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The Dynamic Environment of International Trade. . Chapter 02. Modular: Afjal Hossain Assistant Professor, Department of Marketing PSTU. McGraw-Hill/Irwin International Marketing, 13/e. Balance of Payments. Transactions recorded yearly Must always be in balance

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The Dynamic Environment of International Trade





Assistant Professor, Department of Marketing


McGraw-Hill/Irwin International Marketing, 13/e

balance of payments
Balance of Payments
  • Transactions recorded yearly
  • Must always be in balance
  • A record of condition, not determinant of condition
  • A Balance of Payments statement includes three accounts:
    • Current account
    • Capital account
    • Reserves account

Balance of Payments is the system of accounts that records a nation’s international financial transactions.

protection logic and illogic
Protection Logic and Illogic
  • Arguments concerning protectionism on trade:
    • Protection of infant industry
    • Protection of the home market
    • Need to keep money at home
    • Encouragement of capital accumulation
    • Maintenance of the standard of living and real wages
    • Conservation of natural resources
    • Industrialization of a low-wage nation
    • Maintenance of employment and reduction of unemployment
    • National defense
    • Increase of business size
    • Retaliation and bargaining
monetary trade barriers
Monetary Trade Barriers
  • Monetary Barriers
    • Blocked currency
    • Differential exchange
    • Government approval
  • Others
    • Tariffs
    • Boycotts and Embargoes
non monetary trade barriers
Non-monetary Trade Barriers
  • Standards
  • Antidumping Penalties
  • Others
    • Quotas
    • Voluntary Export Restraints
the omnibus trade and competitiveness act
The Omnibus Trade and Competitiveness Act
  • Designed to deal with trade deficits, protectionism, and the overall fairness of our trading partners.
  • The bill covers three areas considered critical in improving U.S. trade:
    • Market access
    • Export expansion
    • Import relief
  • Four ongoing activities to support the growth of international trade:
    • GATT
    • The associated World Trade Organization (WTO)
    • International Monetary Fund (IMF)
    • The World Bank Group
general agreement on tariffs and trade
General Agreement on Tariffs and Trade
  • Paved the way for the first effective worldwide tariff agreement.
  • Basic Elements of the GATT:
    • Trade shall be conducted on a nondiscriminatory basis
    • Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas
    • Consultation shall be the primary method used to solve global trade problems.
  • Eliminating barriers to international trade (Uruguay Round):
    • The General Agreement on Trade in Services (GATS)
    • Trade-Related Investment Measures (TRIMs)
    • Trade-Related Aspects of Intellectual Property Rights (TRIPs)
world trade organization
World Trade Organization
  • An institution, not an agreement as was GATT
  • Sets many rules governing trade between its 156 members
  • Provides a panel exports to hear and rule on trade disputes between members.
  • Issues binding decisions
  • All member countries will have equal representation
  • For the first time, member countries, will undertake obligations to open their markets and to be bound by the rules of the multilateral trading system.
  • Trouble with U.S. ratification:
    • Concern for the possible loss of sovereignty over its trade laws to WTO
    • The lack of veto power
    • The role the U.S. would assume when a conflict arises over an individual state’s laws that might be challenged by a WTO member.
  • Skirting the Spirit of GATT and WTO
the international monetary fund
The International Monetary Fund
  • Created to assist nations in becoming and remaining economically viable.
  • Objectives of the IMF:
    • Stabilization of foreign exchange rates
    • Establishment of freely convertible currencies to facilitate the expansion and balanced growth of international trade
  • Special Drawing Rights (SDRs)
    • “paper gold”
the world bank group
The World Bank Group
  • Institution that has as its goal the reduction of poverty and the improvement of living standards by promoting sustainable growth and investment in people.
  • The World Bank has five institutions each of which performs the following services:
    • Lending money to the government of developing countries
    • Providing assistance to governments for developmental projects to the poorest developing countries.
    • Lending directly to the private sector
    • Providing investors with investment guarantees against “noncommercial risk.”
    • Promoting increased flows of international investment
protests against global institutions
Protests against Global Institutions
  • The basic complaint against the WTO, IMF and others is the amalgam of unintended consequences of globalizing:
    • Environmental concerns
    • Worker exploitation and domestic job losses
    • Cultural extinction
    • Higher oil prices
    • Diminished sovereignty of nations
  • Terrorism in London (2005)
  • “Antisweatshop” campaigns