Page 69 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes

Caselet Serving European Community Market

small Canadian firm that has developed some valuable new medical products
using its unique biotechnology knowhow is trying to decide how best to serve
Athe European Community market. Its choices are:

(a) Manufacture the product at home and let foreign sales agents handle marketing.
(b) Manufacture the product at home and set up a wholly-owned subsidiary in Europe
to handle marketing.

(c) Enter into a strategic alliance with a large European pharmaceutical firm. The product
would be manufactured in Europe by the 50/50 joint venture and marketed by the
European firm.
The cost of investment in manufacturing facilities will be a major one for the Canadian
firm, but is not outside its reach. If these are the firm’s only options, which one would you
advise it to choose? Why?

Barriers to International Trade

The government’s interference with international trade, for whatever motivations, creates
barriers to trade. These barriers can be in different forms, but they generally fall into three
distinct categories:

Tariff barriers: Tariffs were originally intended to raise revenues for the government.
However, they are now commonly used as a form of protectionism to restrict imports to
protect domestic industry or to restrict exports to preserve national endowments.
Non-tariff barriers: Non-tariff barriers are restrictions arising from measures such as
licensing, product testing, certifications, procedural hurdles, etc.

Quota restrictions: Quota restrictions mean explicit limit (usually measured by volume
or sometime by value) on the amount of a particular product that can be imported or
exported during a specified time period.

Quotas are a specific form of non-tariff barriers. A quota may be applied on a selective basis,
with varying limits set according to the country of origin. It may also be applied on a global
basis, which only specifies the total limit and thus leads to benefit the more efficient suppliers.

Task Why is there a need to go international? What problems are encountered while
going international?

Self Assessment

Fill in the blanks:
11. ..........................renders the business environment increasingly global even for domestic
firms.
12. A global strategy is one where the company’s approach is mostly the .........................in all
countries.

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