1. Chapter 2: The Dynamic Environment of International Trade

2. The International Marketing Environment7
Foreign Environment
(Uncontrollables)
1. Competition
7. Structure of
Distribution
Domestic environment
(Uncontrollables)
Environmental
uncontrollables
country market A
(Controllables)
1. Competition
Price
Product
2. Technology
Target
Market
5. Political-
Legal
Environmental
uncontrollables
country
market B
6. Geography and
Infrastructure
Place or
Distribution
2 .Technology
Promotion
4. Culture
Environmental
uncontrollables
country
market C
3. Economy
5. Political-
Legal
3. ECONOMY
4. Culture

3. Introduction
Proliferation of trade and emergence of the global economy
Intensification of global competition
More emerging markets
Developments in technology allow communications with global consumers and movement of goods

6. 21st Century: The First Decade and Beyond
With exception of China, slower economic growth in U.S. and other countries is currently evident.
Faster growth rates expected in developing countries such as Brazil, China, India, Indonesia, and Russia.
More trade expected within emerging markets, regional trade areas, and the established markets in Europe, Japan, and U.S.
Companies need to be more efficient, improve productivity, expand global reach, and respond quickly.
Greater growth in international sales expected by smaller firms.

7. Balance of Payments
When countries trade money flows into and out of each country
The accounts that record a nation’s international financial transactions are called its balance of payments (BP)
Records all financial transactions between a country and the rest of the world over a year
The BP is maintained on a double-entry bookkeeping system

8. The difference between receipts and payments
Balance of Payments
The difference between receipts and payments
costs of goods exported.
money spent by foreign tourists.
transportation.
payments of dividends and interest from FDI abroad.
new foreign investments
BP Receipts
costs of goods imported.
spending by tourists abroad
new overseas investments.
cost of foreign aid.
BP Payments

9. (3) the official reserves account
Balance of Payments
The Balance of Payments includes three accounts:
(1) current account
(2) the capital account
(3) the official reserves account

10. (3) the official reserves account
Balance of Trade
(1) current account
(2) the capital account
If exports exceed imports, The Balance of Trade is positive
If imports exceed exports, the Balance of Trade is negative
Is a negative balance bad?
(3) the official reserves account

11. Balance of Payments and Exchange Rate
The Exchange Rate is determined by Supply and Demand
To buy Canadian goods, Canadian currency is demanded
More exports or direct investment will increase the exchange rate
As the value of the dollar increases, the price of exports increases.

12. Protectionism: Logic and Illogic
Countries use protectionist measures to shield a country’s markets from intrusion by foreign competition and imports.
Arguments for Protectionism include:
Maintain employment and reduce unemployment
Increase of business size
Retaliation and bargaining
Protection of the home market
Need to keep money at home
Encouragement of capital accumulation

13. Protectionism: Logic and Illogic
Arguments for Protectionism include:
Maintenance of the standard of living and real wages
Conservation of natural resources
Protection of an infant industry
Industrialization of a low-wage nation
National defense

14. Protectionism: Logic and Illogic
In general, protectionism contributes to industrial inefficiency and makes a nation uncompetitive
Protectionism is implemented through the imposition of trade barriers, which include tariff barriers and non-tariff barriers

15. The Impact of Tariff (Tax) Barriers
Tariff Barriers tend to Increase:
Inflationary pressures
Special interests’ privileges
Government control and political considerations in economic matters
The number of tariffs they beget via reciprocity

16. The Impact of Tariff (Tax) Barriers
Tariff Barriers tend to Weaken:
Balance-of-payments positions
Supply-and-demand patterns
International relations (they can start trade wars)

17. The Impact of Tariff (Tax) Barriers
Tariff Barriers tend to Restrict:
Manufacturer’ supply sources
Choices available to consumers
Competition

18. Six Types of Non-Tariff Barriers
(1) Specific Limitations on Trade:
Quotas
Import Licensing requirements
Proportion restrictions of foreign to domestic goods (local content requirements)
Minimum import price limits
Embargoes
(2) Customs and Administrative Entry Procedures:
Valuation systems
Antidumping practices
Tariff classifications
Documentation requirements
Fees

19. Six Types of Non-Tariff Barriers
(3) Standards:
Standard disparities
Intergovernmental acceptances of testing methods and standards
Packaging, labeling, and marking
(4) Government Participation in Trade:
Government procurement policies
Export subsidies
Countervailing duties
Domestic assistance programs

20. Six Types of Non-Tariff Barriers
(5) Charges on imports:
Prior import deposit subsidies
Administrative fees
Special supplementary duties
Import credit discriminations
Variable levies
Border taxes
(6) Others:
Voluntary export restraints
Orderly marketing agreements

21. Three types of monetary barriers include:
In addition to the Six Types of Non-Tariff Barriers, monetary barriers are also used by countries
Three types of monetary barriers include:
Blocked currency
Differential exchange rates
Government approval

22. World Trade Organization (WTO)
Unlike GATT, is an institution, not an agreement
It sets many rules governing trade between its 132 members
WTO provides a panel of experts to hear and rule on trade disputes between members, and, unlike GATT, issues binding decisions

23. The International Monetary Fund (IMF)
IMF was created to assist nations in becoming and remaining economically viable
It assists countries that seek capital for economic development and restructuring
IMF loans come with stipulations that borrowing countries slash spending and impose controls to curb inflation
It helps maintain stability in the world financial markets
Objectives of the IMF include:
stabilization of foreign exchange rates
establish convertible currencies to facilitate international trade
lend money to members in financial trouble

24. World Bank Group (WBG)
The goal of WBG is to reduce poverty and the improvement of living standards by promoting sustainable growth and investment in people.
The functions of the WBG include:
lending money to countries to finance development projects in education, health, and infrastructure;
providing assistance for projects to the poorest developing countries;
lending directly to the private sector in developing countries with long-term loans, equity investments, and other financial assistance;
provide investors with investment guarantees against “noncommercial risk,” so developing countries will attract FDI; and
provide conciliation and arbitration of disputes between governments and foreign investors

25. Protests Against Global Institutions
In 1999 “anti-capitalist protestors” complained against the WTO and IMF, over the unintended consequences of globalization that include:
environmental concerns
worker exploitation and domestic job losses
cultural extinction
higher oil prices, and
diminished sovereignty of nations