The World Trading Environment

World trading patterns

World trading patterns (cont.)

Top 10 world exporters in merchandise 2009

World trading patterns (cont.)

% change on previous year in real GDP/GNP and consumer prices

The reasons countries trade

How Comparative
Advantage is Achieved
sustained period of
investment
lower labour cost
proximity to raw materials
subsidies to help native
industries
building expertise in
certain key areas

Building National
Advantage (Porter,1990)
factor conditions
demand conditions
related and supporting
industries
firm strategy, structure
and rivalry

Source: Porter (1990) The Competitive Advantage of Nations

Barriers to world trade

Barriers to world trade (cont.)

Barriers to world trade (cont.)

Initiatives from the Bretton Woods
Agreement, 1944
World Bank (IBRD)
Currently 187 member countries
Provides financial and technical help for the development
of poorer countries

International Monetary Fund (IMF)

Provides short-term international liquidity to countries
with Balance of Payments difficulties

World Trade Organization (WTO)

Evolved from GATT (treaty)

Barriers to world trade (cont.)

The WTO promotes trade by:
Working to reduce tariffs
Prohibiting import/export bans and quotas
Eliminating trade discrimination
Eliminating non-tariff barriers

Barriers to world trade (cont.)

The Doha Round

Commenced 2001
Called the development round
+75% of WTO members are developing countries
LDC's face greater barriers than DC's
Key problem areas - textiles & agriculture
Accounting for 70% of LDC exports

Ave.tariff on textiles are 15-20% against 3% on industrialised goods

In EU & US agricultural subsidies = $1 billion per day
6x annual amount spent by them on aid

The Uruguay Round

107 participants
Most complex ever attempted
15 sectors
US$1 trillion of trade

ch2/11

The development of world trading groups

MAJOR CHANGES IN THE SINGLE

EUROPEAN MARKET
Removal of tariff
barriers
Removal of technical
barriers
Public procurement
Free movement of
labour and workers
rights
Opening up of
professions

Financial services
Transport, haulage
and coastal carriage
Company law
Fiscal barriers
The environment

European Monetary Union

STRATEGIC IMPLICATIONS

Price and wage transparency

Consumers can shop for best deals
Exploitation of regional price differences
Pressure on margins

TRADE AREAS

NAFTA: free trade area

US, Canada, Mexico
Worlds richest single market

Mercosur: customs union

Brazil, Paraguay, Uruguay, Venezuela and Argentina

APEC: forum of 21 countries bordering the

Pacific
ASEAN: free trade area (to complete AFTA by 2015?)
-Thailand, Indonesia, Singapore, Brunei, Malaysia,
Philippines, Vietnam, Myanmar, Cambodia and Laos