Chapter 2 The Dynamics of International Markets 3) Includes three accounts (Of the three, the current account is of primary interest to
international business.):
a. the current account -- a record of all merchandise exports, imports and services plus
The twentieth century unilateral (单边的) transfers of funds;
o Marxist-socialist approach -- where a communist or socialist economic system is followed b. the capital account -- a record of direct investment portfolio transactions, and short-
o Marshall Plan -- a financial and industrial development plan designed to assist in the term capital movements to and from countries; and
rebuilding of Europe after the Second World War c. the official reserves account -- a record of exports and imports of gold, increases or
decreases in foreign exchange, and increases or decreases in liabilities to foreign central
Tariff -- a tax imposed by a government on goods entering at its borders banks.
General Agreement on Tariffs and Trade (GATT): provided a forum for member countries to
Protectionism
negotiate a reduction of tariffs and other barriers to trade → replaced by the World Trade
Organization (WTO) in 1995 Countries utilise legal barriers, exchange barriers and psychological barriers to restrain entry of
unwanted goods. Businesses work together to establish private market barriers, while the
• World trade and the emergence of multinational corporations market structure itself may provide formidable barriers to imported goods. ( The complex
Newly industrialised countries (NICs) -- South Korea, Taiwan, Singapore and Hong Kong -- distribution system in Japan is a good example of a market structure creating a barrier to trade.)
experienced rapid industrialisation in selected industries and became aggressive world
competitors in steel, shipbuilding, consumer electronics, automobiles, light aircraft, shoes, Protection logic and illogic
textiles, clothing and so forth. Essential arguments of using protectionism:
Emerging markets -- China, India, Indonesia, Turkey, Thailand, Malaysia, Brazil, Mexico, Pakistan 1) protection of an infant industry
and Vietnam. A number of countries from the former Eastern Bloc, Russia, Poland, Hungary and 2) industrialisation of a low-wage nation Valid for developing country
the Czech Republic. The four biggest emerging markets, with greatest growth potential, are now 3) national defence
often referred to as BRIC (Brazil, Russia, India and China) countries. 4) protection of the home market
5) need to keep money at home
Balance of payments 6) encouragement of capital accumulation
7) maintenance of the standard of living and real wages
The relationship between merchandise imports and exports is referred to as the
8) conservation of natural resources
Balance of payments -- system of accounts that records a nation’s international financial 9) maintenance of employment and reduction of unemployment → substantial political
transactions (between its residents and those of the rest of the world during a given period of appeal
time – usually one year). 10) increase of business size
11) retaliation and bargaining
1) It represents the difference between receipts from foreign countries on one side and payments
to them on the other. When arguing for protection, the basic economic advantages of international trade are ignored.
2) Plus side -- export sales, money spent by foreign tourists, payments to the country for The consumer ultimately bears the cost of tariffs. (Example: Agriculture and textiles in the USA and European
insurance, transportation and similar services, payments of dividends and interest on countries – high tariffs on import and heavy subsidies)
investments abroad, return on capital invested abroad, new foreign investments in the country
Trade barriers
and foreign government payments to the country.
, To encourage the development of domestic industry and protect existing industry, governments → A public boycott can be either formal or informal and may be government sponsored or
may establish such barriers to trade as tariffs, quotas, boycotts, monetary barriers, non-tariff sponsored by an industry. It is not unusual for the citizens of a country to boycott goods of
barriers and market barriers. other countries at the urging of their government or civic groups.
6. Monetary barriers -- putting monetary restrictions on trade, e.g. availability of foreign
1. Tariffs -- a tax imposed by a government on goods entering at its borders.
exchange for imports. A government can effectively regulate its international trade position
→ Tariffs may be used as a revenue-generating tax or to discourage the importation of goods, by various forms of exchange-control restrictions.
or for both reasons. In general, tariffs: → Exchange-control: when rate of exchange (e.g. for money) is controlled or fixed by the
authority.
balance-of-payments
restrict → There are three barriers to consider: blocked currency, differential exchange rates and
inflationary pressures
positions government approval requirements for securing foreign exchange.
• Blocked currency -- used as a political weapon or as a response to difficult balance-of-
increase special-interest privileges weaken supply-and-demand patterns manufacturers’ payments situations. In effect, blockage cuts off all importing or all importing above a
supply sources certain level. Blockage is accomplished by refusing to allow importers to exchange
choices available
to consumers
national currency for the seller’s currency.
government control and international understanding competition • Differential exchange rate -- requires the importer to pay varying amounts of domestic
political considerations (they can start trade wars)
in economic matters the
currency for foreign exchange with which to purchase products in different categories. It
number of tariffs (they encourages the importation of goods the government deems desirable, and discourages
beget other tariffs) importation of goods the government does not want.
• Exchange permit -- permission to exchange an amount of local currency for foreign
→ Tariffs are arbitrary, discriminatory and require constant administration and supervision. currency. Government approval to secure foreign exchange is often used by countries
They are often used as reprisals against protectionist moves of trading partners. experiencing severe shortages of foreign exchange. Thus, importers who want to buy a
foreign good must apply for an exchange permit.
2. Non-tariff barriers -- quality standards on imported products, sanitary and health standards, 7. Standards -- The standards are sometimes used in an unduly stringent or discriminating way
quotas, embargoes and boycotts. to restrict trade. (For example: The North American Free Trade Agreement (NAFTA) stipulates that all vehicles
coming from member countries must have at least 62.5 per cent North American content to deter foreign
3. Quotas -- a specific unit or dollar limit applied to a particular type of good.
manufacturers from using one-member nation as the back door to another.)
→ Quotas put an absolute restriction on the quantity of a specific item that can be imported.
Like tariffs, quotas tend to increase prices. Easing trade restrictions
4. Voluntary export restraints (VERs) -- similar to quotas, VER is an agreement between the
importing country and the exporting country for a restriction on the volume of exports. Two ongoing activities to make international trade easier are: (1) the WTO; and (2) the
(Japan has a VER on vehicles to France, Italy and the USA; that is, Japan has agreed to export a fixed number of International Monetary Fund (IMF).
these annually.)
→ A VER is called ‘voluntary’ in that the exporting country sets the limits; however, it is General Agreement on Tariffs and Trade (GATT)
generally imposed under the threat of stiffer quotas and tariffs being set by the importing 1. non-tariff barriers -- hurdles or restrictions on trade that are other than tariff rates, e.g.
country if a VER is not established. quotas
5. Boycott -- a government boycott is an absolute restriction against the purchase and 2. Trade-Related Investment Measures (TRIMS) -- established the basic principle that
importation of certain goods from other countries. investment restrictions can be major trade barriers
, → An initial set of prohibited practices included 1) local content requirements specifying Geography -- the study of the earth’s surface, climate, continents, countries, peoples,
that some amount of the value of the investor’s production must be purchased from local industries and resources. – Uncontrollable environment
sources or produced locally; 2) trade balancing requirements specifying that an investor
must export an amount equivalent to some proportion of imports or condition the amount Climate and topography (地势)
of imports permitted on export levels; and 3) foreign exchange balancing requirements 1. the physical terrain ( 地 形 ) and climate of a country are important environmental
limiting the importation of products used in local production by restricting its access to considerations when appraising ( 评估) a market – product adaptation, development of
foreign exchange to an amount related to its exchange inflow. marketing system
2. Altitude, humidity and temperature extremes are climatic features that affect the uses
3. intellectual property -- a non-material asset that can be bought, sold, licensed, exchanged or
and functions of products and equipment.
gradually given away like any other form of property 3. Some countries have preserved physical barriers as protection and have viewed them as
4. Trade-Related Aspects of Intellectual Property Rights (TRIPs) -- establishes substantially political as well as economic statements.
higher standards of protection for a full range of intellectual property rights (patents,
copyrights, trademarks, trade secrets, industrial designs and semiconductor chip mask works) Geography, nature and international trade
than are embodied in current international agreements, and it provides for the effective
enforcement of those standards both internally and at the border. Social responsibility and environmental management
1. century of the environment -- in the early 2000s the environment was considered the
World Trade Organization (WTO) most important issue
1. customs union -- creation of a common external tariff that applies for non-members, the 2. Green activists -- organizations or individuals who actively want to protect the
establishment of a common trade policy and the elimination of rules. environment
2. trade sanctions (贸易制裁) -- stringent penalties imposed on a country by means of import 3. Kyoto agreement -- agreement signed by the EU, Russia and a number of countries,
tariffs or other trade barriers determining the decrease required in pollution over the coming years.
4. activist groups -- people or organizations acting to bring about social, political, economic
International Monetary Fund (IMF) or environmental change, e.g. Greenpeace.
1. International Monetary Fund (IMF) -- To overcome these particular market barriers, which
plagued international trading before the Second World War. Its objectives were the
Resources
stabilisation of foreign exchange rates and the establishment of freely convertible currencies. The availability of minerals and the ability to generate energy are the foundations of modern
2. European Payments Union -- to facilitate multinational payments. technology.
3. special drawing rights (SDRs) -- developed by the IMF to overcome universally floating Energy is necessary to power the machinery of modern production, and to extract and process
exchange rates the resources necessary to produce the goods reflecting economics prosperity (繁荣). The
principal supplements to human energy are animals, wood, fossil fuel, nuclear power, the
Chapter 3 Geography and History: The Foundations of Cultural
ocean’s tides, geothermal power and the sun. Of all the energy sources, petroleum (石油)
Understanding usage is increasing most rapidly because of its versatility (多功能性) and the ease with which
it can be stored and transported.
Culture can be defined as a society’s programme for survival, the accepted basis for
responding to external and internal events. Because of the great disparity in the location of the earth’s resources, there is world trade
between those who do not have all they need and those who have more than they need and
Geography and international markets are willing to sell.
World population trends
