International Marketing - Essay Example

?International Marketing Table of Contents Table of Contents 2 0 Introduction 3 2.0 Distinction and Explanation of Differences between Tariff and Non-Tariff Barriers to Trade 4 3.0 Strategic Options Open to Marketing Firms to Deal with the Problems of Non-Tariff Barriers in Economically Developed and Industrialised Countries 6 4.0 Conclusion 10 References 11 1.0 Introduction Tariff along with non-tariff barriers have an impact on marketing while conducting export and import business. Most governments have the intention to impose these trade barriers so as to restrict imports of certain specific products in their countries. With these trade barriers, the governments tend to reach definite targets related to economies that may encompass protection of local employees, encourage domestic production, enhance revenue, reduce consumption and increase exports. Tariff is a tax which is imposed on imported goods with an intention to increase revenue of domestic industries and protect them. Apart from non-tax barrier, the entire barrier of trade is considered as non-tariff barrier. Both tariff as well as non-tariff barriers may result in creating difficulties for national economies in the long run. In this paper, the distinction between tariff and non-tariff barriers has been elucidated succinctly. The paper also covers in detail the non-tariff barriers faced by a marketing organisation while conducting business with developed and industrialised countries (International Marketing, 2010). 2.0 Distinction and Explanation of Differences between Tariff and Non-Tariff Barriers to Trade Trade barriers are often tariffs and taxes imposed to protect and increase the revenue of local producers. International efforts to eliminate these discriminatory tariffs have been an on-going process for around 50 years. This process is synchronised initially by the General Agreement on Tariffs and Trade (GATT), which is followed by the World Trade Organisation (WTO) and also other nine rounds of the international trade negotiations which govern the current WTO system (Business Link, n.d.). A tariff is a tax which is imposed on foreign goods when they enter a country. It is a tax which is imposed on the imports of commodities into a region and is considered to be among the oldest forms of government intervention in economic activity. This tax is implemented for two reasons which include: i) it provides income for the government, and ii) it develops economic returns to firms as well as improve suppliers of resources towards domestic industry that face competition from foreign imports. Tariff facilitates the income of domestic producers from competition in foreign environment. This protection helps the consumers, who generally pay higher prices for import-competing goods to pay at an economic cost in the domestic environment. Furthermore, it also comes at an economic cost towards the economy through inadequate allocation of resources towards the domestic industry which has been competing for imports (Sumner & Et. Al., n.d.). Non-tariff barrier is a non tax barrier which is imposed by governments in order to support domestic suppliers over foreign suppliers. This type of barrier covers broad range of measures. A few of the measures among these possess a comparatively insignificant trade effects and this may include packaging as well as labelling requirements that may hinder trade but only marginally. Various other non-tariff measures are quotas, restraints, voluntary restraint of export, non-automatic import authorization and trade restraint under Multifiber Arrangement along with variable import. All these have been considered in order to reduce imports and thereby benefit domestic producers (Coughlin & Wood, n.d.). Quota is a restriction specified in either value or physical units while importing the products for a specific period. It is implemented by means of licenses issued to either importers or exporters. It is also related to import from a few countries or from all foreign countries. Voluntary export restraints and Multifiber Arrangement relate to the union between exporting as well as importing countries. They restrict the maximum amount of exports in either value or quantity terms and allows it to be sold within a specific time (Coughlin & Wood, n.d.). Non-automatic import authorisation does not approve to import the products in a free or automatic way. Non-automatic licensing comprises of two categories. When a government approves for import of the products to the importer, it can be represented as discretionary licensing. The second category is that non-automatic import licensing needs the importer in order to reach definite condition which includes minimum performance of the export and the use of imported goods for a specific purpose. Variable import levies are the charges which have been set to balance the price of a product which has been imported with the price rate of domestic charge. A country uses non-tariff barriers while importing exclusive goods or products from a particular country. They do not impose it while importing similar goods or products from the other nations (Coughlin & Wood, n.d.). 3.0 Strategic Options Open to Marketing Firms to Deal with the Problems of Non-Tariff Barriers in Economically Developed and Industrialised Countries In developed countries with the diminishing tariffs, the focus of the makers of trade policy and analysts is turning in the direction of non-tariff barriers. Tackling these barriers create challenges for the analysts due to their complex and diverse nature. The non-tariff barriers also lack available evidence which further makes it more critical. It can be analysed from the data from World Bank as well as UNCTAD (United Nations Conference on Trade and Development) about the affect of liberalisation of non-tariff barriers at an international level. Non-tariff barriers have the ability to generate various economic effects. This barrier instead of protecting the local industry and producers has other objectives. Two other objectives of NTB (Non-Tariff Barriers) are ‘supply-shift effect’ and ‘demand shift effect’. It can be utilised to attain the objective related to social as well as administrative fields by means of handling the external factors. The factors are responsible and have an impact on the global trade of goods, for instance, preventing the extension of harmful disease, i.e. supply-shifting as well as market failures, i.e. demand-shifting. The result of supply-shift is recognised for non-core NTBs and it remains as a specific significance for technical regulations for sanitary and phytosanitary concerns. Demand-shift is related to the outcome of any technical regulations (Fugazza & Maur, 2006). Non tariff barrier plays a significant role while trading in developed countries with advanced economies like that of UK. This type of barrier possesses sensitive cultural and social issues. There are several other non-tariff barriers that may act as an obstacle for trade in the UK. They are standards and conformity, technical regulations, evaluation procedures, misuses of sanitary and phytosanitary measures, inadequate protection of intellectual property rights as well as geographical indicators, unfair subsidies. The other barriers are discriminatory taxation along with other additional fees, unjustified trade defence measures which include anti dumping action, government procurement, quantitative restrictions, custom procedures, non-automatic licensing procedures, barrier to trade in investment as well as services and ad hoc bans along with prohibitions in imports (Business Link, n.d.). The development of trade barriers may be due to several reasons. This may arise either due to poor interpretation or misinterpretation of agreements. The problems and barriers can be solved through formal arrangement as consultation with the trading partner of the UK (Business Link, n.d.). Technical barrier is the technical regulation along with voluntary standard that has been set to exemplify the characteristics of a product, for instance, its shape, design, size, performance and packaging before it enters the market. This measure act as legitimate goals related to public policy such as protection of human health, safety, environment and others. The standards of products as well as technical barriers to trade have an influence on the market access along with export performance of business. This may be expensive and restrict international trade. The World Trade Organisation after an agreement with Technical Barrier to Trade is taking steps in order to prevent such measures so that barriers are not created. The various types of technical barriers are investigated by the OECD (Organisation for Economic Co-operation and Development) which is a non-tariff barrier to trade (OECD, n.d.). Sanitary and phytosanitary measures are relevant to both domestic and imported goods so as to protect human and animal life from the attack of food-borne risk. In order to reach the goals of SPS measures, certain criteria need to be considered that may include the features of final products, its processing, storage and transportation. They may take the form of conformity assessment certificates, import bans, inspections, quarantine requirements and others. While a few of these SPS methods may bring about trade restrictions. According to governments, certain restrictions are essential and appropriate to protect human as well as animal in addition to plant life and health. An Agreement on the Application of Sanitary and Phytosanitary Measures was settled during the Uruguay Round of the Multi Trade Negotiations which was part of the GATT, in which it identified that a country has the right to preserve the measures of SPS for bringing protection to agriculture and population. This agreement entails the marketers to use this measure as a systematic principle and not to consider it as a disguised constraint to trade (Zarrilli, 1999). Anti-dumping represents the action which is taken by the country in opposition to dump imports. When the goods are sold at a value lower than their common value then it may be referred as dumped. The anti dumping measures are taken by the ‘Members of WTO’. This remedy is applied after conducting extensive investigation along with the terms of Anti Dumping Agreement as the material damage of a local industry is caused by a dumped import. The agreement is made with the exporter so that they cannot sell the product below a definite price (Department of Business Innovation and Skills, 2010). Lack of intellectual property rights in a few countries may hurt the export procedure of other nations. Several illegal practices are performed in Gulf countries which may affect the export of European nations. An export subsidy is an extensive barrier while trading in other nations. European nations are extensively subsidising the agricultural sectors by means of export refunds, various intervention measures along with production system (Breaking paper, 1997). Custom procedure is the module that is performed by the official of the UK while importing the goods from other nations. It is done to check whether there is any banned or restricted goods or products and also to charge the tax of the goods. The custom officials check the imported goods from both within the European Union and outside the EU (HM Revenue and Custom, n.d.). The European Commission has employed Market Access Strategy with an intention to remove trade barriers along with investment. The team which has taken an initiative to deal with the barriers are representatives of the UK Trade and Investment, delegation of local European Union as well as businesses. They are extensively taking part in the purging of trade barriers all around the country (Business Link, n.d.). Market Access DataBase (MADB) possesses information related to trade barriers in world wide basis. This database facilitates to check the export scenario by product or country and also helps in identifying such barriers. MADB with European Union government tackle such situation of trade barrier if it takes place (Business Link, n.d.). 4.0 Conclusion With reference to the above reports, it can be concluded that both tariff as well as non-tariff barriers ultimately restrict any business to the foreign country especially in economically developed nations. It has been observed that while exporting and importing products in other countries several non-tariffs barrier arises. This is because government has charged an amount of tax to the goods with the purpose of protecting domestic industries from earning revenue, but ultimately the consumer is paying high price for the products. Developed countries are having huge trade barriers, which hinder the growth of business of other marketers. Due to these barriers and high tax rate, the consumers face problem with inflation as well as high price. It has been observed that World Trade Organisation has taken steps to eliminate barriers of trade around the world. It has also taken an initiative to improve the transparency of international trade by removing all the discrimination related to it. References Breaking paper, 1997. Meaning of Non-Tariff Barrier. Non Tariff Barrier and Disguised Protectionism. [Online] Available at: http://www.cuts-international.org/1997-2.htm [Accessed April 02, 2011]. Business Link, No Date. The European Commission’s Market Access Strategy. Market Access for UK Exporters-Removing Trade Barriers. [Online] Available at: http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1084144292&r.l1=1079717544&r.l2=1087336726&r.l3=1087336842&r.l4=1084140482&r.s=sc&type=RESOURCES [Accessed April 02, 2011]. Business Link, No Date. Non-Tariff Barriers. Marketers Access for UK Exporters Removing Trade Barriers. [Online] Available at: http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1084144292&r.i=1084140630&r.l1=1079717544&r.l2=1087336726&r.l3=1087336842&r.l4=1084140482&r.s=sc&r.t=RESOURCES&type=RESOURCES [Accessed April 02, 2011]. Coughlin, C. C. & Wood, E. G., No Date. Non-Tariff Barriers: Types and Use. An Introduction to Non-Tariff Barriers to Trade. [Online] Available at: http://research.stlouisfed.org/publications/review/89/01/Trade_Jan_Feb1989.pdf [Accessed April 02, 2011]. Department of Business Innovation and Skills, 2010. The Anti Dumping Agreement. Anti-Dumping Anti Subsidies and Countervailing Measures and Safeguards. [Online] Available at: http://webarchive.nationalarchives.gov.uk/+/http://www.berr.gov.uk/whatwedo/europeandtrade/key-trade-issues/anti-dumping-subsidy-safeguards/page27512.html [Accessed April 02, 2011]. Fugazza, M. & Maur, C. J., 2006. Abstract. Non Tariff Barrier In A Non-Tariff World. [Online] Available at: http://www.etsg.org/ETSG2006/papers/Fugazza.PDF [Accessed April 02, 2011]. HM Revenue and Custom, No Date. Customs Procedures For Goods Posted To The UK. Home. [Online] Available at: http://www.hmrc.gov.uk/customs/post/customs-procedures.htm [Accessed April 02, 2011]. International Marketing, 2010. How Tariff And Non-Tariff Barrier Can Affect Your Export. Home. [Online] Available at: http://internationalmarketing.joburl.net/international-marketing-mistakes/how-tariff-and-non-tariff-barriers-can-affect-your-exports/ [Accessed April 02, 2011]. OECD, No Date. Technical Barriers to Trade. Trade and Agriculture Directorate. [Online] Available at: http://www.oecd.org/document/62/0,3343,en_2649_36251006_1842622_1_1_1_1,00.html [Accessed April 02, 2011]. Sumner, D. A. & Et. Al., No Date. Tariffs and Tariff rate Quotas. Tariff and Non-Tariff Barriers to Trade. [Online] Available at: http://www.farmfoundation.org/news/articlefiles/816-sumner.pdf [Accessed April 02, 2011]. Zarrilli, S., 1999. Abstract. WTO Agreement on Sanitary and Phytosanitary Measures: Issues for Developing Countries. [Online] Available at: http://www.ppl.nl/bibliographies/wto/files/3172.pdf [Accessed April 02, 2011]. Read More