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Discussion questions for chapter 2(global marketing)


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International Marketing Essay Question

International Marketing Essay Question

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  • 1. Questions for Chapter 2: The Global Environment of International MarketingDiscussion Questions 1 Define: . GATT NAFTA WTO ASEAN+3 IMF APEC Special drawing rights Economic dualism EMU United States-Canada Free Trade Agreement2. The Tokyo Round of GATT has emphasized the reduction of nontariff barriers. How does theUruguay Round differ? Nontariff barriers are all the restrictions imposed on the importation of goods by a host government with the exception of tariffs. Such things as standards, quotas, import licenses, countervailing duties, border taxes can be classified as nontariff barriers. The Tokyo Round considered nontariff barriers as having become one of the major deterrents to international trade. Earlier rounds of negotiations by GATT members had been successful in reducing tariffs but nontariff barriers are considered to be insidious protectionist devices and the Tokyo Round focused on the reduction of nontariff barriers. The Tokyo Round made a good start at addressing a number of nontariff barriers that have become more serious in recent years. Despite the success of these past rounds, high tariffs have not disappeared entirely and nontariff barriers are still widely used. There are also areas that, until now, GATT has not addressed such as services, intellectual property rights, and investment. Specifically, GATT negotiations in this round are to address key areas of importance in international trade which are not now under the scope of GATT rules. For example, GATT rules do not apply to the international trade of services which represent an increasing percentage of international trade flows. Similarly, GATT rules have little influence over government investment policies affecting international trade or on policies concerning the protection of intellectual property rights such as patents, trademarks, and copyrights. Agricultural trade is another area where GATT rules either do not apply or are not effective. Finally, the dispute settlement mechanism is seen to be increasingly ineffective at resolving conflicts among GATT members.3. Discuss the impact of GATS, TRIMS, AND TRIPS on global trade. 1
  • 2. An important objective of the United States in the Uruguay Round was to reduce or eliminate barriers to international trade in services. While there is still much progress to be made before free trade in services will exist throughout the world, the General Agreement on Trade in Services (GATS) is the first multilateral, legally enforceable agreement covering trade and investment in services sector. It provides a legal basis for future negotiations aimed at eliminating barriers that discriminate against foreign services trade and deny them market access. For the first time, comprehensive multilateral disciplines and procedures covering trade and investment in services have been established. Specific market-opening concessions from a wide range of individual countries were achieved and provision was made for continued negotiations to further liberalize telecommunications and financial services. Equally significant were the results of negotiations in the investment sector. Trade-Related Investment Measures (TRIMs), established the basic principle that investment restrictions can be major trade barriers and therefore are included, for the first time, under GATT procedures. An initial set of specific practices were prohibited including: local content requirements specifying that some amount of the value of the investor’s production must be purchased from local sources or produced locally; trade balancing requirements specifying that an investor must export an amount equivalent to some proportion of imports or condition the amount of imports permitted on export levels; and, foreign exchange balancing requirements limiting the importation of products used in local production by restricting its access to foreign exchange to an amount related to its exchange inflow. As a result of TRIMs, restrictions in Indonesia which prohibit foreign firms from opening their own wholesale or retail distribution channels can be challenged. And so can investment restrictions in Brazil that require foreign-owned manufacturers to buy most of their components from high-cost local suppliers and that affiliates of foreign multinationals maintain a trade surplus in Brazil’s favor by exporting more than they sell within. Another objective of the United States from the Uruguay Round was achieved by an agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). The TRIPs agreement establishes substantially higher standards of protection for a full range of intellectual property rights (patents, copyrights, trademarks, trade secrets, industrial designs, and semiconductor chip mask works) than are embodied in current international agreements and it provides for the effective enforcement of those standards both internally and at the border.4. Discuss the evolution of world trade that has led to the formulation of the WTO. Since the inception of GATT, there have been eight “rounds” of intergovernmental tariff negotiations. The most recently completed was the Uruguay round which built on the success of the Tokyo Round, the most comprehensive and far-reaching round undertaken by GATT up to that time. The Tokyo Round resulted in tariff cuts and set new international rules for subsidies and countervailing measures, anti-dumping, government procurement, technical barriers to trade (standards), customs valuation, and import licensing. While the Tokyo Round addressed non-tariff barriers, there were some areas not covered by that round which continued to impede free trade. In addition to market 2
  • 3. access, there were issues of trade in services, agriculture, and textiles; intellectual property rights; and investment and capital flows. .The Uruguay Round was begun in 1986 in Punta del Este, Uruguay and finally concluded in 1994. By 1995, 80 GATT members including the United States, the European Union (and it member states) Japan, and Canada had accepted the agreement. Perhaps the most notable achievement of the Uruguay Round was the creation of a new institution as a successor to the GATT, the World Trade Organization (WTO). At the signing of the Uruguay Round trade agreement, U.S. representatives pushed for an enormous expansion of the definition of trade issues. The result was the creation of the World Trade Organization that encompasses the current GATT structure and extends it to new areas not adequately covered in the past. The WTO is an institution—not an agreement as was GATT. It will set the rules governing trade between its 117 members, provide a panel of experts to hear and rule on trade disputes between members and, unlike GATT, issue binding decisions. It will require for the first time, the full participation of all members in all aspects of the current GATT and the Uruguay Round agreements and, through its enhanced stature and scope, provide a permanent, comprehensive forum to address the trade issues of the 21st century global market. Trade disputes will be heard by a panel of experts. A panel of experts, selected by the WTO, will hear both sides and issue a decision; the winning side will be authorized to retaliate with trade sanctions if the losing country does not change its practices. While the WTO has no actual means of enforcement, international pressure to comply with WTO decisions from other member countries is expected to force compliance. The WTO ensures that member countries agree to the obligations of all the agreements, countries, including developing countries (the fastest growing markets of the world) will undertake obligations to open their markets and to be bound by the rules of the multilateral trading system. The GATT has had a long and eventful history. Visit and write a short report on the various Rounds of GATT. What were the key issues addressed in each round? This exercise is designed to familiarize the student with the Internet and issues GATT as well as the WTO. In addition to the various Rounds of GATT, this site is a complete discussion of WTO. The discussion of this question could include a broader discussion of WTO.5. U. S. exports to the European Community are expected to decline in future years. What marketing actions may a company take to counteract such changes? An economic unity such as the EC is primarily concerned with increases of trade within its member-countries because they want to raise their own production and gain through economic growth that their specialized members can supply. It may be said that the EC wants to decrease their trade with nonmember nations. One study has shown some proportional declines already. 3
  • 4. What the U.S. marketer should do to counteract such actions is to, as rapidly as possible, expand exports to this market. More important, the marketers should build new and expand EC-located, U.S.-owned industries and marketing facilities to strengthen their position before it becomes too late. EC members are now busy building new plants and establishing their outlets and markets. From the U.S. foreign marketer’s point of view, there is no time to waste, otherwise they will lose some of the grip they have established in Europe. Also, keeping in mind that many other Western European countries are again interested in joining EC. The typical argument: “It will be too expensive to stay outside.” A sound policy for American companies wanting or dependent upon marketing in the European market might increase their potential in EFTA.6. “Because they are dynamic and because they have great growth possibilities, the multinational markets are likely to be especially rough-and-tumble for the external business.” Discuss. The attractive growth and profit opportunities in multinational markets tend to draw the more aggressive marketers into competition. Whereas, a company may have virtually no competition in its home market, it may be competing with three or four major firms in the multinational market. National interest gives preferential treatment of various types to firms from member nations and intensifies the normal market competition.7. Discuss the implications of the European Union’s decision to admit Eastern European nations to the group. The admission of Eastern European nations into the EU will create an ever larger and more economically important than the present EU. The globalization of markets, the restructuring of Eastern Europe into independent market-driven economies, the dissolution of the Soviet Union into independent states, the worldwide trend toward economic cooperation, and enhanced global competition make it important that market potential be viewed in the context of regions of the world rather than country by country. Formal economic cooperation agreements such as the EC are the most notable examples of multinational market groups but many new coalitions are forming, old ones are being re-energized, and the possibility of many new cooperative arrangements is on the horizon.8. Discuss the strategic marketing implications of the Canada-United States-Mexico Free Trade Agreement. NAFTA affects a variety of strategic issues, the most important of which are: Market Access. Within 10 years of implementation, all tariffs will be eliminated on North American industrial products traded between Canada, Mexico, and the United States. All trade between Canada and the U.S. not already duty free will be duty free by 1998 as provided for in CFTA. Mexico will immediately eliminate tariffs on nearly 50 percent of all industrial goods imported from the U.S., and remaining tariffs will be phased out entirely within 15 years. 4
  • 5. Nontariff Barriers. In addition to elimination of tariffs, Mexico will eliminate nontariffbarriers and other trade-distorting restrictions. U.S. exporters will benefit immediatelyfrom the removal of most import licenses that have acted as quotas essentially limiting theimportation of products into the Mexican market. NAFTA also eliminates a host of otherMexican barriers such as local content, local production, and export performancerequirements that have limited U.S. exports.Rules of Origin. NAFTA reduces tariffs only for goods made in North America. Toughrules of origin will determine whether goods qualify for preferential tariff treatment underNAFTA. Rules of origin are designed to prevent “free riders” from benefiting throughminor processing or transshipment of non-NAFTA goods. For example, Japan could notassemble autos in Mexico and avoid U.S. or Canadian tariffs and quotas unless the autohad a specific percentage of Mexican (i.e., North American) content. For goods to betraded duty free, they must contain substantial (62.5 percent) North American content.Since NAFTA rules of origin have been strengthened, clarified, and simplified over thosecontained in the U.S.-Canada Free Trade Agreement, they supersede the CFTA rules.Customs Administration. Under NAFTA, Canada, Mexico, and the U.S. have agreed toimplement uniform customs procedures and regulations. Uniform procedures ensure thatexporters who market their products in more than one NAFTA country will not have toadapt to multiple customs procedures. Most procedures governing rules of origindocumentation record keeping, and origin verification will be the same for all threeNAFTA countries. In addition, the three will issue advanced rulings, on request, onwhether or not a product qualifies for tariff preference under the NAFTA rules of origin.Investment. NAFTA will eliminate investment conditions that restrict the trade of goodsand service to Mexico. Among conditions eliminated are the requirements that foreigninvestors export a given level or percentage of goods or services, use domestic goods orservices, transfer technology to competitors, or limit imports to a certain percentage ofexports.Services. NAFTA establishes the first comprehensive set of principles governing servicestrade. U.S. and Canadian financial institutions are permitted to open wholly ownedsubsidiaries in Mexico, and all restrictions on the services they offer will be lifted by theyear 2000. U.S. and Canadian trucking companies are able to carry international cargointo Mexican border states and, by 1999, they will be able to truck throughout Mexico.Intellectual Property. NAFTA will provide the highest standards of protection ofintellectual property available in any bilateral or international agreement. The agreementcovers patents, trademarks, copyrights, and trade secrets, semiconductor integratedcircuits, copyrights for North American movies, computer software, and records.Government Procurement. NAFTA guarantees businesses fair and open competition forprocurement in North America through transparent and predictable procurementprocedures. In Mexico, Pemex (national oil company), CFE (national electric company),and other government-owned enterprises will be open to U.S. and Canadian suppliers. 5
  • 6. Standards. NAFTA prohibits the use of standards and technical regulations used as obstacles to trade. However, NAFTA provisions do not require the United States or Canada to lower existing health, environmental, or safety regulations, nor does NAFTA require the importation of products that fail to meet each country’s health and safety standards.9. For each regional trade group—EC, NAFTA, AFTA, ASEAN+3 and Mercosur—cite which of the factors for success are the strongest and which are the weakest. Discuss each factor. Students will have different responses to this question. The important point is if they realize the importance of the different factors on the ultimate success of any regional trade group. In most cases, there are cultural, social, economic, political and ever, geographical differences among country members. The critical point is if their commitment to economic integration is sufficiently strong to allow them to deal with the differences that will arise as a result. Each response to this question will be different. For what it is worth, the author would rank them as follows: POLITICAL ECONOMIC SOCIAL GEOGRAPHIC EC S S to W S S NAFTA W to S W to S S to W S AFTA S, S W to S W to S MERCOSUR S to W W to S S S10. What is the motive behind ASEAN+3 and what are the probable implications for global trade? One result of the Asian financial crisis of 1997–98 was the creation of ASEAN+3 (ASEAN plus China, Japan and South Korea), to deal with trade and monetary issues facing Asia. Most East Asia felt that they were both let down and put upon by the West who they felt created much of the crisis by pulling out in the midst of the crisis. It was felt that the leading financial powers either declined to take part in the rescue operations, as the US did in Thailand, or that they proposed unattainable solutions. The result was the creation of ASEAN+3,1 consisting of the foreign and finance ministers of each country, which meets annually after ASEAN meetings. Their first meeting was devoted to devising a system whereby they share foreign exchange reserves to defend their currencies against future attack. While still only tentative, there was also discussion among the members of ASEAN+3 of creating a common market and even a single currency or, perhaps, a new Asian entity encompassing both Northeast and Southeast Asia. 2 Closer links between Southeast Asia and Northeast Asia is seen as a step towards strengthening Asia’s role in the global economy and the creation of a global three-block configuration. 3123 6
  • 7. 11. Discuss the economic and trade importance of the big emerging markets. The Department of Commerce estimates that over 75 percent of the expected growth in the world trade over the next two decades will come from the more than 130 developing and newly industrialized countries (NICs). There is a small core of these that will account for over half of that growth. They predict that the countries identified as Big Emerging Markets (BEMs) alone will be a bigger import market by the end of this decade than the European Union and by the year 2010, will be importing more than the EU and Japan combined. The BEMs differ from other developing countries because they import more than smaller markets an more than economies of similar size. As they embark on economic development, demand for capital goods to build their manufacturing base and develop infrastructure increases. Increased economic activity means more jobs and more income to spend on products not yet produced locally. Thus, as their economies expand, there is an accelerated growth in demand for goods and services, much of which must be imported. BEM merchandise imports are expected to be nearly one trillion dollars higher than they were in 1990; if services are added, the amount jumps beyond one trillion dollars. 12. What are the traits of those countries considered to be big emerging markets? Discuss Those BEMs, as the Department of Commerce refers to them, share a number of important traits: They are all physically large; have significant populations; represent considerable markets for a wide range of products; all have strong rates of growth or the potential for significant growth have all undertaken significant problems of economic reforms; are all of major political importance within their regions; are “regional economic drivers;” will engender further expansion in neighboring markets as they grow. While these criteria are general ion nature and each country does not meet all the criteria, the Department of Commerce has identified the following BEMs. In Asia: China, Indonesia, India, and South Korea. In Latin America: Mexico, Argentina, and Brazil. In Africa: South Africa. In Central Europe: Poland. In Southern Europe: Turkey. Vietnam, Thailand, Venezuela, and Columbia may warrant inclusion in the near future. The list is fluid in that some countries will drop off while others will be added as economic conditions change. The message is clear, the Department of Commerce is focusing on countries that demonstrate the greatest potential for growth. Teaching Plan of Every UnitUnit 1:Teaching content I. GATT and WTO GATT’s work done 7
  • 8. GATT trade roundsYear Place/name Subjects covered Countries1947 Geneva Tariffs 231949 Annecy Tariffs 131951 Torquay Tariffs 381956 Geneva Tariffs 261960-1961 Geneva (Dillon Round) Tariffs 261964-1967 Geneva (Kennedy Round) Tariffs and anti-dumping 62 measures1973-1979 Geneva (Tokyo Round) Tariffs, non-tariff measures, 102 “framework” agreements1986-1994 Geneva (Uruguay Round) Tariffs, non-tariff measures, 123 rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc Four important exceptions to the key GATT principle of non-discrimination WTO functions and principles WTO’s influence to USA and China Dynamic factors in the global trade Tarrif and none-tarrif barriers Skirting the spirit of GATT and WTO II. The International Monetary Fund and World Bank Group Relations of WTO, IMF,and WBG III. Protests against Global Institutions Protests Against Global InstitutionsThe Unit’s Teaching Method Teaching by lecturer mainly with the help of multimediaDesign of Lecturer and Students’ Activities in the Unit Students answer questions and teacher sums up their ideas.Lecture Outline & Design of Writing on Blackboard in the Unit(same as Content part) 8
  • 9. Exercise distribution of the Unit NoUnit 2:Teaching content I. Global Markets and Multinational Market GroupsTraits of Successful Economic Unions Patterns of Multinational Cooperation Regional Cooperation Groups: Free Trade Areas , Customs Unions, Common Markets, Political Unions, Others: FTAA, ASAEAN, APECProposed company responses to Eur integrationNorth America integrationLatin America integrationAsia integrationAfrica, Middle East, Arab world,What should a marketer do? V. Marketing in a Developing CountryThe Unit’s Teaching Method Teaching by lecturer mainly with the help of multimediaDesign of Lecturer and Students’ Activities in the Unit Students answer questions and teacher sums up their ideas.Lecture Outline & Design of Writing on Blackboard in the Unit(same as Content part)Exercise distribution of the Unit: Nil 9