Current Issues in International Trade & International Retailing

Instructor: Scott Tuning

Scott has been a faculty member in higher education for over 10 years. He holds an MBA in Management, an MA in counseling, and an M.Div. in Academic Biblical Studies.

International trade an international retailing face a unique set of challenges compared to their domestic-only counterparts. This lesson details some of the WTO's most significant current issues in international commerce.

Purpose of the World Trade Organization (WTO)

Who watches over international commerce to make sure it runs smoothly, predictably and freely as possible? The World Trade Organization (WTO), which is a quasi-authority that provides oversight of international trade rules.

There are, of course, a huge number of issues with which the WTO could contend. However, the WTO has established a few top priorities for the critical or high-frequency issues. Let's look at them now.

Dumping

Dumping is when a foreign trade partner floods a domestic market with goods that are being sold well below the prevailing price in the domestic market. Dumping is a priority concern for the WTO because it disrupts international retailers by artificially manipulating the prices of goods.

This is an important issue because unrestricted dumping can put domestic retailers at a significant disadvantage because they can't offer a competitive price. This is further imbalanced because, in many cases, the reason that the foreign partner is able to produce the good so inexpensively is because they are not subject to the environmental, labor, or regulatory rules that prevail in the domestic marketplace.

For example, consider a dumping complaint that arose between Zenith USA and several Japanese electronics manufacturers. The complaint alleged that the Japanese firms were dumping in an effort to force domestic competitors out of the market. Zenith argued that this would have given them a monopoly, since, if successful, their dumping would lower demand for Zenith's products to the point that they could no longer compete.

Tariffs

A tariff is a special type of tax or assessment on goods that are inbound to a domestic marketplace. In April of 2018, US President Donald Trump announced a significant shift in US trade policy as it relates to tariffs.

His proposal of a substantial tariff increases was based on the opinion of some economists that certain products being imported from the international marketplace, particularly China, were being traded on an extremely unfair playing field. This situation often develops when there is a profound difference in regulatory standards between international trading partners.

In many instances like this, an escalation of tariffs can lead to a trade war in which countries begin an escalating series of high tariffs against the other. This is a priority to the WTO because trade wars rarely have a net positive effect on international trade and the global economy.

Agricultural Protectionism

Of all the WTO priorities we've discussed this far, agricultural protectionism, the act of altering the normal supply-and-demand process, is the most complex in an economic context. There are several reasons why the WTO considers this a top priority:

  • Because many farmers find certain necessary crops unappealing in a profit context, many agricultural producers receive a subsidy from the government. Subsidies alter the normal process of supply and demand.
  • Like other goods, tariffs on agricultural imports can manipulate many aspects of the import/export process.
  • As an industry, agricultural products have a low elasticity of demand. When demand elasticity is low, agricultural producers do not reap substantial benefits from a great economy.

An unintended consequence of agricultural protectionism is that it deals a substantial economic disadvantage to developing nations, since they are not able to quickly bring their crops into the global marketplace.

Agricultural products like fish are one of the highest priorities of the WTO because they do not behave like other industries in terms of economic impact.
Fish Market

Intellectual Property Theft and Counterfeiting

A United States citizen visiting any one of a hundred countries (including China, India, Vietnam, and Mexico) wouldn't have to look very far for intellectual property theft. This type of theft occurs when customers are made to believe they are getting a genuine product when they are not. Another common area of intellectual property theft can be seen in multimedia products like software, movies, and music, which are often copied illegally and then re-sold.

The WTO wants to protect intellectual property like software, music, and movies from unauthorized copying and re-sale.
Software Box

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