- The Global Trade Environment -

Sandra Creus & Katharina Niehoff

North America

Latin America

Asia-Pacific

Europe

Middle East

Africa

North America

Latin America

Asia-Pacific

Europe

Middle East

Africa

Definitions

• Preferential Trade Agreements: Confers special treatment on

selected trading partners

• Free Trade Area: Two or more countries eliminate tariffs and

other barriers using the „Rules of origin“

• Customs Union: Establishment of common external tariffs

(CETs)

• Common Markets: Free movement of labor, capital and

information

• Economic Union: Coordination and Harmonization of economical

and social policies

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Latin America

Asia-Pacific

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Forms of trade negotiations

• Global agreements like the World Trade Organization (WTO)

• Bilateral arrangements ( USA and Chile)

• Regional arrangements like the Free Trade Area of the Americans (FTAA)

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Latin America

Asia-Pacific

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The World Trade Organization / GATT

• 1947: foundation of the General Agreement on Tariffs and Trade ( GATT)

• GATT should promote trade among members by liberalizing world mercandise trade

•But it had no enforcement power

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Latin America

Asia-Pacific

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The World Trade Organization

• 1.1.1995: Foundation of WTO

• 147 Members meeting annually

• Serve as mediatiors in global trade disputes

• Goal: further reduction of trade barriers

• Can authorize trade sanctions

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North America

• 1988: U.S. – Canada Free Trade Agreement ( CFTA)

• 1992: U.S., Canada & Mexico signed North American Free Trade

Trade Agreement (NAFTA) to promote economic growth through

tariff elimination and expanded trade and investment

But does leave the door open for discretionalry protectionism

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Latin America

Asia-Pacific

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Latin America

• Including Caribbean, Central and South America

• The four most important trading arrangements are:

- Central American Integration System (SICA)

- Andean Community

- Common Market of the South (Mercosur)

- Caribbean Community and Common Market (CARICOM)

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Latin America

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SICA

• 1991: Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica

establish the Contral American Common Market (CACM)

• 1997: With Panama they form the Central American Integration

System (Sistema de la Integración Centroamericana / SICA)

• Headquartered in Guatemala City

• Common rules of origin, freer movement of goods, common external

tariff

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Latin America

Asia-Pacific

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Africa

Andean Community

• Formally Andean Pact

• Formed in 1969 to accelerate development of Venezuela, Colombia,

Ecuador, Peru and Bolivia

• lower tariffs on intra-group trade, foreign goods are kept out,

abolishment of all foreign exchange, financial and fiscal incentives and

export subsidies, common external tariffs lead to a true customs union

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Latin America

Asia-Pacific

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Mercosur

• 1991: Argentina, Brazil, Paraguay and Uruguay formed the Common

Market of the South (Mercado Comun del Sur / Mercosur)

• Internal tariffs were eliminated and Common external tariffs agreed

• There are exceptions caused by a lack of economic and political

discipline and responsibility

• 1996: Chile became an associate member which means a participation

in the free-trade-area but not in the customs union

Today Bolivia is an associate member too.

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Latin America

Asia-Pacific

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CARICOM

• 1965: foundation of Caribbean Free Trade Association (CARIFTA)

• 1973: replacement through the Caribbean Free Trade Association

(Caribbean Community and Common Market / CARICOM)

• 15 members: Antigua, Barbuda, Bahamas, Barbados, Belize,

Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts,

Nevis, St. Lucia, St. Vincent, Grenadines, Trinidad and Tobago

• Aims: deepening the economic integration and create a common

market

• 1991: rules of origin, customs union with common external tariffs

• 1998: economic union with a common currency

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Latin America

Asia-Pacific

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Africa

ASEAN

• Association of Southeast Asian Nations (ASEAN) was founded in

1967 from Brunei, Indonesia, Malaysia, the Philippines, Singapore

and Thailand

• 1995: Vietnam

• 1997: Cambodia and Laos

• 1998: Burma (Myanmar)

• Aim: Organization for economic, political, social and cultural

cooperation

• They are active (individually and collectively) in regional and global

trade (USA, the European Union and China).

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•The WE countries are among the most prosperous in the world.

WESTERN, CENTRAL AND EASTERN EUROPE

The European Union (EU)

• 1958 Treaty of Rome. European Community (6 members).

• Belgium, France, Holland, Italy, Luxembourg and West German

1973 Great Britain, Denmark, and Ireland 1981 Greece 1986 Spain and Portugal

• 1987 EC members created an economic union (single market in goods, services, and capital)

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• Objective: Harmonize national laws and regulations so that goods, services, people and money can flow freely across national boundaries.

• EU Continuous growing: • 1991Czechoslovakia, Hungary and Poland became

associate members (E. Agreements)

• 1995 Finland, Sweden and Austria

• 2004 Cyprus, the Czech Republic, Estonia, Hungary, Poland, Latvia, Lithuania, Malta, the Slovak Republic and Slovenia became full members.

The European Union (EU)

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•Today: 25 nations of EU represents 458million people and a combined GNP of $8.8 trillion.

•Currency:1979-1999 a European Monetary System was create (in form

of checks and electronically in computers).1991 Maastricht Treaty to create an EMU (European central

banc and a single European currency, the Euro)1998 Austria, Belgium, Finland, Ireland, The Netherlands France,

France, Germany, Italy, Luxembourg, Portugal and Spain became the 11 members 2001Greece became the 12th member.2002 those 12 members started to use the Euro

The European Union (EU)

North America

Latin America

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EFTA and EEA

• Since 1991 has conclude more than 20 trade pacts with other nations

• 1991 EFTA reached agreement on the creation of the EEA that began in 1993.

• The ultimate goal is to achieve the free movement of goods, sevices, capital and labor between the two groups.

• EEA is a free trade area, not a customs union with common external tariffs.

EFTA: The European Free Trade Area

EEA: And European Economic Area

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Marketing Issues in the European Union

• The EC establishes directives and sets deadlines for their implementation by legislation in individual nations.

• 1992 Marketing Mix– Developing strategies to make advantage of

opportunities – Corporations – Harmonization of laws and flexibility in the

placement of factories.

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The Lome Convention and the Cotonou Agreement

• EU Maintains an accord with 71 countries in Africa, Caribbean, and the Pacific (ACP)

• The Lome Convention took effect 1975– Designed to promote trade and provide poor countries with

financial assistance from the European Development Fund.

– The have a preferential access to EU (for commodities as sugar, bananas rum and rice)

• The convention expire in 2000

• 2000 they sign new 20-year pact ( Cotonou Agreement)– Cuba wants to become part of them ( better prices for sugar

export ) and also is interested in joining CARICOM.

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Central European Free Trade Association (CEFTA)

• CEFTA, 1992 by Hungary, Poland, Czech Republic and Slovakia. Now Slovenia is also a member.

• They could join to the EU as a group. Meanwhile, within the Commonwealth of Independent State.

• Markets of Central and Eastern Europe present interesting opportunities and challenges (important new source of growth, the direct investment is on the rise, low-cost manufacturing for consumer products, distribution is a critical marketing mix element)

• High degree of standardization of marketing program elements. (Consumer companies: target high-end segments of the market and focus on brand image and product quality. Industrial marketers: opportunities to do business with the largest firms in a given country.)

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Africa

THE MIDDLE EAST

• Includes 16 countries: – Afghanistan, Bahrain, Cyprus, Egypt, Iran, Iraq, Israel, Jordan,

Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, The United Arab Emirates, and Yemen.

• Middle Eastern countries, mostly free, mostly unfree and repress.

• Middle East very different society types• Business is driven by the price of oil

• Disparities contribute to political and social instability in the area

• The repercussions of Americans military action in 2003 continue to be felt throughout the region.

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Cooperation Council for the Arab States of the Gulf

• 1981 Gulf Cooperation Council (GCC) • Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab

Emirates

• Had 45% of the world’s oil reserves/Production 18% of the world oil output.

• Provides a means realizing coordination, integration, and cooperation in all economic, social and cultural affairs.

• Finance an economic cooperation agreement covering investment, petroleum the abolition of customs duties, harmonization of banking regulation and financial and monetary coordination.

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• Coordinate trade development, industrial strategy, agricultural policy, and uniform petroleum policies and prices.

• Current goals include establishing an Arab common market and increasing trade ties with Asia.

• Is part of the three newer regional organizations, GCC, ACC, and AMU, will foster the development of inter Arab trade investment. (21 Member states, constitution of unanimous decisions)

– ACC: Arab Cooperation Council: Egypt, Iraq, Jordan and North Yemen

– AMU: Arab Maghreb Union: Morocco, Algeria, Mauritania, Tunisia, and Libya

Cooperation Council for the Arab States of the Gulf

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Marketing Issues in the Middle East

• Connection is the key in conducting business

• Establishing personal report, mutual trust and respect are essentially the most important factors leading to a successful business relationship.

• Does business with the individual, not with the company and never by correspondence or telephone.

• Women are usually not part of the business or entertainment (Arab male-dominated society).

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AFRICA

• Continent of 11,7 million square miles

• Is not a single economic unit

• 54 nations divided into: The Republic of South Africa, Nord

Africa, and sub-Saharan or Black Africa.

• Average per capita income of less than $600

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ECOWAS(Economic Community of West African States)

• Established in 1975 by 16 states.

• Object: Promoting trade, cooperation and self-reliance in West Africa.

• Members: Benin, Burkina Faso, Cape Verde, Cote D’Ivoire, The Gambia, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Nigeria, Senegal, Sierra Leone, Togo.

• The economies of some of them are still experiencing political conflict and economic decline.

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East African Cooperation

• 1996 Kenya, Uganda, and Tanzania established a mechanism of free trade and economic integration.

• Kenya is the most developed of the three nations.

SADC(Southern African Development Community)

• In 1992 to promote trade, cooperation, and economic integration

• Members: Angola, Botswana, Democratic Republic of Congo (Zaire), Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Seychelles, Swaziland, Tanzania, Zambia, and Zimbabwe. 1994 South Africa.

• It represents 75% of the income / 86% intra-regional exports