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INTERNATIONAL TRADE: 
INSTITUTIONAL BARRIERS AND 
FACILITATORS 
INTERNATIONAL MARKETING 
TEACHER: Juan Conde Revuelta 
MEMBERS: Andrea Aguila 
Stefanie Aguila 
Daniela Restrepo 
Natalia Salazar
OBJECTIVES: 
•Examine trade barriers imposed on international trade and arguments used to 
erect and maintain these barriers. 
•Provide an overview of organizations facilitating international trade directly or 
by promoting economic development. 
•Examine government efforts involved at promoting economic development and 
international trade. 
•Describe trade facilitators such as foreign trade zones, offshore-assembly 
plants, special economic zones and the Most-Favored-Nation Status.
PROTECTIONISM 
All actions by national and local 
governments aimed at protecting 
local markets from foreign 
competitors.
Chapter 3   international marketing
ARGUMENTS FOR PROTECTIONISM 
Countless reasons to maintain government restrictions on trade are given as a 
reason by protectionists, but essentially all arguments can be classified as 
follows: 
1) Protection of markets with excess productive capacity 
2) Employment protection and Protection of markets with excess labor. 
3) Infant industry arguments and Arguments related to the 
industrialization of developing countries. 
4) Natural resources conservation and Protection of the environment. 
5) Protection of consumers. 
6) National Defence Interests.
Chapter 3   international marketing
● PROTECTION OF MARKETS WITH EXCESS OF PRODUCTIVE 
CAPACITY 
The excess production capacity of some industries is rooted in local 
government protectionism in the new industries and reliance on the 
conventional industries. 
● PROTECTION OF MARKETS WITH EXCESS LABOR 
The erection of barriers to imports of products competing with local offerings in 
an effort to protect local jobs.
EMPLOYMENT PROTECTION 
Protection of local employment by not granting import licenses for products 
competing with similar locally produced goods. 
INFANT INDUSTRY ARGUMENTS 
A protectionist strategy aimed at protecting a national industry in its infancy 
from powerful international competitors.
PROTECTION OF THE ENVIRONMENT 
Environmental protection is a practice of protecting the natural environment on 
individual, organizational or governmental levels, for the benefit of both the 
natural environment and humans. 
PROTECTION OF CONSUMERS 
Consumer protection is a group of laws and organizations designed to ensure 
the rights of consumers as well as fair trade, competition and accurate 
information in the marketplace. 
The laws are designed to prevent businesses that engage in fraud or specified 
unfair practices from gaining an advantage over competitors. They may also 
provide additional protection for those most vulnerable in society.
TOOLS OF GOVERNMENT 
PROTECTIONISM 
TARIFFS 
● Discourage imports of particular goods 
● Protect local industry 
● Penalize countries that are not politically aligned with the importing country 
● Generate revenues for the importing country 
● US tariffs < 15% 
● Other countries can impose tariffs > 100% for protected products
NON TARIFF BARRIERS 
Measures, other than traditional tariffs, that are used to distort international 
trade flows. 
-Raise prices of both imports and import-competing goods 
-Favor domestic over foreign supply sources by causing importers to charge 
higher prices and to restrict import volumes 
-Examples: 
•Orderly market arrangements 
•Voluntary import expansion 
•Voluntary export restraints
IMPORT QUOTAS 
● Specify maximum quantity (unit limit) or value of a product that may be 
imported during a specified period. 
● Administered either on a global first-come, first-served basis or on a 
bilateral basis to restrict shipments from a specific supply source.
LICENSES 
•Non-automatic import licenses 
Restrict volume and/or quantity of imports 
•Automatic import licenses 
Granted freely to importing companies 
Facilitate import surveillance 
Discourage import surges 
Place administrative and financial burdens on importer 
May raise costs by delaying shipments
VOLUNTARY IMPORT EXPANSION 
● Voluntary Import Expansion: 
A government’s response to the protectionist threats. 
It agrees: 
1. Open the market to imports. 
2. Increase foreign access to a domestic market. 
3. Increase competition and reduces prices.
Voluntary Export Restraints - Price Controls: 
Increasing Prices of Imports 
● Voluntary Export Restraints: 
A government’s self-imposed export quotas to a particular country. 
1. To avoid more severe protectionist action. 
2. To protect local industries. 
● Price Controls: Increasing Prices of Imports: 
Strategy to sell for a particular price in local market. 
1. To increase the prices of imports.
Price Controls: Antidumping and 
Countervailing Duty Actions 
● Antidumping: To offset dumping. 
● Countervailing duty actions: Result of foreign subsidies. 
1. Protect the local market. 
2. restrict trade.
Price Controls: Paratariff Measures 
● Paratariff measures: 
Additional fees that increase the cost of imports. 
Such as: 
Advance import deposits 
Import charges 
Seasonal tariffs and customs charges 
Mainly imposed by highly industrialized countries.
Standards: As a Barrier to Trade - Local 
Content Requirements and Foreign Ownership 
● Standards: As a barrier to trade: 
Imposes performance, environmental, or other requirement that are 
primarily aimed imports. 
1. Help local and international industry. 
● Percentage Requirements: 
A percentage of the products imported are locally produced. 
1. Local content requirement. 
2. Limit foreign ownership.
Boycott - Embargo - Sanctions 
● Boycott: 
Action calling for a ban on consumption all goods. 
● Embargo: 
Prohibiting all business deals with the target country. 
● Sanctions 
Punitive trade restrictions applied for noncompliance.
Currency and Capital Flow Controls 
● Capital Flow: 
1. Affect international businesses. 
2. Restrict market dictated activity in the name of protectionism. 
● Currency Flow: 
1. To influence the stability of national currency. 
2. Affect the flow of imports into the country .
Currency and Capital Flow Controls 
Among the currency controls used by governments we can find the 
following : 
● Blocked Currency: 
Does not allow importers to exchange of local currency or a currency 
that the seller is willing to accept as payment. 
1. It can be used as a political weapon. 
2. Create obstacles for international businesses attempting to enter 
the country.
Currency and Capital Flow Controls 
● Differential Exchange Rates: 
1. To promote imports of desirable and necessary goods. 
2. It can be the difference between the black market exchange rate 
and the official government rate. 
● Foreign Exchange Permit: 
1. Such permits are provided by the central bank of the country. 
2. Give priority to imports of goods that are in the national interest.
International Trade and Trade Facilitators 
Severals important international and local institutions play an active role 
in promote international trade and have a considerable impact on the 
development of international trade and marketing operations. 
● To increase the flow of good. 
● Open access to products and services. 
● To minimize cost to companies and final consumers.
The International Trade Imperative 
Free Trade is essential to the economic development. 
Arguments for: 
● Economist David Ricardo’s theory comparative advantage. 
Free Trade = Benefits for all countries. 
● Free trade suggest that opening up the home market: 
1. Increase competition. 
2. Reduction of prices to local consumers. 
Free Trade = Economic Growth.
International Trade and 
Economic Development 
Organizations
The General Agreement on Tariffs and 
Trade 
- It is a multilateral agreement regulating international 
trade. 
- It was signed by 124 nations. 
- Promote trade. 
- Eliminate barriers. 
- Open markets.
The World Trade Organization 
- It is the only global international organization. 
- Intends to supervise and liberalize international trade. 
- It is run by its member governments.
Group of Eight 
- It is a group leading industrialised 
countries. 
- The members are: Canada, France, 
Germany, Italy, Japan, the United 
Kingdom, the United States and 
Russia. 
- The group addresses issues.
The International Monetary Fund 
- It is an organization of 188 countries. 
- Foster global growth 
- Economic stability 
- Reduces poverty
World Bank 
- It is an financial and technical 
assistance. 
- Unique partnership to reduce poverty. 
- Comprises five institutions managed 
by their member countries.
Other Development Banks 
The African 
Development Bank 
The Asian 
Development Bank 
Poverty reduction 
in Africa 
Focuses on the 
private sector
Other Development Banks 
The European Bank 
for Reconstruction and 
Development 
The Inter-American 
Development Bank 
Reforming and 
strengthening 
markets 
Clients companies that do 
not ordinarily deal with the 
large development bank
United Nations Organizations 
- It is an intergovernmental 
organization. 
- Maintain international peace and 
security. 
- Achieve international cooperation in 
solving international economic
GOVERNMENT ORGANIZATIONS 
Promoting international trade constitutes one of the more important tasks of the 
national and local governments of most countries. 
Regardless of the level of country economic development, most international 
trade issues are addressed by the national Department of Commerce, known 
as the Ministry of Trade. 
Frequently, the Ministry of trade works in tandem with the State Department, 
known as the Ministry of Foreign Affairs which promotes the respective 
country’s foreign policy.
United States Agencies: Federal and State 
Government 
Many United States Federal, state, and local government agencies promote the 
interests of U.S. businesses abroad, encouraging their international involvement 
in the form of export promotion or by providing foreign direct investment support. 
They also actively encourage foreign direct investment in the United States. 
United States Agency for International Development (USAID): is an 
independent agency of the federal government. USAID engages in economic 
development-related operations. unlike the development organizations 
previously discussed, is an arm of the United States Department of State.
United States Agencies: Federal and State 
Government 
United States Department of Commerce: engages in many activities that 
promote trade. It offers export assistance and counseling to businesses 
involved in international trade, provides country information and the assistance 
of country specialists, and helps bring buyers and sellers together through 
trade shows and other trade-related events. 
The department of Commerce also regulates trade by issuing export licenses 
and by offering food, health, and safety inspections and certification.
United States Agencies: Federal and State 
Government 
An example of government agencies that actively support international trade is 
the state economic development offices. Most of the 50 U.S. states have a 
department whose goal is to promote local firms internationally; this is typically 
the Department of Economic Development. 
Among the trade services that state governments provide often free of charge 
are export counseling, full or partial sponsoring of trade promotion (primarily 
trade shows), and dissemination of market information. 
State and local governments also actively attempt to promote international 
business. 
for example, the state of South Carolina was able to draw substantial 
investments from noteworthy international firms such as Michelin, Fuji, BMW.
Other institutions and Procedures 
Facilitating International Trade 
Foreign Trade Zones 
A foreign trade zone, is a tax-free area in a particular country that is not 
considered part of the respective country in terms of import regulations and 
restrictions. 
An FTZ is a site within a particular country that is considered to be an 
international area; merchandise in the FTZ, both foreign and domestic, without 
outside the jurisdiction of the host country’s customs services.
The international firm operating in the FTZ 
benefits from the following: 
● Foreign goods that enter the foreign trade zone are exempt from the usual 
customs duties, tariffs, and other import controls as long as the goods do 
not enter the country. 
● An FTZ lowers prices for goods sold in the importing country: 
Unassembled goods are cheaper to transport, and duties are assessed at 
lower rates for unassembled, than for assembled, goods.
VIDEO: Exposing the Myth of 
Economic Protectionism 
https://www.youtube.com/watch?v=9DoBnoMR 
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Chapter 3 international marketing

  • 1. INTERNATIONAL TRADE: INSTITUTIONAL BARRIERS AND FACILITATORS INTERNATIONAL MARKETING TEACHER: Juan Conde Revuelta MEMBERS: Andrea Aguila Stefanie Aguila Daniela Restrepo Natalia Salazar
  • 2. OBJECTIVES: •Examine trade barriers imposed on international trade and arguments used to erect and maintain these barriers. •Provide an overview of organizations facilitating international trade directly or by promoting economic development. •Examine government efforts involved at promoting economic development and international trade. •Describe trade facilitators such as foreign trade zones, offshore-assembly plants, special economic zones and the Most-Favored-Nation Status.
  • 3. PROTECTIONISM All actions by national and local governments aimed at protecting local markets from foreign competitors.
  • 5. ARGUMENTS FOR PROTECTIONISM Countless reasons to maintain government restrictions on trade are given as a reason by protectionists, but essentially all arguments can be classified as follows: 1) Protection of markets with excess productive capacity 2) Employment protection and Protection of markets with excess labor. 3) Infant industry arguments and Arguments related to the industrialization of developing countries. 4) Natural resources conservation and Protection of the environment. 5) Protection of consumers. 6) National Defence Interests.
  • 7. ● PROTECTION OF MARKETS WITH EXCESS OF PRODUCTIVE CAPACITY The excess production capacity of some industries is rooted in local government protectionism in the new industries and reliance on the conventional industries. ● PROTECTION OF MARKETS WITH EXCESS LABOR The erection of barriers to imports of products competing with local offerings in an effort to protect local jobs.
  • 8. EMPLOYMENT PROTECTION Protection of local employment by not granting import licenses for products competing with similar locally produced goods. INFANT INDUSTRY ARGUMENTS A protectionist strategy aimed at protecting a national industry in its infancy from powerful international competitors.
  • 9. PROTECTION OF THE ENVIRONMENT Environmental protection is a practice of protecting the natural environment on individual, organizational or governmental levels, for the benefit of both the natural environment and humans. PROTECTION OF CONSUMERS Consumer protection is a group of laws and organizations designed to ensure the rights of consumers as well as fair trade, competition and accurate information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors. They may also provide additional protection for those most vulnerable in society.
  • 10. TOOLS OF GOVERNMENT PROTECTIONISM TARIFFS ● Discourage imports of particular goods ● Protect local industry ● Penalize countries that are not politically aligned with the importing country ● Generate revenues for the importing country ● US tariffs < 15% ● Other countries can impose tariffs > 100% for protected products
  • 11. NON TARIFF BARRIERS Measures, other than traditional tariffs, that are used to distort international trade flows. -Raise prices of both imports and import-competing goods -Favor domestic over foreign supply sources by causing importers to charge higher prices and to restrict import volumes -Examples: •Orderly market arrangements •Voluntary import expansion •Voluntary export restraints
  • 12. IMPORT QUOTAS ● Specify maximum quantity (unit limit) or value of a product that may be imported during a specified period. ● Administered either on a global first-come, first-served basis or on a bilateral basis to restrict shipments from a specific supply source.
  • 13. LICENSES •Non-automatic import licenses Restrict volume and/or quantity of imports •Automatic import licenses Granted freely to importing companies Facilitate import surveillance Discourage import surges Place administrative and financial burdens on importer May raise costs by delaying shipments
  • 14. VOLUNTARY IMPORT EXPANSION ● Voluntary Import Expansion: A government’s response to the protectionist threats. It agrees: 1. Open the market to imports. 2. Increase foreign access to a domestic market. 3. Increase competition and reduces prices.
  • 15. Voluntary Export Restraints - Price Controls: Increasing Prices of Imports ● Voluntary Export Restraints: A government’s self-imposed export quotas to a particular country. 1. To avoid more severe protectionist action. 2. To protect local industries. ● Price Controls: Increasing Prices of Imports: Strategy to sell for a particular price in local market. 1. To increase the prices of imports.
  • 16. Price Controls: Antidumping and Countervailing Duty Actions ● Antidumping: To offset dumping. ● Countervailing duty actions: Result of foreign subsidies. 1. Protect the local market. 2. restrict trade.
  • 17. Price Controls: Paratariff Measures ● Paratariff measures: Additional fees that increase the cost of imports. Such as: Advance import deposits Import charges Seasonal tariffs and customs charges Mainly imposed by highly industrialized countries.
  • 18. Standards: As a Barrier to Trade - Local Content Requirements and Foreign Ownership ● Standards: As a barrier to trade: Imposes performance, environmental, or other requirement that are primarily aimed imports. 1. Help local and international industry. ● Percentage Requirements: A percentage of the products imported are locally produced. 1. Local content requirement. 2. Limit foreign ownership.
  • 19. Boycott - Embargo - Sanctions ● Boycott: Action calling for a ban on consumption all goods. ● Embargo: Prohibiting all business deals with the target country. ● Sanctions Punitive trade restrictions applied for noncompliance.
  • 20. Currency and Capital Flow Controls ● Capital Flow: 1. Affect international businesses. 2. Restrict market dictated activity in the name of protectionism. ● Currency Flow: 1. To influence the stability of national currency. 2. Affect the flow of imports into the country .
  • 21. Currency and Capital Flow Controls Among the currency controls used by governments we can find the following : ● Blocked Currency: Does not allow importers to exchange of local currency or a currency that the seller is willing to accept as payment. 1. It can be used as a political weapon. 2. Create obstacles for international businesses attempting to enter the country.
  • 22. Currency and Capital Flow Controls ● Differential Exchange Rates: 1. To promote imports of desirable and necessary goods. 2. It can be the difference between the black market exchange rate and the official government rate. ● Foreign Exchange Permit: 1. Such permits are provided by the central bank of the country. 2. Give priority to imports of goods that are in the national interest.
  • 23. International Trade and Trade Facilitators Severals important international and local institutions play an active role in promote international trade and have a considerable impact on the development of international trade and marketing operations. ● To increase the flow of good. ● Open access to products and services. ● To minimize cost to companies and final consumers.
  • 24. The International Trade Imperative Free Trade is essential to the economic development. Arguments for: ● Economist David Ricardo’s theory comparative advantage. Free Trade = Benefits for all countries. ● Free trade suggest that opening up the home market: 1. Increase competition. 2. Reduction of prices to local consumers. Free Trade = Economic Growth.
  • 25. International Trade and Economic Development Organizations
  • 26. The General Agreement on Tariffs and Trade - It is a multilateral agreement regulating international trade. - It was signed by 124 nations. - Promote trade. - Eliminate barriers. - Open markets.
  • 27. The World Trade Organization - It is the only global international organization. - Intends to supervise and liberalize international trade. - It is run by its member governments.
  • 28. Group of Eight - It is a group leading industrialised countries. - The members are: Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and Russia. - The group addresses issues.
  • 29. The International Monetary Fund - It is an organization of 188 countries. - Foster global growth - Economic stability - Reduces poverty
  • 30. World Bank - It is an financial and technical assistance. - Unique partnership to reduce poverty. - Comprises five institutions managed by their member countries.
  • 31. Other Development Banks The African Development Bank The Asian Development Bank Poverty reduction in Africa Focuses on the private sector
  • 32. Other Development Banks The European Bank for Reconstruction and Development The Inter-American Development Bank Reforming and strengthening markets Clients companies that do not ordinarily deal with the large development bank
  • 33. United Nations Organizations - It is an intergovernmental organization. - Maintain international peace and security. - Achieve international cooperation in solving international economic
  • 34. GOVERNMENT ORGANIZATIONS Promoting international trade constitutes one of the more important tasks of the national and local governments of most countries. Regardless of the level of country economic development, most international trade issues are addressed by the national Department of Commerce, known as the Ministry of Trade. Frequently, the Ministry of trade works in tandem with the State Department, known as the Ministry of Foreign Affairs which promotes the respective country’s foreign policy.
  • 35. United States Agencies: Federal and State Government Many United States Federal, state, and local government agencies promote the interests of U.S. businesses abroad, encouraging their international involvement in the form of export promotion or by providing foreign direct investment support. They also actively encourage foreign direct investment in the United States. United States Agency for International Development (USAID): is an independent agency of the federal government. USAID engages in economic development-related operations. unlike the development organizations previously discussed, is an arm of the United States Department of State.
  • 36. United States Agencies: Federal and State Government United States Department of Commerce: engages in many activities that promote trade. It offers export assistance and counseling to businesses involved in international trade, provides country information and the assistance of country specialists, and helps bring buyers and sellers together through trade shows and other trade-related events. The department of Commerce also regulates trade by issuing export licenses and by offering food, health, and safety inspections and certification.
  • 37. United States Agencies: Federal and State Government An example of government agencies that actively support international trade is the state economic development offices. Most of the 50 U.S. states have a department whose goal is to promote local firms internationally; this is typically the Department of Economic Development. Among the trade services that state governments provide often free of charge are export counseling, full or partial sponsoring of trade promotion (primarily trade shows), and dissemination of market information. State and local governments also actively attempt to promote international business. for example, the state of South Carolina was able to draw substantial investments from noteworthy international firms such as Michelin, Fuji, BMW.
  • 38. Other institutions and Procedures Facilitating International Trade Foreign Trade Zones A foreign trade zone, is a tax-free area in a particular country that is not considered part of the respective country in terms of import regulations and restrictions. An FTZ is a site within a particular country that is considered to be an international area; merchandise in the FTZ, both foreign and domestic, without outside the jurisdiction of the host country’s customs services.
  • 39. The international firm operating in the FTZ benefits from the following: ● Foreign goods that enter the foreign trade zone are exempt from the usual customs duties, tariffs, and other import controls as long as the goods do not enter the country. ● An FTZ lowers prices for goods sold in the importing country: Unassembled goods are cheaper to transport, and duties are assessed at lower rates for unassembled, than for assembled, goods.
  • 40. VIDEO: Exposing the Myth of Economic Protectionism https://www.youtube.com/watch?v=9DoBnoMR o3Q