CH 08 Slides Short Version

In 1995 the gatt was superseded by the world trade

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In 1995 the GATT was superseded by the World Trade Organization (WTO), and grew to include 150 member nations. The GATT and WTO presided over the greatest global decline in trade barriers in history. International Business: The New Realities 8-20
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Market Liberalization in China In 1949, China established communism and centralized economic planning. Agriculture and manufacturing were controlled by inefficient state-run industries. The country was long closed to international trade. In the 1980s, China liberalized its economy In 2001, China joined the WTO China is now a key member of world trading system
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Intervention and the Global Financial Crisis The crisis raises new questions about government’s role in business and the world economy. The crisis arose largely from inadequate regulation and enforcement of current regulations in the banking and finance sectors. In response, governments around the world are increasing regulation and examining ways to improve enforcement. International Business: The New Realities
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How Firms Should Respond to Government Intervention Research to gather knowledge and intelligence . Understand trade and investment barriers abroad. Scan the business environment to identify the nature of government intervention. Choose the most appropriate entry strategies . Most firms choose exporting as their initial strategy, but if high tariffs are present, other strategies should be considered, such as licensing, or FDI and JVs that allow the firm to produce directly in the market.
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How Firms Should Respond to Intervention (cont’d) Take advantage of foreign trade zones . FTZs are areas where imports receive preferential tariff treatment, intended to stimulate local economic development. E.g., a successful experiment with FTZs has been the maquilladoras — export- assembly plants in northern Mexico. Seek favorable customs classifications for exported products . Reduce exposure to trade barriers by ensuring that products are classified properly. International Business: The New Realities 8-24
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How Firms Should Respond to Intervention (cont’d) Take advantage of investment incentives and other government support programs . Lobby for freer trade and investment . Increasingly, nations are liberalizing markets in order to create jobs and increase tax revenues. International Business: The New Realities 8-25 Examples The government of Hong Kong put up much of the cash to build the Hong Kong Disney Park. Mercedes-Benz received several hundred million dollars in subsidies to build a plant in the U.S. state of Alabama.
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