Ch2
15
Use with INTERNATIONAL MARKETING STRATEGY: Analysis, development and implementation 5 TH edition ISBN 13:978-1-84480-763-5 Published by Cengage Learning DOOLE AND LOWE ch2/1 THE INTERNATIONAL TRADING ENVIRONMENT Session 2
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Transcript of Ch2
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THE INTERNATIONAL TRADINGENVIRONMENT
Session 2
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GLOBAL TRADE FLOWS
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PERCENTAGE OF THE TOTAL OF WORLD EXPORTS IN MERCHANDISE (2007)
Country
Germany
United States
China
Japan
France
Netherlands
Britain
Italy
Canada
Belgium
Percentage %
9.3
8.7
7.3
3.4
4.4
3.9
3.7
3.5
3.4
3.9Source: WTO.org
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% Changes On Previous Year:CONSUMER PRICES AND REAL GDP/GNP 2007
Country
ArgentinaAustraliaBelgiumBrazilCanadaChinaCzech RepFranceGermanyHong KongIndiaItalyJapanMalaysia
% inflation rate9.82.81.83.72.02.13.31.41.42.56.11.90.43.4
% growth rate6.32.92.13.32.4
10.44.82.01.65.09.21.21.95.2
Source: The Economist (2007)
Country
MexicoNetherlandsPolandRussiaSingaporeSouth AfricaSouth KoreaSpainTaiwanThailandTurkeyUKUSAVenezuelaEU
% inflation rate3.81.72.59.21.05.62.32.71.53.68.62.22.217.02.0
% growth rate3.22.34.76.55.04.24.23.03.94.34.02.42.25.52.0
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Trade Balance in Merchandise Trade 2007
Source: World Bank: World Development Indicators (2007)
US $ Billion
Argentina
Australia
Brazil
China
Germany
Hong Kong
Japan
Mexico
Malaysia
+12.4
-9.4
+46.1
+177.5
+203.0
-17.9
+79.6
-5.8
+28.6
Netherlands
Poland
Russia
Spain
Taiwan
Turkey
UK
USA
EU
+39.4
-4.1
+140.8
-112.8
+21.3
-53.2
-152.2
-837.2
-15.7
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COMPARATIVE ADVANTAGE
• Achieving Comparative Advantage – sustained period of
investment– lower labour cost– proximity to raw
materials– subsidies to help native
industries– building expertise in
certain key areas
• Building National Advantage (Porter, 1990)
– factor conditions– demand conditions– related and supporting
industries– firm strategy, structure
and rivalry
Source: Porter (1990) The Competitive Advantage of Nations
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Market Entry Barriers
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WORLD TRADING INSTITUTIONS
• Initiatives from the Bretton Woods Agreement, 1944– World Bank (IBRD)
• Currently 150 member countries• Provides financial and technical help for the development
of poorer countries
– International Monetary Fund (IMF)• Provides short-term international liquidity to countries
with Balance of Payments difficulties
– World Trade Organisation (WTO)• Evolved from GATT (treaty)
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WORLD TRADE ORGANISATION
• The WTO promotes trade by:
– Working to reduce tariffs– Prohibiting import/export bans and quotas– Eliminating trade discrimination– Eliminating non tariff barriers
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Trade liberalization ‘rounds’Latest two
• The Doha Round– Commenced 2001– Called the ‘development round’
• +75% of WTO members are developing countries• LDC's face greater barriers than DC's• Key problem areas - textiles & agriculture
– Accounting for 70% of LDC exports
– Ave.tariff on textiles are <20% against <3% on industrialised goods– In EU & US agricultural subsidies = $1 billion per day
• 6x annual amount spent by them on aid• The Uruguay Round
– 107 participants– Most complex ever attempted
• 15 sectors• US$1 trillion of trade
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MAIN TYPES OF TRADE ASSOCIATIONS
Type
Economic co-operation
Bi-lateral or multi-lateral trade treaty
Sectoral free trade agreement
Trade preference agreement
Free trade area (or agreement)
Customs union
Common market
Economic union
Political
Common external tariff
No
No
No
No
No
Yes
Yes
Yes
Yes
Free movement of capital and people
No
No
No
No
No
Possibly
Yes
Yes
Yes
Example
Canada - EC framework agreement, APEC
The Peru, Chile accord
The multi-fibre agreement
South African Development Cone (SADC)
ASEAN NAFTA Mercosur
Economic Community of West African States
European Single Market
European Monetary Union
Would resemble federal states (e.g. US, Canada, Germany)
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REGIONAL TRADING AREAS OF THE WORLD
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MAJOR CHANGES IN THE SINGLE EUROPEAN MARKET
• Removal of tariff barriers
• Removal of technical barriers
• Public procurement• Free movement of
labour and workers’ rights
• Opening up of professions
• Financial services• Transport, haulage
and coastal carriage• Company law• Fiscal barriers• The environment
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European Monetary UnionSTRATEGIC IMPLICATIONS
• Price and wage transparency
• Consumers can shop for ‘best deals’
• Exploitation of regional price differences
• Pressure on margins
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TRADE AREAS
• NAFTA: free trade area– US, Canada, Mexico– World’s richest single market
• Mercosur: customs union– Brazil, Paraguay, Uruguay and Argentina
• APEC: forum of 21 countries bordering the Pacific
• ASEAN: free trade area (to complete ‘AFTA’ by 2015?)– Thailand, Indonesia, Singapore, Brunei, Malaysia &
Philippines, Vietnam, Myanmar, Cambodia and Laos
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