6. wto frame work and international marketing

7/28/2019 6. WTO Frame Work and International Marketing

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International Trade


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What is international trade?

imports, exports

foreign investment

WTO, NAFTA, EU and, potentially, everything else


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Opposing Forces

National and local governmentswant to protect small /medium

enterprises

Build trade barriers

Reduction of trade barriers

Multinational firms and governmentsof the multinational firms


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Tools of Government Protectionism

Tariffs: any type of tax imposed onimported goods Discourage imports of particular goods

Protect local industry

Penalize countries that are not politicallyaligned with the importing country.

Generate revenues

US tariffs are generally less than 15%.

Other countries impose tariffs greaterthan 100% for protected products.


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Tools of Government

Protectionism (contd.) Non-Tariff Barriers:Measures, other

than traditional tariffs, that are used todistort international trade flows

Raise prices of both imports and import-competing goods.

Favor domestic over foreign supply sources

by causing importers to charge higherprices and to restrict import volumes.


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Tools of Government

Protectionism (contd.)Non-Tariff Barriers (contd.):

Quotas:

Specify maximum quantity (unit limit) orvalue of a product that may be importedduring a specified period.

Orderly market arrangements

Complicated approach to establishing what,in essence, is a quota. (Textile and apparelindustries)


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Non-Tariff Barriers (contd.):

Licenses

Non-Automatic Import Licenses:

Issued on a discretionary basis to restrictimports of a given product or from a certain

country

Examples:

Military equipment and other armamentfrom any country

Birds

Restrict volume and/or quantity of imports


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Licenses (contd.)

Automatic Import Licenses:

Granted freely to importing companies

Facilitate import surveillance Discourage import surges

Place administrative and financialburdens on importer

May raise costs by delaying shipments


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Voluntary Expansion/Restraints Voluntary Import Expansion:

Governments agree to allow imports froma particular country as a result of

pressure from another country. Increases foreign access to a domestic

market.

Increases competition and reduces local

prices. Voluntary Export Restraints:

Self-imposed export quotasimposed toavoid a greater penalty.

Used by the importing country to protect localindustries.


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Price Controls

Increasing the Price of Imports to matchminimum domestic prices

Antidumping and Countervailing DutyActions:

investigations to determine

if products were sold below fair value to get rid

of excess inventory (dumping) or as a result of foreign subsidies.

Such measures can intimidate importers.


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Price Controls (contd.)

Paratariff Measures:

Additional charges that increase thecost of imports

Examples:

Advance import deposits

Import charges Seasonal tariffs

Customs charges


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Standards

Environmental, performance,manufacturing and other standards usedas barriers to imports.

Primarily imposed by highly industrializedcountries

E.g. EU against hormone fed US beef,bioengineered corn and soybeans


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Percentage Requirements

Requirement that a percentage of theproducts imported be locally produced

Local content requirement: Often met by manipulating and/or

assembling the product on the territory ofthe importing country, usually in a foreign

trade zone. Favoring local contribution and labor

Limiting foreign ownership to a certainpercentage.


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Boycotts

Boycotts

Action group calling for a ban on all

goods associated with a particularcompany and/or country.

Target company is representative

of its country of origin.


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Embargos and Sanctions

Embargos

Prohibiting all business deals with the target

country; affects third parties. E.g. US Cuba

Sanctions

Punitive trade restrictions applied by acountry or group against another country fornoncompliance.


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Currency Controls

Blocked Currency

Does not allow importers to exchange oflocal currency for currency a seller is

willing to accept as payment. Differential Exchange Rates

Favorable and less favorable exchangerates imposed on imports, based on the

extent to which the goods are necessaryand desirable.

Foreign Exchange Permits

Give priority to imports in the nationalinterest.


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Arguments for free trade

increases competition (lower prices for localconsumers)

Multinationals encourage efficiency in localmanufacturing and services.

Local firms no longer have to limitthemselves to the local, national market.

Increase production, achieve economies ofscale, and offer lower prices to world

markets.

Avoidance of protectionism of othergovernments


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Arguments for free trade

International trade ImperativeDavid Ricardos Theory

Countries benefit from specialization inan industry in which they havecomparative advantage and fromtrading with one another.


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Facilitators of International Trade

International Trade and EconomicDevelopment Organizations

Government Organizations Other Institutions and Procedures

Facilitating International Trade


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World Trade Organization Largest and most influential international

trade organization (153 members on23 July 2008 from 197 countriesworldwide)

Ensures free flow of trade

Functions:

Provides assistance to developing and transitioneconomies

Offers help for export promotion. Promotesregional trade agreements and economiccooperation.

Reviews members trade policies and engages

in routine notification of new trade measures.


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World Trade Organization (contd.)

WTO agreements represent trade rulesand regulations and act as contractsguaranteeing countries trade rights and

binding governments to free tradepolicies.

Agreements:

General Agreement on Tariffs and Trade (GATT) General Agreement on Trade in Services (GATS)

Trade-Related Aspects of Intellectual PropertyRights (TRIPS)


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Legal framework

most countries members of WTO

many countries also have bilateral

or regional trade agreements trade agreements generally have

dispute resolution mechanisms

trade obligations mayaffect/supplant national law


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WTO history

Began in 1995, built on GATT

GATT began in 1947.

GATT intended as tariff-cuttingagreement.

Rounds are series of negotiationsintended to cut tariffs.


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3 main principles of GATT/WTO

convert all trade barriers to tariffs

transparent

easier to administer

most-favored-nation (MFN)

any favorable trade treatment must begiven to all members

national treatment imports treated equally with domestic


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WTO: 6 components

trade in goods 1994 GATTagreement all bound

product standards all bound

GATS trade in servicesnot allbound

TRIPs all bound

plurilateral agreements (e.g., govtprocurement) some bound

dispute resolution all bound


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WTO structure

Ministerial Body (meets every 2years; e.g., Seattle)

General Council main governingbody

Secretariat permanent professionalstaff


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WTO dispute resolution process

request for consultations =complaint

panel appellate body (appeals routine)

loser must bring itself intocompliance

if not, winner can retaliate


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Regional Trade Agreements (RTAs);

Free Trade Agreements (FTAs)

permitted by WTO

multilateral or bilateral

important because of stalledprogress on Doha round

US aggressively pursuing


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NAFTA

earlier CFTA (US-Canada)

decreases, then removes tariffs

Anti-dumping, countervailing dutydisputes (Chapter 19) arbitrationbefore bi-national panels

investment disputes (Chapter 11)ICSID arbitration (International Centre forSettlement of Investment Disputes), UNCITRAL(United Nations Commission on International Trade Law)
http://icsid.worldbank.org/http://icsid.worldbank.org/http://www.uncitral.org/uncitral/en/index.htmlhttp://www.uncitral.org/uncitral/en/index.htmlhttp://icsid.worldbank.org/http://icsid.worldbank.org/


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WTO Analytical Index


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Group of Eight - G8

Members from the most industrializedcountries: Canada, France, Germany,Italy, Japan, United Kingdom, United

States and Russia Yearly meetings involve heads of state,

government ministers, directors of centralbanks

Addresses: biotechnology, food safety,economic development, disarmament, armscontrol, organized crime, drug trafficking,terrorism, environmental issues and trade


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Trade terms

Dumping -- selling imports into a domestic marketat a price lower than the cost of production in thecountry of originless than fair value (LTFV)

Tariff--A fee (or duty) levied upon goods

transported from one customs area to another Trade subsidies -- government payments or other

benefits to producers that make their pricesunfairly low

Countervailing duties extra fee levied by

importing country to counter unfair subsidy

6. wto frame work and international marketing

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