Presentation Transcript

1. International Business

   Session 6
2. National Trade Policies Protectionist Policies Economic Development Programs Export promotion strategy Import substitution strategy Industrial Policy Key domestic industries chosen, protected, and promoted Regional Agreements
3. Trade Intervention Should a national government intervene to protect the country’s domestic firms by taxing foreign goods entering the domestic market or constructing other barriers against imports? Should a national government directly help the country’s domestic firms increase their foreign sales through export subsidies, government-to-government negotiations, and guaranteed loan programs?
4. Two Types of Rationale for Protectionism Defensive barriers safeguard industries, workers, special interest groups, protect infant industries and to promote national security (export controls). Offensive barriers pursue a strategic or public policy objective, such as increasing employment or generating taxes. International Business: Strategy, Management, and the New Realities
5. National Defense Argument Country must be self-sufficient in critical raw materials, machinery, and technology or else be vulnerable to foreign threats Appeals to general public Protects steel, electronics, and machine tools industries, and merchant marines
6. Infant Industry Argument Imposition of tariffs to give U.S. firms temporary protection from foreign competition until firms are fully established Powerful economic development strategy Which industries should be protected? For how long?
7. Maintenance of Existing Jobs Jobs in high-wage countries threatened by imports from low-wage countries Forms of assistance Tariffs Quotas
8. Protection of the National Economy advanced economies cannot compete with those in developing countries that employ low-cost labor, thus governments should impose trade barriers to block imports
9. Preserving National Culture and Identity Governments seek to protect certain occupations, industries, and public assets central to national culture: Switzerland imposed trade barriers to preserve its long-established tradition in watch making. Japanese restrict the import of rice because it is central to the nation’s diet and food culture. U.S. opposed Japanese investors’ purchase of the Pebble Beach golf course in California, New York’s Rockefeller Center, and the Seattle Mariners baseball team, all considered to be part of the national heritage. France does not allow significant foreign ownership of its TV stations because of concerns that foreign influences will taint French culture.
10. National Strategic Priorities Intervention encourages the development of industries that bolster the nation’s economy. Countries with many high-value-adding industries —such as IT, pharma, automotive, or financial services — create better jobs and higher tax revenues. Deciding which industries to support is challenging; it is difficult to predict which industries will produce comparative advantages. May result in continuous subsidization of underperforming industries.
11. Barriers to International Trade Tariff barriers Export tariff Transit tariff Import tariffs Ad valorem Specific Compound Non-tariff barriers Quotas Product and testing standards Restricted access to distribution networks Public-sector procurement policies Regulatory controls Local-purchase requirements
12. Tariffs Export tariffs- taxes on products exported by domestic firms- Example- Russia charges a duty on oil exports, intended to generate government revenue and maintain higher stocks of oil within Russia. Import tariff(most common) - tax levied on imported products. Ad valorem - tariffs are assessed as a percentage of the value of the imported product. Specific tariff—a flat fee or fixed amount per unit of the imported product—based on weight, volume, or surface area (such as barrels of oil or square meters of fabric). Revenue tariff - intended to raise money for the government, e.g. by taxing cigarette imports. Protective tariff - protects domestic industries from foreign competition. Prohibitive tariff - is so high that no one can import any of the items. International Business: Strategy, Management, and the New Realities
13. World Trade Organization Started in 1947 as General Agreement on Tariffs and Trade (GATT) Goal: to promote a free and competitive international trading environment Method: multilateral negotiations Becomes WTO in 1995 Added: Services, IP, Investment, and Enforcement powers Currently 153 member countries
14. Success in Reducing Tariffs
15. Doha Round Started in 2001, aim for conclusion 2011 Aims for developing countries: reforming agricultural subsidies improving the access to global markets ensuring that new liberalisation in the global economy respects the need for sustainable economic growth in developing countries General Agreement on Trade in Services (GATS) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
16. Harmonized Tariff Schedule Most countries have adopted a detailed classification scheme for imported goods called the harmonized tariff schedule (HTS). Because of its complexity, the HTS can sometimes be difficult to use.
17. Sample Import Tariffs
18. TARIC – Info on Tariffs http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en
19. Degrees of International Integration Source: SUDER
20. Why Nations Pursue Economic Integration? 1. Expand market size Regional integrationgreatly increases the scale of the marketplace for firms inside the economic bloc. Example- Belgium has a population of just 10 million; the EU gives Belgian firms easier access to a total market of roughly 490 million. Consumers also gain access to a greater selection of products and services. 2. Achieve scale economies and enhanced productivity Expansion of market size within an economic bloc gives member country firms the opportunity to gain economies of scale in production and marketing. Internationalization inside the bloc helps firms learn to compete more effectively outside the bloc as well. Labor and other inputs are allocated more efficiently among the member countries- leading to lower prices for consumers.
21. Why Nations Pursue Economic Integration? 3. Attract direct investment from outside the bloc Compared to investing in stand-alone countries, foreign firms prefer to invest in countries that are part of an economic bloc as they receive preferential treatment for exports to other member countries. Examples- General Mills, Samsung, and Tata- have invested heavily in the EU to take advantage of Europe's economic integration. By establishing operations in a single EU country, these firms gain free trade access to the entire EU market. 4. Acquire stronger defensive and political posture Provide member countries with a stronger defensive posture relative to other nations and world regions- this was one of the motives for the initial creation of the European Community (precursor to the EU).
22. International Trade Groups
23. Trade Group Comparison
24. Trade Group Comparison 2
25. Producers’ Alliances and ICCAs Producers’ Alliances Membership agreements between producing and exporting countries. OPEC (Producers’ Cartel), Diamonds, Wool, Bananas Quota system International Commodity Control Agreements Agreements between producing and consuming countries. Aim is to counteract price instability. ICCO: International Cocoa Organization 42 countries + EU Represents 80% of production and 70% of consumption
26. Doing Business in the EU
27. EU Competencies
28. Development of the EU Political Union Economic Union Common Market Customs Union Free Trade Area EURO Lisbon EMS Single Europe European Economic Community Coal and Steel
29. EU Trade - Export
30. Exports - percentage
31. EU Trade - Import
32. Imports - percentage
33. Export Import United States (18.7%) Switzerland (8.1%) China (7.5%) Russia (6%) Turkey (4%) Top 5 total: 44.3% China (17.9%) United States (13.3%) Russia (9.6%) Switzerland (6.2%) Norway (5.7%) Top 5 total: 52.7% Main Trade Partners
34. Main Industries by Country Automobiles - France, Italy, UK, Germany, Czech Republic, Slovakia, Spain Fashion- Italy and France and other western European countries Aircraft- France and Germany Machinery- The entire continent Electronics- Italy, The Netherlands, Germany Food products such as wine, beer, cheeses, chocolates- Western Europe Pharmaceuticals- Switzerland Military equipment- UK, France, Italy, Germany, Russia Industrial chemicals- Most countries
35. Single European Market Free Movement of: Goods Services Labor Capital
36. SEM principles Harmonisation = common rules time consuming, complex, inflexible Mutual recognition - Cassis de Dijon home country control new approach to standards - ‘essential requirements’ liberalisation
37. Free Movement of Goods Most of the SEM reforms of 1992 involved goods Success Results Ever increasing intra-EU trade Reduction in consumer prices (est 11%)
38. Free Movement of Services Services currently represent two-thirds of the EU's GDP and employment, they only make up for around one-fifth of total intra-EU trade. Why?
39. Barriers to Exporting Services
40. Services Directive to ease freedom of establishment for providers and the freedom of provision of services in the EU; to strengthen rights of recipients of services as users of the latter; to promote the quality of services; to establish effective administrative cooperation among the Member States.
41. Freedom of Labor How mobile is labor? Are some professions more mobile? How diverse is labor? Productivity Wages
42. Non-nationals (EU)
43. Non-nationals (All)
44. Mobility by Profession
45. The Neighborhood
46. EU USA Population (million): 494 307 Area (1000km2) 4422 9826 Population density(inh./km2) 112 34 EU and the USA They are the two largest economies in the world They enjoy the world's biggest bilateral trading and investment relationship Common goals and interests worldwide Common concerns on security and political issues US FDI is the greatest in the EU The US receives one quarter of EU exports and supplies 20% of its imports.
47. The Lisbon Criteria In 7 out of 8 Lisbon dimensions, the EU is less competitive than the US. These include: “An Information Society for All”, “Innovation, Research and Development”, “Liberalization”, “Network Industries”, “Efficient and Integrated Financial Services”, “Enterprise Environment” and “Social Inclusion”. The EU outperforms the US in “Sustainable Development” and in the subcategories “Telecommunications” and “Modernising Social Protection”.
48. EU View of the World Oil And Gas Biggest trade partner Reaching East Neighborhood Regional Realations Regional Realations