Trade Barriers – An International marketers Minefield

We all know the story about our trade disputes with Japan. Japan has so many trade barriers and high tariffs that US manufacturers are unable to sell in Japan as much as Japanese companies sell in the United States. The Japanese claim that “unique” Japanese snow requires skis made in Japan, and US baseballs are not good enough for Japanese baseball. Even when Japan opened its rice market, the popular California rice had to be mixed and sold with inferior grades of Japanese rice.

However Japan are not alone; every country seems to take advantage of the open US market while putting barriers in the way of US exports. The French for example, protect their film and broadcast industry from foreign competition by limiting the number of American shows that can appear on television, the percentage of American songs broadcast on radio, and the proportion of US movies that can be shown in French theaters. Most recently France launched its own “French” version of CNN with strong government financial support. Not only do these barriers and high tariffs limit how much US companies can sell; they also raise prices for imported products much higher than they sell for in the United States.

Consider the fiscal hazards facing international marketing managers at a company like Neutrogena contemplating exporting its products to Russia. Upon arrival there the firm’s products might be classified by Russian customs officers into any one of three separate categories for the purposes of assigning tariffs; pharmaceuticals at a 5 percent duty, soap at 15 percent, or cosmetics at 20 percent. Of course, Neutrogena managers would argue for the lowest tariff by pointing out that their hypoallergenic soaps are recommended by dermatologists. And, as long as shipments remain relatively small, the customs officers might not argue. However, as export to Russia grew from cartons to container loads, there product classification receives more scrutiny. Simple statements on packaging, such as “Pure Neutrogena skin and hair care products are available at drug stores and cosmetic counters” would give the Russians reason to claim the highest duty of 20 percent.

Barriers to trade, both tariff and non-tariff are one of the major issues confronting international marketers. Fortunately, tariffs generally have been reduced to record lows and substantial progress has been made on eliminating non-tariff barriers. However, nations continue to use trade barriers for a variety of reasons: some rational, some not so rational.

Yesterday’s competitive market battles were fought in western Europe, Japan and the United States; tomorrow’s competitive battles will extend to Latin America, eastern Europe, Russia, China, India, Asia and Africa as these emerging markets continue to open to trade. More of the world’s people, from the richest to the poorest, will participate in the world’s wealth through global trade. The emerging global economy in which we live brings us into worldwide competition with significant advantages for both marketers and consumers. Marketers benefit from new markets opening and smaller markets growing large enough to become viable business opportunities. Consumers benefit by being able to, select from the widest range of goods produced anywhere in the world at the lowest prices.

Bound together by satellite communications and global companies, consumers in every corner of the world are demanding an ever expanding variety of goods. World trade is an important economic activity. Because of this importance, the inclination is for countries to control international trade to their own advantage. As competition intensifies, the tendency towards protectionism gains momentum. If the benefits of the social, political, and economic changes now taking place are to be fully realized, free trade must prevail, throughout the global marketplace. The creation of the World Trade Organization (WTO) is one of the biggest victories for free trade in decades.

United States past and present role in global trade and some concepts important in understanding the relationship between international trade and national economic policy. A discussion of the logic and illogic of protectionism the major impediment to trade, is followed by a review of the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), two multinational agreements designed to advance free trade.