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 3
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Do curso por University of New Mexico
International Business I
505 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 is module six, and it'll be part three of module six, in which we're
asking, is today's world dominated by free trade, freer trade, or managed trade?
We talked last time about trade agreements and
the interest that each economy has when they sign trade agreements
to protect certain interests, industries for certain reasons.
Tariffs though are not the only way that those interests are protected
within individual, individual market or economy or country.
There are other ways that economies and companies have developed to
protect interests in markets and products, and we call these non-tariff barriers.
And so, these are ways of getting around the agreements that have been signed.
For example, if a country agrees to have a three percent tariff rate on sugar imports
there might be other ways that they can formally, through agreements, or
informally prohibit or impede trade from other countries.
So let's look a little bit at the, at that.
One way to get around it is import bans, just saying the product is, is illegal.
They also sometimes have quotas, and they say, okay we'll have a low tariff rate
like 3%, but we'll only allow certain numbers of this product to be imported.
In the 1980s, for example the United States placed a quota
on Japanese imports of cars into the United States.
Now, this actually was something that both countries agreed to, but
at the time, companies that made cars in the United States were struggling
because of competition from Japanese made cars.
And so, the United States car companies were worried that their,
their jobs would be lost, that they would lose their position in the market, and
that ultimately they'd be less profitable.
And so, instead of increasing a tariff rate on the vehicles,
making them more expensive, they countries agreed to
have a quota placed on the importation of Japanese made cars in the United States.
Well it has the same effect, those quotas or trade barriers on prices because it
increases or demand might increase while supply decreases.
And so, simple economics would tell us that the price would increase if
the supply decreases, and if demand either stays the same or increases.
Sometimes there are complex rules of origin.
In today's world we see very complex manufacturing processes of products.
Parts, parts might be imported into another country, assembled exported for
additional assembly, and then reimported for sale.
And so, countries may have these complex rules about what percent
of the product must be made in a certain country.
Sometimes there's standards placed in the products or
regulations that make it very difficult for companies to compete.
There are all types of safety and health regulations
placed on imports for certain reasons.
For example, in some parts of the world, genetically modified food
is prohibited and therefore that protects local farmers from
competing with major multinational companies that export food.
Sometimes those prohibitions or laws are based in cultural preferences for
natural food as opposed to genetically modified foods.
But those are enacted into law,
where it is illegal to to import those types of foods, and
so those are seen in many places as non-tariff barriers.
Other types of non-tariff barriers include subsidies.
In some parts of the world, some products receive subsidies from the government,
thereby making them cheaper or less expensive to manufacture for
the company and make the product more competitive.
And when that company goes to export into another country the local
producers in that foreign country have a hard time keeping up with prices.
There are all types of, of, of non-tariff barriers or things that countries and
economies do to manage trade besides place tariffs.
And so, these have an impact in today's world and
what the World Trade Organization and other regional trade agreements
are attempting to do is to also decrease the incentives to economies
incurring these types of barriers in their markets.
And so that's a very important thing to understand as we move forward into
a new era of global trade.
One final thing I thought I would mention to you about the increase in world trade
and the the managed trade we live in today, is that it's
not just tariff barriers or non-tariff barriers that impact trade flows.
There have been lots of innovations that have increased the trade and
made it freer.
And so those innovations we've mentioned early on in this course
include costs of transportation, costs of communication.
I wanted to mention one in particular that has to do with transportation.
If you think about today's world much of what we see shipped in imports and
exports is transferred across the world in ships like this that cross the ocean and
the goods are housed or stored in the shipping containers.
Well, surprisingly, many years ago,
these shipping containers were of a very diverse set of sizes.
And so, it wasn't uniform and that acted as a barrier to trade in many countries.
It wasn't until the mid 1960s, that countries
agreed across the world to adopt a standard size of shipping container.
And since that occurred and that was an innovation brought about by companies and
countries we see that there's been this great increase in,
in trade across the world.
These standardized containers make it very simple for
companies to manage trade across the ocean.
And then when these containers are brought to a port to transport them by truck or
tra, rail, because these are of a standard size and
it's very easy for, for that to be transported.
And so, there are a number of things that have caused trade to not occur
at the levels that it might, besides trade barriers like tariffs that across history.
And in the recent past, we've seen this great innovation,
a very simple innovation of shipping container size becoming uniform,
which has had a great impact on trade.
So, that ends part three of module six.
Next time, we will look a model of framework that can help us explain or
understand how this managed trade works across today's global economy.
Thank you.
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