Dynamic environment of international trade
THESIS DEFENSE PRESENTATION TEMPLATE
Lecturer:
Ilhamova Z.P
Learning objectives
01
The concept of international trade and the factors that make it a dynamic environment.
02
Protectionism as a major barrier in international trade
03
Types of trade barriers
04
The importance of GATT and the World Trade Organization
International trade is the exchange of goods, services, and technologies between companies and countries, carried out to meet market demand, create a competitive advantage, and expand the value chain on a global scale.
We say “the dynamic environment of international trade” because conditions in international trade are constantly in motion: rules, costs, competition, markets, and demand change frequently. As a result, companies cannot rely on a strategy chosen once for the long term—they must continuously adapt.
Trade barriers are constantly changing.
The geography of competition is expanding.
The balance of global economic power is shifting.
The trade system is updated through negotiations and institutions.
Non-tariff barriers
According to Cateora, the term “dynamic environment of international trade” is used for five main reasons
Trade barriers are constantly changing.
*In the European Union, requirements for plastic packaging have been significantly updated.
Previously: the product could be packaged as usual, and the amount of plastic was not a key issue.
Later: recyclable packaging became mandatory, and labeling requirements changed.
As a result, companies from Asia and Latin America exporting to Europe:
switched to new packaging,
obtained additional certificates,
and faced higher costs.
The United States updated its sanitary regulations for imported fruits and vegetables.�Previously, only a standard phytosanitary inspection was required. Later, stricter laboratory testing requirements for pesticide residues were introduced, and additional documentation began to be required.�As a result, some exporters from Africa and South America were unable to meet the new requirements, and their shipments were rejected and sent back from the port.
The geography of competition is expanding.
Previously (1950s–1980s):�Main competitors:
The United States (Ford, GM)
Europe (Volkswagen, BMW)
Japan (Toyota, Honda)
Later:
South Korea (Hyundai, Kia)
China (BYD, Geely, Chery)
Eastern Europe (Czech Republic, Slovakia, Poland — manufacturing bases)
👉 The market center shifted:
Textiles and apparel: Europe/USA → Asia and Africa�Previously, production was concentrated in the United States and Western Europe, with relatively low competition and higher prices.�Later, countries such as Bangladesh, Vietnam, Cambodia, and Ethiopia became major producers.
👉 The geography of competition expanded: new manufacturers entered the market, and the center of production shifted.
The balance of global economic power is shifting.
Shift in the list of major companies (Fortune Global 500)
Previously: the list was dominated mainly by companies from the United States and Europe.
Later: the number of Chinese companies increased sharply, and companies from South Korea, India, and Saudi Arabia also began to appear.
Shifts in GDP share: the United States and Europe → Asia�In the mid-20th century, a large share of global GDP belonged to the United States and Western Europe.�Today, the shares of China, India, and Southeast Asian countries have increased rapidly. The global center of production and consumption is shifting toward Asia.
The “most attractive market” is no longer only the United States or Europe—companies are increasingly viewing Asia as a key strategic market.
Changes in the direction of export–import flows
Previously: trade flows were mainly between the United States ↔ Europe ↔ Japan.
Today:
Asia–Asia trade (e.g., China–ASEAN, Korea–Vietnam) has grown rapidly,
and South–South trade (trade among developing countries) has strengthened.
Non-tariff barriers.
In Japan, the retail distribution system is multi-layered and built on long-term, trust-based relationships. Stores often work with the same suppliers for decades.
An invisible barrier: there is no clause in the law saying “a foreign company cannot enter.” However, for a newly arrived foreign company, it becomes difficult to find a distributor, responses are delayed, and time is lost with phrases like “we’ll look into it later.” The product may be good and the price competitive, but the channel remains closed.
In China, guanxi (personal connections and networks of trust) is very important in business.
An invisible barrier: a contract may exist, but things still do not move forward. A formal agreement is not enough—relationships and trust matter.
If you have a connection with a manager today, the deal works. If that person leaves the position tomorrow, the entire agreement can freeze.
“If trade is so important, how do countries manage or restrict it?”
The impact of protectionism on world trade.
Protectionism is a government policy aimed at protecting domestic producers by restricting the entry of foreign goods and services into the market. These restrictions are implemented through tariffs, quotas, and non-tariff barriers (such as technical standards, sanitary regulations, packaging requirements, and others).
Protectionism does not stop trade, but it makes it more expensive, slower, and more complex (Cateora).
A country introduced a 25% tariff on imported cars.
Imported car price: $20,000
After the tariff: $25,000
Protectionists provide many reasons for restricting trade, and all of them can be grouped into a few main categories.
-protecting new (infant) industries
Types of trade barriers
Tariffs
A tariff—simply put—is a tax imposed by the government on goods entering the country across its borders. Tariffs can be used to generate revenue for the state budget, restrict imports, or achieve both goals at the same time.
In addition, tariffs are often discretionary and discriminatory, and they require continuous administration and enforcement. They are frequently used as a retaliatory measure in response to protectionist actions by trading partners.
For example, in a dispute with the European Union over pasta export subsidies, the United States raised tariffs on European spaghetti and specialty pasta products by 40 percent. The European Union responded with countermeasures against U.S. walnuts and lemons. The “pasta war” continued: Europe increased tariffs on fertilizers, paper products, and tallow imported from the United States, and the United States retaliated in a similar way. This trade conflict ended when Europeans finally eliminated subsidies for pasta exports. Meanwhile, less developed countries are increasingly voicing dissatisfaction with U.S. and European tariffs on agricultural products.
Types of non-tariff trade barriers
Special trade restrictions
Import licensing requirements
Proportionality restrictions that give preference to domestic goods
Local content requirements
Minimum import prices
Embargoes
Customs and administrative entry procedures
Valuation methods
Special documentation requirements
Tariff classification
Documentation requirements
Standards
Incompatibility of standards
Intergovernmental recognition of testing methods
Domestic standards
Packaging, labeling, and marking
Government participation in trade
Government procurement policies
Export subsidies
Domestic subsidies
Quota and import licensing
A quota is a specific quantity or value limit set for a particular type of product. In other words, a quota is a government-imposed limit on how much of a certain product may be imported. The United Kingdom limits the number of imported televisions; Germany has imposed quotas on Japanese ball bearings; Italy restricts Japanese motorcycles; and the United States applies quotas to sugar, textiles, and even peanuts. Quotas place an absolute limit on the amount of a product that can be imported. When Japan initially allowed foreign rice into the country, it did so under a quota system; however, from 2000 onward, quotas were replaced with tariffs.
An import license is a permit granted by the government. Countries often require import licenses as a tool to regulate foreign exchange flows and the quantity of certain imported goods. The main difference between quotas and import licenses in controlling imports is that import licensing is more flexible than quotas. Quotas allow imports until a fixed limit is reached, whereas licensing restricts quantities on a case-by-case basis.
Voluntary export restrictions
There are voluntary export restraints (VERs), which are similar to quotas, as well as orderly marketing agreements (OMAs). Common in the textiles, apparel, steel, agriculture, and automobile industries, these export restraints are agreements between the importing and exporting countries to limit the volume of exports. For many years, Japan had export restraints on car exports to the United States, meaning Japan agreed to export only a specified number of cars each year. When televisions were still being produced in the United States, Japan signed orderly marketing agreements limiting its exports of color televisions to the United States to 1.56 million units per year.
Government boycott
A government boycott is an absolute ban on purchasing and/or importing certain goods and/or services from other countries. Such restrictions may also include travel bans—for example, the current restriction affecting Chinese tourists: the Beijing government refuses to recognize Canada as an approved tourist destination. Officials in Beijing have provided no clear explanation even after three years of Canadian protests and negotiations, but many believe the reason is Canada’s continued criticism of China’s human rights policies.
An embargo is a total or near-total ban on trade between countries. Since 1962, the United States has imposed an almost complete embargo on Cuba, largely prohibiting:
Standards.
This category of non-tariff barriers includes standards aimed at protecting public health, safety, and product quality. Sometimes these standards are applied in an excessively strict or discriminatory way to restrict trade; however, the sheer volume of regulations in this area is itself a problem.
In the Netherlands, imported chicken and duck eggs must be marked with indelible ink indicating the country of origin; in Spain, if imported condensed milk contains less than 8 percent fat, this must be stated on the label; and in the European Union, strict controls were imposed on beef and beef products imported from the United Kingdom due to “mad cow” disease. This list can also include genetically modified food products, which face strong opposition from activists in the European Union and around the world.
Cracker Jack has included a toy prize inside its candy since 1912.�Ferrero (Kinder eggs) made this idea popular worldwide.�Kinder eggs are sold in 37 countries, but not in the United States, because children could swallow the toy inside and choke.
Therefore, in the U.S.:
non-edible toys inside confectionery are prohibited, and
the toy must be large enough.
As a result:
Cracker Jack removed many of its toy prizes,
Nestlé withdrew a similar product from the U.S. market, and
Wonderball is sold only with edible chocolate shapes.
The importance of GATT and the World Trade Organization (WTO).
Soon after World War II, the United States and 22 other countries signed the General Agreement on Tariffs and Trade (GATT). Although not all countries participated, this agreement paved the way for the first effective global tariff arrangement. The initial agreement established a mechanism for reducing tariffs and created a supervisory body to oversee world trade.
In general, the agreement covered the following key principles:
GATT was useful, but it also had shortcomings:
-it covered only trade in goods
-it did not include services
-intellectual property
- its decisions were not legally binding
- stronger countries often had greater advantages.
The World Trade Organization(WTO)
When the Uruguay Round trade agreement was signed in April 1994 in Marrakesh, Morocco, U.S. representatives pushed to greatly broaden the definition of trade issues. As a result, the World Trade Organization (WTO) was created. It incorporates the existing GATT framework and extends it to new areas that had previously been insufficiently covered. The WTO is not an agreement like GATT; it is an institution. It has established numerous rules governing trade among its 148 members, provides panels of experts to examine and resolve trade disputes among members, and—unlike GATT—issues decisions that are binding. For the first time, the WTO requires full participation by all members in all aspects of the existing GATT and the Uruguay Round agreements. With its strengthened status and broader scope, it creates a permanent and comprehensive forum for discussing trade issues in the global marketplace of the twenty-first century.
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