve global trade problems.
11 World Trade Organization An institution, not an agreementSets rules governing trade between its 148 membersProvides experts to rule on trade disputesIssues binding decisionsAll member countries will have equal representationTrouble with U.S. ratification:Concern for the possible loss of sovereignty over its trade laws to WTOThe lack of veto powerSkirting the Spirit of GATT and WTO
12 The International Monetary Fund Created to assist nations in becoming and remaining economically viable.Objectives of the IMF:Stabilization of foreign exchange ratesEstablishment of freely convertible currencies to facilitate the expansion and balanced growth of international tradeSpecial Drawing Rights (SDRs)“paper gold”
13 The World Bank GroupThe World Bank has five institutions performing thefollowing services -Lending money to governments of developing countries.Providing assistance to governments for developmentalprojects to the poorest developing countries.Lending directly to the private sector.Providing investors with investment guarantees against“noncommercial risk.”Promoting increased flows of international investment.
14 Protests against Global Institutions The basic complaint against the WTO, IMF and others is the amalgam of unintended consequences of globalizing:Environmental concernsWorker exploitation and domestic job lossesCultural extinctionHigher oil pricesDiminished sovereignty of nationsTerrorism in London (2005)“Antisweatshop” campaigns
15 SummaryThe benefits from absolute or comparative advantage clearly can accrue to any nation.Increased pressure for protectionism.The consumer seldom benefits from such protection.Free international markets help underdeveloped countries become self-sufficient.Freer trade will always be partially threatened by various governmental and market barriers that exist or are created for the protection of local businesses.The future of open global markets lies with the controlled and equitable reduction of trade barriers.