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Chapter 2 — The Dynamic Environment of International Trade
Teaching Objectives
This chapter has a short history of international trade. Included is a history of GATT and the role of
multinationals from the end of World War II through the present time and beyond.
The aim of this chapter is to provide a brief overview of the international trade issues that constitute the
environment of global business. Issues reflecting the political and economic trade policies that affect how
international business is conducted. The teaching objectives are to:
1. Provide some insight into the balance of payments and the relationship of a country’s current
account and balance of trade.
2. Show the U.S. government’s role in helping to ease restrictions on trade through the Omnibus
Trade and Competitiveness Act.
3. Explore the provisions and effects of protectionism on world trade and to show that no country,
including the United States, has “clean hands” when it comes to protecting home markets.
4. Illustrate the types of trade barriers that may confront a business.
5. Explore how GATT and the new World Trade Organization are designed to eliminate trade
restrictions and provide a means for countries to settle trade disputes.
6. The importance of the Internet to global business.
Comments and Suggestions
1. The discussion on the evolution of the multinational company during the 21st Century and the decade
of the nineties may be used as an extension of the discussion of Chapter One since it illustrates the
changing role of the U.S. multinational. The focus in this section is how the relative importance of
U.S. MNCs after WW II changed from one of dominating world markets to a more competitive world
market where U.S. multinationals compete with strong multinationals from Japan, Western Europe,
Asia and many developing countries. This competitive environment is forcing MNCs to examine new
ways to remain competitive. Some of these changes will be discussed as the course evolves.
2. Besides the discussion of the concept of protectionism and different trade barriers, a class discussion
on how markets are protected can be interesting. On the one hand the United States alleges to be for
free trade, yet it ignores the WTO in its trade dispute with Japan over opening its markets for a
variety of products and services from America. The U.S. also has trade barriers. See, for example,
Crossing Borders 2–1.
Lecture Outline
GLOBAL BUSINESS ENVIRONMENT
I. The 21st Century
A. World Trade and U.S. Multinationals
B. II. Balance of Payments
A. Current Account
B. Balance of Trade
III. The Omnibus Trade and Competitiveness Act
IV. Protectionism
A. Protection Logic and Illogic
B. Trade Barriers
1. Tariffs
2. Quotas
3. Voluntary Export Restraints
4. Boycott
5. Monetary Barriers
6. Standards
V. Easing Trade Restrictions
A. General Agreement on Tariffs and Trade (GATT)
B. World Trade Organization
C. International Monetary Fund
