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The Dynamic Environment of International Trade - Coggle Diagram
The Dynamic Environment of International Trade
The 20th to 21st Century
The first half of the 20th had a major worldwide economic depression between two world wars that destroyed most of the industrialized world.
The last half of the century, was marred by struggles between socialist Marxist and democratic capitalist approaches to economic development.
After WWII:
Creation of the GATT
Became part of the WTO in 1995
Marshall Plan and others
In the 21st century economic power and potential became more evenly distributed among countries
More emerging economies
Balance of Payments
The system of accounts that records a nation’s international financial transactions
Usually in a period of one year
Important economic measure used by treasuries, central banks, and other government agencies.
Three Accounts
Current account: record of all merchandise exports, imports, and services plus unilateral transfers of funds
Capital account: record of direct investment, portfolio investment, and short-term capital movements to and from countries
Reserves account: record of exports and imports of gold, increases or decreases in foreign exchange and in liabilities to foreign central banks.
Protectionism
Nations utilize legal, exchange, and psychological barriers to restrain the entry of unwanted goods.
Arguments
protection of an 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
Nontariff barriers: quotas, boycotts, monetary barriers, and market barriers.
Barriers are imposed against imports and against foreign businesses.
A tariff is a tax imposed by a government on goods entering its borders.
May be used as revenue-generating taxes or to discourage the importation of goods, or for both reasons.
Rates are based on value or quantity or a combination of both.
Easing Trade Restrictions
The Omnibus Trade and Competitiveness Act of 1988 focuses on assisting businesses to be more competitive in world markets and correcting perceived injustice in trade practices.
Designed to deal with trade deficits, protectionism, and the overall fairness of our trading partners.
The United States and 22 other countries signed the General Agreement on Tariffs and Trade (GATT) shortly after World War II.
The original agreement provided a process to reduce tariffs and created an agency to serve as watchdog over world trade.
The World Trade Organization (WTO) encompasses the current GATT structure and extends it to new areas not adequately covered in the past.
The International Monetary Fund and World Bank Group
The International Monetary Fund (IMF) and the World Bank Group are two global institutions created to assist nations in becoming and remaining economically viable.
To cope with universally floating exchange rates, the IMF developed special draw- ing rights (SDRs), one of its more useful inventions.
Originally 29 countries signed the agreement; now 184 countries are members.
The World Bank Group has five institutions, each of which performs the following services
lending money to the governments of developing countries
providing assistance to governments for developmental projects in the poorest developing countries
lending directly to the private sector to help strengthen the private sector in developing countries with long-term loans, equity investments, and other financial assistance
providing investors with investment guarantees against “noncommercial risk”
promoting increased flows of international investment by providing facilities for the conciliation and arbitration of disputes between governments and foreign investors.
Protests against Global Institutions
The basic complaint against the WTO, IMF, and others is the amalgam of unintended consequences of globalization:
Environmental concerns, worker exploitation, and domestic job losses, cultural extinction, higher oil prices, and diminished sovereignty of nations.
Global Perspective
Barriers to trade, both tariff and nontariff, are one of the major issues confronting international marketers.
Benefits to a Global Market
Consumers benefit by being able to select from the widest range of goods at the lowest prices.
Marketers benefit from new markets opening and smaller markets growing enough to become business opportunities.