We live in a world of intensifying global relationships, one in which international business has become the key determinant of economic development and prosperity. This course, Global Business Environment, Part I, introduces students to a fundamental understanding of the socioeconomic political, cultural, and linguistic environment in which international businesses operate. This course utilizes an inquiry-based approach to understanding country level relationships in the Global Business Environment. It surveys the global business environment by asking and answering key questions about society, the global economy, cultures, institutions and languages. The questions we will ask are: 1. What is Globalization?, 2. Is Globalization New?, 3. How do Political and Social Institutions impact National Economic Development?, 4. What is the role of Culture?, 5. What are the Gains from Trade?6. Free Trade, Free-r Trade or Managed Trade?, 7. What are Foreign Currencies and how are Exchange Rates Determined?, 8. What does the Current Global Business Environment look like? This inquiry-based approach creates reflective opportunities for students to better understand the environment in which businesses operate. Lectures are delivered in an engaging manner, which encourages reflection and inquiry.
Module 6, Part 1
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Do curso por University of New Mexico
International Business I
587 classificações
Na lição
Week 6
Free Trade, Free-r Trade or Managed Trade?
Conheça os instrutores
Doug E Thomas, Ph.D.Professor
International Management, Anderson School of Management
Hi guys welcome back to Global Business Environment.
This will be, continuation of module six.
This will be part one of module six in which we're asking to what degree is trade
free in today's world, is it freer trade, managed trade, or pure fee, free trade.
As you can see from this latest table or graph I've got displayed,
the, the past 67 years has been a period of great change in the world.
Here's another tariff rate graph that shows that
tariff rates have decreased greatly since the late 1940s across the world.
And we've seen previously, that there's this corresponding increase in
world trade, or imports and exports, as the tariff rates drop.
And also that corresponding increase in gross domestic product.
If you recall from an earlier module, there was an agreement signed in the late
1940s, coming out of World War II, called the general agreement on trade and
tariffs or the GATT the became the World Trade Organization.
We've shown you previously as well in the 1990s it was formalized into an actual
entity that could help manage disputes and conflicts for
example when, when those arise in trade agreements or trade processes.
This table or graph also shows something very interesting.
It shows, with these, grey, bars
the number of new trade agreements signed across the world in any given year.
And we see that in the 1990s that really began to pick up.
We saw some years where there were more than 40 regional trade agreements or
other types of trade agreements signed.
And so, the GATT is kind of a world wide trade agreement and
the World Trade Organization, as its name suggests, is a worldwide body.
Not every single country in the world is part of it but
the majority of the world countries are part of the World Trade Organization, and
this black line indicates the number of new members who have joined,
signed on to the GATT or who have joined the WTO in any given year.
So, the question you might ask yourself is, if there's this worldwide trade
agreement, the GATT, and the World Trade Organization,
why do regional areas, continents or groupings of countries,
or even individual pairings of countries, sign their own trade agreements?
If, if the world is agreeing to lower tariffs,
why do we see regional groups decide to do the same thing?
And the answer can be somewhat complex.
But to try to put it simply the truth is that the GATT and
the WTO, even though they have a worldwide coverage,
don't say that every country in the world has to lower their, their tariffs.
It covers certain agreements and
certain negotiations, and only go to a certain degree.
These regional trade agreements tend to take trade negotiations to
a higher level or a different level within certain trading areas or trading blocks.
So this is another way of depicting that the number of new
regional trade agreements, and seeing it a little bit easier, perhaps, and again,
we see that since the 1990s, these, regional trade agreements have increased.
And what's happened here is these, these red lines are negotiation rounds
across the world, of the GATT and the WTO, or the World Trade Organization.
And, as you can see, these agreements or talks or
negotiations have collapsed at times.
At times, for example, in the, very recent past, in 2008,
one of these worldwide negotiations collapsed and
there was no further agreement reached.
No new levels of tariffs negotiated downward.
And so, since it's very difficult for the entire world, or
all the countries in the world to agree, it's somewhat easier for
these regional areas to come to agreements.
There's also competition between these areas.
So, for example, the European Union is a regional trade agreement area.
It actually goes further than trade agreement,
it's actually a customs union, we call it, because it allows for
free flow of immigration and capital, for example.
But it also is a regional trade agreement.
And that allows for the European Union to be more competitive and
has somewhat forced other regions in the world for example in Asia,
Africa, to also negotiate competitive trading areas.
Here's a map that shows some of the, the trade unions or trading trade agreements.
Or trading blocks that had been signed around the world.
Here is in this blue, the North American block,
which is was formed by the North American Free Trade Agreement.
And in many respects, this agreement, signed in the early 90s,
was a reaction to the power, growing power of the European Union, with the Euro.
And, the, the trade power that existed because countries within
the European Union could take advantage of lower, labor costs, and could,
do all kinds of competitive and comparative advantage-based decisions.
And so, the North American regions decided to try to counteract that
by signing a free trade agreement.
And we see in addition to those regional trade agreements.
And here's the, the North American Free Trade Agreement that I just referred to,
we see individual countries like Mexico signing their own free trade agreements.
And those agreements go beyond the regional agreements.
Mexico in fact, is the country in the world with the highest number
of free trade agreements signed.
It has free trade agreements with individual countries, like Chile, or
Israel, or Japan.
And so, these are basically one-on-one negotiations between countries to,
manage trade on, on a two-country level in specific industries,
on specific products in specific markets and
it tried to, have a win-win situation, as we referred to in the past, for
each country to, to benefit their economies, and ultimately their citizens.
And so, in today's world, we see a lot of this.
We see free trade agreements continue to be negotiated between nations.
We see new regional trade agreements signed and we see them renegotiated.
And new portions of the agreement updated.
And we also see the World Trade Organization continue to attempt to
provide worldwide, negotiations.
All of these countries are trying to win and so
even though we talked about win-win, some countries still feel like or
perhaps in fact are losing depending on individual products or periods of time.
And so that's the reason that they're managing these trades
they're managing their trade in this way.
What they're doing is they're receiving pressure perhaps from
internal industries or markets to continue to provide some level of protection.
Because the other country in the trade agreement,
perhaps, also has some protected industry or market.
So for example, if you recall, we talked about sugar in the United States and
the protection that's placed on the sugar
farmers in the United States through tariffs.
That is an example of the type of interests that are protected in these
agreements so that's why it takes time to negotiate these because they're not pure,
free trade.
It would probably be better to call the North American Free Trade Agreement
the North American Freer Trade Agreement.
And we'll talk about that in a little more depth in the next part.
Thank you very much.
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