International Marketing
Discuss the stages of the research process in relation to the problems encountered. Give examples.
-Define the research problem and establish research objectives. -Determine the sources of information to fulfill the research objectives. -Gather the relevant data from secondary and/or primary sources. -Analyze, interpret, and present the results.
Differentiate among the three international marketing concepts or levels of involvement
1.Domestic Market Expansion Concept (that is, No Direct Foreign Marketing, Infrequent Foreign Marketing, and Regular Foreign Marketing)2. International Marketing (sometimes referred to as multi-domestic marketing) 3. Global Marketing
What are the most common causes of instability in governments? Discuss.
A change in the form of government: - this is the most drastic cause because a "reform" government is often replacing a government which encouraged foreign business A shift in political parties: - The policy of various parties quite often differs concerning restrictions or encouragements of foreign business A rise in feelings of nationalism: -The people may pressure the government or party in control to negatively influence the extent of trade with foreign countries (i.e., "Buy American").
Enumerate the ways in which a nation can overcome an unfavorable balance of trade.
A country can overcome an unfavorable balance of trade by increasing exports or decreasing imports. Temporary aid may also result from infusions of capital, loans, or foreign aid.
Discuss the impact of GATS, TRIMS, AND TRIPS on global trade.
An important objective of the United States in the Uruguay Round was to reduce or eliminate barriers to international trade in services. While there is still much progress to be made before free trade in services will exist throughout the world, the General Agreement on Trade in Services (GATS) is the first multilateral, legally enforceable agreement covering trade and investment in services sector. It provides a legal basis for future negotiations aimed at eliminating barriers that discriminate against foreign services trade and deny them market access. For the first time, comprehensive multilateral disciplines and procedures covering trade and investment in services have been established. Specific market-opening concessions from a wide range of individual countries were achieved and provision was made for continued negotiations to further liberalize telecommunications and financial services.
Suggest some cautions that an individual from a high‑context culture should take when dealing with someone from a low-context culture. Do the same for low- to high-context situations.
An individual from a high‑context culture operating in a low-context culture should be careful about: a. assuming that he has communicated when he has not. b. leaving out major elements of communication. c. depending too much on the spoken word and not enough on writing. d. becoming frustrated by lack of feedback in interpersonal communication. An individual from a low‑context culture operating in a high-context culture should be careful about: a. communicating messages he did not intend. b. becoming frustrated from the imprecision of his counterpart's communication. c. expending too much on reports and letters. d. missing important communication cues.
The telegraph, telephone, television, satellites, computer, the Internet, and mobile phones have all had an effect on how international business operates. Discuss how each of these communications innovations affects international business management.
An underpinning of all commerce is effective communications, knowledge of where goods and services exist and where they are needed and the ability to communicate instantaneously across vast distances. Facilitating the expansion of trade have been continuous improvements in electronic communications. First came the telegraph, then the telephone, television, satellites, the computer and the Internet. Each revolution in electronic technology has had a profound effect on human conditions, economic growth and the manner in which commerce functions. As each "new" communications technology has had its impact, new business models have been spawned and some existing businesses re-invented to adapt to the new technology while other businesses have failed to respond and thus ceased to exist. The Internet revolution will be no different; it too affects human conditions, economic growth, and the manner in which commerce operates. As we will discuss in subsequent chapters, the Internet has already begun to shape how international business is managed. However, as the Internet permeates the fabric of the world's cultures, the biggest changes are yet to come!
Business customs and national customs are closely interrelated. In what way would one expect the two areas to coincide and in what ways would they show differences? How could such areas of similarity and difference be identified?
COINCIDE a. Language used b. Methods of carrying on business must coincide with local customs c. Religious effect d. Political effect 1. Laws 2. Taxes DIFFER a. Subject matter b. Degree of technicalities involved c. Business customs are continually changing—national customs do not d. Business customs cause some change in national customs
Discuss measures a company might take to lessen its political vulnerability.
Companies investing in foreign countries can minimize the political and economic risks by: -Establishing a management of Americans and nationals, -employing nationals, -selling stock in the company to nationals, -sharing the profits and earnings in a fair manner, -understanding the traditions of the people in the host country, -having the national work with you, not for you.
Cultures are dynamic. How do they change? Are there cases where change is not resisted but actually preferred? Explain. What is the relevance to marketing?
Cultures change gradually with resistance to changes. The resistance varies inversely with the interest a society has in the change. Culture doesn't resist change if the product is a status-valued imported item, a fashion item, or is given the advantage of inferior feelings about local products. Marketers can expect resistance to their products, with greater resistance to those products with the greatest deviation from the cultural norm or status quo.
What are the most frequently encountered political risks in foreign business? Discuss.
Expropriation: - the acquisition of a company's property by the host country. The companies may or may not be compensated. Exchange Controls: - used to conserve the supply of foreign exchange. Controls may be levied against foreign companies or types of products. Import Restrictions: - restrictions on the imports of raw material, parts, etc., are employed to induce the foreign industry to purchase its supplies locally. Taxes: - they are sometimes increased despite prior agreements calling for a specific tax rate. Price Controls: - generally applied during inflationary periods to essential products. Labor Problems: - unions may have strong government support which allows special labor concessions from the foreign business. Companies may be forced to abide by rules set up by labor unions through the government.
How do foreign governments encourage investment? Discuss.
Foreign governments encourage foreign investment by offering tax exemptions, protection against competing imports, and unimpeded movement of capital and profits
Why study geography in international marketing?
Geography is a study of the physical characteristics of a particular region of the earth. Involved in this study are climate, topography, and population. The interaction of the physical characteristics is one of the principal determinants of a country's customs, products, industries, needs, and methods of satisfying those needs. Marketing is concerned with satisfying the needs of people. International marketing seeks out the whole world as its marketplace. Therefore, for an international marketer to know how to satisfy the needs of the international market, he must be familiar enough with geography to know what the various causal factors of the people's needs are. He must know that various climates and topographies do exist and that they are vital in shaping the marketing plans that an international marketer must make. As an example, a producer selling machinery in the tropics would have to realize that special protection is needed to keep a machine running properly in hot and humid climates.
Discuss how governmental instability can affect marketing.
Government instability affects marketing because of the risks which are inherent in foreign marketing. Much can be lost if a company invests money in a plant or operation within a foreign country and is later subjected to restrictions, controls, or expropriation by the present or new government.
What are the motives behind U.S. government encouragement for foreign investment? Explain
Governments, both foreign and U.S. encourage foreign investment as well as discourage it. In fact, within the same country some foreign businesses may fall prey to politically induced harassment while others may be placed under a government umbrella of protection and preferential treatment. The difference lies in the evaluation of a company's contribution to the nation's interest. The most important reason to encourage foreign investment is to accelerate the development of an economy. An increasing number of countries are encouraging foreign investment with specific guidelines aimed toward economic goals. Multinational corporations may be expected to create local employment, transfer technology, generate export sales, stimulate growth and development of local industry, conserve foreign exchange, or meet a combination of these expectations as a requirement for market concessions. Recent investments in China, India, and the former republics of the USSR include provisions stipulating specific contributions to economic goals of the country that must be made by foreign investors. The U.S. government is motivated for economic as well as political reasons to encourage American firms to seek business opportunities in countries worldwide, including those that are politically risky. It seeks to create a favorable climate for overseas business by providing the assistance that helps minimize some of the more troublesome politically motivated financial risks of doing business abroad. The Department of Commerce (DOC) http://www.doc.gov/ is the principal agency that supports U.S. business abroad. The International Trade Administration (ITA) http://trade.gov/index.asp, a bureau in the DOC is dedicated to helping U.S. business compete in the global marketplace.
How can the increased interest in international marketing on the part of the U.S. firms be explained?
Increased interest has been brought about because of changing competitive structures, coupled with shifts in demand characteristics throughout the world. The U.S. market has reached saturation levels for many products and services and increasing numbers of firms are faced with surpluses which must be sold. Also, many firms find that return on investment may be higher in foreign markets than in domestic markets. Finally, more and more firms realize that tomorrow's markets will be world markets and it is imperative that they establish world market positions early.
What are intellectual property rights? Why should a company in international marketing take special steps to protect them?
Industrial property rights are rights to the exclusive or limited use of products, processes, designs, formulas, brand names, and trademarks which provide a company with advantages over competitors; i.e., patents, trademarks, and copyrights. Such industrial properties are among the most important assets of a company because they symbolize quality, entice consumers, and have a psychological or intangible quality which is invaluable. Because of this fact and the fact that millions of dollars are spent developing such qualities, the international marketer should take special steps to govern these properties since the rules governing them vary from country to country. Most countries of the world follow a code law principle concerning property rights. That is, rights are established by registration, and the first to register a product is its legal owner. In the United States, the common law principle is observed: prior use established ownership. That is, whoever can establish first use is considered the owner and has legal rights. Obviously, an oversight in understanding these differences may result in much pirating and the loss of property rights, or at least in the loss of a great deal of time, effort, and/or money. Obviously, uniform laws would help since the international marketer must necessarily consider the world as his or her market and should have a means of obtaining worldwide intellectual property rights.
What are some particularly troublesome problems caused by language in foreign marketing? Discuss.
Language poses some difficult problems in foreign marketing not merely because of the obvious differences in tongues, but because the idiomatic expressions or merely clever slogans in English might translate into something different than what the marketer had intended. Examples of this are KFC's "Finger Lickin' Good" which translated in Chinese into "Eat Your Fingers Off," or "Come Alive with Pepsi" slogan translated to "Pepsi Brings your Ancestors Back From the Dead." Or, coming the other direction to the US from global marketers abroad, Electrolux's slogan for its vacuum cleaners translated from Swedish to English as, "Nothing Sucks Like an Electrolux."
"Theoretically, the market is an automatic, competitive, self-regulating mechanism which provides for the maximum consumer welfare and which best regulates the use of the factors of production." Explain.
Productivity and market demand are the determinants of the standard of living differentials throughout the world as determined by the market if (theoretically) free competition exists. However, many variables pollute this "best of all possible worlds" model. Government interference, cartels and other monopolistic practices, and market barriers all corrupt this market (free) system.
Discuss when qualitative research may be more effective than quantitative research.
Qualitative research is more effective than quantitative research when: 1) the researcher seeks open-ended, in‑depth and unstructured responses that reflect the person's thoughts and feelings on a subject. Qualitative research interprets what the " . . . people in the sample are like, their outlooks, their feelings, the dynamic interplay of their feelings and ideas, their attitudes and opinions, and their resulting actions," 2) the researcher wants to formulate and define a problem more clearly and to determine relevant questions to be examine in subsequent research. It can also be used where interest is centered on gaining an understanding of a market, rather than quantifying relevant aspects; 3) the researcher seeks an understanding of the impact of sociocultural factors on behavior patterns and wants to develop research hypothesis that can be tested in subsequent studies designed to quantify the concepts and relevant relationships uncovered in qualitative data collection. Research conducted by Procter & Gamble in Egypt is an example of how qualitative research leads to specific points that can be measured by using survey or quantitative research; and, 4) the respondent has no immediate experience with the product or concept under study and a small sample of carefully selected consumers is sufficient. For example, it is often difficult for respondents to know whether a product, flavor, concept or some other new idea is appealing if they have no experience with the issue being studied. To simply ask in a direct way may result in no response or worse, a response that does not reflect how respondents would react if they had more experience.
Discuss the evolution of world trade that has led to the formulation of the WTO.
Since the inception of GATT, there have been eight "rounds" of intergovernmental tariff negotiations. The most recently completed was the Uruguay round which built on the success of the Tokyo Round, the most comprehensive and far-reaching round undertaken by GATT up to that time. The Tokyo Round resulted in tariff cuts and set new international rules for subsidies and countervailing measures, anti-dumping, government procurement, technical barriers to trade (standards), customs valuation, and import licensing. While the Tokyo Round addressed non-tariff barriers, there were some areas not covered by that round which continued to impede free trade. In addition to market access, there were issues of trade in services, agriculture, and textiles; intellectual property rights; and investment and capital flows.
How does the international marketer determine what legal system will have jurisdiction when legal disputes arise?
Since there is no judicial body to deal with legal problems arising between citizens of different countries, the foreign marketer must look to the legal systems of all the countries involved; that is, the laws of his own country and the laws of the country in which he is conducting business. In general, a U.S. citizen is subject to the laws of the United States as well as to those of any foreign country in which he lives or works. In the case of a conflict, and unless the government of the citizen takes up the citizen's case in an international court, jurisdiction is generally determined (1) on the basis of jurisdictional clauses included in the contract, (2) on the basis of where a contract was entered into, or (3) on the basis of where the provisions of the contract were performed. The jurisdictional clause is the most clear-cut and is usually honored. If there is no such clause or if it is ineffective, either of the other two methods is used.
Social institutions affect marketing in a variety of ways. Discuss, give examples.
Social institutions affect marketing because they regulate the consumer's behavior and attitudes by organizing his activities and teaching him acceptable behavior. Examples of social institutions affecting marketing are the literacy rate as a function of education, the strength of the family unit, and political acceptance or hindrance of marketing activities.
Trade-Related Aspects of Intellectual Property Rights (TRIPs).
The TRIPs agreement establishes substantially higher standards of protection for a full range of intellectual property rights (patents, copyrights, trademarks, trade secrets, industrial designs, and semiconductor chip mask works) than are embodied in current international agreements and it provides for the effective enforcement of those standards both internally and at the border.
Discuss the bases of world trade. Give examples illustrating the different bases.
The basis for world trade is the differences between countries. One of these differences is the difference between people. Different heritages have resulted in the development of certain unique skills in the people of a country. An example would be the watchmaking skill developed by the Swiss. Thus, they have a unique skill on which to base trade. Another difference is the one of differing stages of economic development existing in the world today. Some countries are highly developed and industrialized. These nations, such as the United States and France, might be trading in luxuries, whereas an underdeveloped nation, such as Kenya, might be forced to trade only in essential capital goods. A third difference in countries serving as a basis for world trade is the availability of natural resources. Great Britain, poor in mineral resources, imports petroleum, where West Germany, rich in mineral resources but not food, imports large amounts of fruits and vegetables. Thus, trade is created by these differences: (1) Differences in skills - other countries seek the products of skills, (2) differences in economies - countries seek products they don't produce but need, and (3) differences in national resources - countries buy and sell resources which they do not have or have an abundance of.
Suppose you were requested to prepare a cultural analysis for a potential market, what would you do? Outline the steps and comment briefly on each.
The best procedure for making a cultural analysis for a potential market is to go through each of the elements of culture and evaluate each on the basis of how it could possibly affect a proposed marketing program. Material Culture 1. Technology - the techniques and "know-how" of producing material goods. 2. Economics - the employment of capabilities and the results. Social Institutions 1. Social organizations - family life, status, age. 2. Education - literacy and intelligence and how informed the public is. 3. Political structures - control over business. Person and the Universe 1. Belief systems - how do these affect product and promotional acceptance? Aesthetics 1. Graphic and plastic arts - degree of modernization. 2. Folklore - superstition, tradition, etc. 3. Music, drama, and the dance - promotional possibilities.
Current Account
The current account is important because it includes all international trade and service accounts, i.e., accounts for the value of all merchandise and services imported and exported and all receipts and payment from investments.
Explore the various ways in which business customs can affect the structure of competition.
The customs would affect the structure of competition mainly by determining whether or not there is competition in that country. If the industries are government controlled, then there is obviously no competition. There may be different policies on how competition may occur in different countries. Some countries might have a rigid competition requirement, whereas another could have a quite loose competition requirement.
Discuss the five phases of international marketing involvement.
The first phase includes those domestic firms which have no foreign business activity except those sales made to foreign customers who come directly to the firm. The second phase includes domestic firms which have temporary surpluses which are sold abroad. Therefore, sales are made on an availability basis with little or no intention for continuing market representation. The third phase includes the domestic firms that have permanent productive capacity which is utilized to produce goods which are sold on a continuing basis in at least one foreign market. The fourth phase includes firms that regularly sell and often produce their products in a number of foreign markets, often around the world. The fifth phase includes the international company that produces a product for the world market
"The foreign market researcher must possess three essential capabilities in order to generate meaningful marketing information." Discuss.
The foreign market researcher must possess three essential capabilities in order to generate meaningful marketing information. First, he must possess a high degree of cultural understanding of the market on which he is doing research. In order to analyze, and in some cases, to compensate for research findings, he must understand the customs, viewpoint, semantics, current attitudes, and business customs of a society or a subsegment of a society. Second, the researcher must possess a creative talent in adapting research findings. Unfortunately, the researcher in foreign markets often finds himself "flying by the seat of his pants," and he or she is sometimes called upon to produce results under the most difficult of circumstances. Third, the researcher should be skeptical in handling both primary and secondary data. He might find it necessary to have a newspaper press run checks over a period of time to get accurate circulation figures, or he or she might find it necessary to deflate or inflate reported consumer income in some areas by 25 to 50 percent on the basis of observable socioeconomic characteristics. Frequently, he is the only individual in a business firm capable of making an accurate judgment on the reliability and validity of primary and secondary data sources. These essential capabilities suggest that the foreign market researcher should be either a foreign national or should be advised by someone who can accurately appraise the data collected in light of the local environment, thereby helping to validate secondary as well as primary data.
What is the importance of "cultural empathy" to the foreign marketer? How does he or she acquire "cultural empathy?"
The importance of "cultural empathy" to the foreign marketer is that being culturally sensitive allows him or her to objectively see, evaluate, and appreciate another culture. A marketer can obtain cultural empathy by studying the culture and living with it. The latter is not always possible, and it may be expedient to hire natives who speak your tongue and their own. This procedure will often give you the intuition which is necessary for success.
Discuss the breadth and scope of international marketing research. Why is international marketing research generally broader in scope than domestic marketing research?
The information requirements of foreign market research can be divided into at least three different types. These three types are: (1) general information about the country, area, and/or market, (2) the study of specific information used to solve such problems as advertising, pricing, distribution, and product development in a marketing of specific products, and (3) forecasting future marketing requirements by anticipating social, economic and consumer trends in specific markets or countries. International marketing research is generally broader in scope than domestic marketing research because the foreign marketer must make up for a lack of knowledge which the domestic marketer has gained from years of business experience within a single market. For the foreign marketer, each market is a completely new market, and thus kinds of information which a domestic marketer would be expected to know from his general experience and from having lived within a country must be attained for every new market the foreign marketer enters.
Balance of Trade
The relationship between merchandise imports and exports is referred to as the balance of merchandise trade or trade balance. If a country exports more goods than it imports, it is said to have a favorable balance of trade; if it imports more goods than it exports, as did the United States, it is said to have an unfavorable balance of trade. Usually a country that has a negative balance of trade also has a negative balance of payments. Both the balance of trade and the balance of payments do not have to be negative; at times a country may have a favorable balance of trade and a negative balance of payments or vice versa. This was the case for the United States during the Korean and Vietnam Wars when there was a favorable balance of trade but a negative balance of payments. The imbalance was caused by heavy foreign aid assistance by the United States to other countries and the high cost of conducting the Korean and Vietnam Wars. In only three years since 1970 has the United States had a favorable balance of trade. This means that for each year there was an unfavorable balance, the United States imported goods with a higher dollar value than the goods it exported. These imbalances resulted primarily from heavy U.S. demand for foreign petroleum, foreign cars, industrial machinery, and other merchandise. Such imbalances have drastic effects on balance of trade, balance of payments, and therefore, the value of local currency in the world marketplace.
What is the task of the international market researcher? How is it complicated by the foreign environment?
The task of the international market researcher is to answer questions with current, valid information that a marketer can use to design and implement successful marketing programs. This task is complicated by the foreign environment in the case of secondary data by a lack of collected data or data which have been poorly collected and the reliability of the secondary data available. In many countries, national pride comes before statistical accuracy, and frequently secondary data are opinions rather than fact. Another difficulty with secondary data involves the comparability and currency of available data. Oftentimes, data are not comparable from period to period, nor are they current or collected on a predictable basis.
Discuss the three factors necessary to achieve global awareness.
The three factors necessary to achieve global awareness are: 1) objectivity; objective in assessing opportunities, evaluating potential, and responding to problems. Too often mistakes are made because companies are swept away with generalities and make investments only later to find out that their commitment or abilities were not sufficient to succeed, 2) tolerance toward cultural differences; tolerance is understanding cultural differences and accepting and working with others whose behavior may be different from yours, 3) knowledgeable; knowledgeable about cultures, history, world market potentials, and global economy and social trends is critical for a person to be culturally aware. To be successfully in international business and globally aware, a person needs to keep abreast of the enormous changes occurring throughout the world. The 21st century will usher in great change and opportunities. The knowledgeable marketer will identify those opportunities long before it becomes evident to others.
Compare three decision‑making authority patterns in international business.
The top management decision making is the centralized decision making whereby only the people at the top make the decisions. The reason for this is management's distrust of the ability of the subordinates. The decentralized decision making is the system whereby executives at various levels of the business hierarchy are given rather complete decision-making authority over their own functions. The committee decision-making places great emphasis on group participation, group harmony, and group decision making.
The world population pattern is shifting from rural to urban areas. Discuss the marketing ramifications
There are many marketing ramifications to the world rural-urban population shift. One of the obvious ones is that the world market is becoming more unified in location. Thus, it is becoming easier to reach a larger segment of the market by just marketing in the urban population centers. The types of products marketed will also change with this population shift. For example, food might become a more important product in international marketing with few people raising their own. Similarly, these shifts will result in greater industrialization in countries with presently low levels of industrialization. This again implies marketing changes that might affect the world marketer, increased sales of capital goods, for example. In summary, people living in cities have different needs than those living in the country. Thus, the shift from country to city means that the world marketer has a different market to serve with different characteristics.
Sampling offers some major problems in market research. Discuss.
There are several difficulties encountered in the process of taking samples and conducting field surveys. The greatest problem stems from the lack of adequate detail of universal characteristics and lists from which to draw meaningful samples. If current and reliable lists are not available, sampling becomes much more complex and generally less reliable. In many countries, telephone directories, cross-index street directories, census tract and block data, and detailed social and economic characteristics of the universe are not available on a current basis, if at all. The researcher then has to estimate characteristics and population parameters, sometimes with little basic data on which to build an accurate estimate. To add to the confusion, in some cities in South America, Mexico, and Asia, street maps are unavailable; and in some large metropolitan areas of the Near East and Asia, streets are not identified, and houses are not numbered.
Balance of Payments
When countries trade, financial transactions among businesses/consumers of different nations occur. Products and services are exported and imported, monetary gifts are exchanged, investments are made, cash payments are made, and cash receipts received, and vacation and foreign travel occurs. In short, over a period of time, there is a constant flow of money into and out of a country. The system of accounts that records a nation's international financial transactions is called its balance of payments. A balance-of-payments statement includes three accounts: the current account, a record of all merchandise exports, imports, and services plus unilateral transfers of funds, the capital account, a record of direct investment, portfolio investment, and short-term capital movements to and from countries; and the official reserves account, records of exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks. Of the three, the current account is of primary interest to international business.
Capital Accumulation
a country indeed does increase capital accumulation by imposing tariffs, but this gain is at the expense of other countries and retaliation soon follows which in the end leaves everybody losing, including the original tariff imposer. Therefore, this argument is invalid.
What are the main factors to consider in assessing the dominant political climate within a country?
a. Current form of government. b. Current political party systems. c. Stability and permanency of government policy. d. Risks or encouragements of foreign business resulting from political activity.
Suggest ways in which persons might prepare themselves to handle unique business customs that may be encountered in a trip abroad.
a. Learn all they can about foreign cultures by reading, visiting with foreigners and those who have traveled or lived in the countries he will visit. b. Condition and sensitize oneself by projecting oneself into possible situations and analyzing their learned belief patterns. c. Seek advice from consultants, ambassadors, and others who can provide professional guidance.
Trade-Related Investment Measures (TRIMs)
established the basic principle that investment restrictions can be major trade barriers and therefore are included, for the first time, under GATT procedures. An initial set of specific practices were prohibited including: local content requirements specifying that some amount of the value of the investor's production must be purchased from local sources or produced locally; trade balancing requirements specifying that an investor must export an amount equivalent to some proportion of imports or condition the amount of imports permitted on export levels; and, foreign exchange balancing requirements limiting the importation of products used in local production by restricting its access to foreign exchange to an amount related to its exchange inflow. As a result of TRIMs, restrictions in Indonesia which prohibit foreign firms from opening their own wholesale or retail distribution channels can be challenged. And so, can investment restrictions in Brazil that require foreign-owned manufacturers to buy most of their components from high-cost local suppliers and that affiliates of foreign multinationals maintain a trade surplus in Brazil's favor by exporting more than they sell within.
Subornation
generally involves large sums of money, frequently not properly accounted for, which are designed to entice an official to commit an illegal act of magnitude on behalf of the one paying the bribe.
National Defense
in particular instances there may be merit to this argument, but it becomes invalid if applied indiscriminately. We must trade to get the proper resources and conserve ours. (See #6). If the economy weakens, the military strength weakens. "National Security depends upon many factors, not the least of which is a community of economically healthy nations devoted to living in harmony and tied together by mutually beneficial trade."
Bribery
is money voluntarily offered by someone seeking unlawful advantage. Lubrication payments are a request for a person to do a job more rapidly or more efficiently, whereas subornation is a request for officials to turn their heads, not do their job, or to break the law. An example of extortion would be a Finance Minister of a country demanding heavy payments under the threat that millions of dollars of investment would be confiscated.
Extortion
is payment extracted under duress by someone in authority from a person seeking only what one is lawfully entitled to.
Lubrication
on the other hand, involves a relatively small sum of cash, gift, or service made to a low-ranking official in a country where such offerings are not prohibited by law; the purpose of such a gift being to facilitate or expedite a normal, lawful performance of a duty by an official.
Industrialization of low wage nation
quite pertinent to underdeveloped countries. However, many times the foreign competition isn't the problem, but the paucity of capital and technical knowledge are problems. The danger of tariffs for this argument lies in the fact that the wrong kind of industries will be created. The types of industries which the underdeveloped areas can economically create and maintain are generally those which don't require protection on any large scale because they are based on natural advantages. Again, this argument is valid if it is used very carefully and closely controlled.
Retaliation and bargaining
retaliation doesn't recover the losses that are suffered due to foreign tariffs. Retaliation further reduces the volume of trade. Bargaining as a reciprocal tool; i.e., tariffs are raised and then offered to be lowered if the other countries will lower theirs. If the reciprocal agreement isn't reached, then the tariffs usually remain. These arguments are sometimes a front for other reasons for erecting tariffs. Therefore, most of the time, this argument is invalid.
Conservation of natural resources
tariffs tend to cause extreme dependence on national resources and, therefore, our economy actually depletes its resources more quickly than if free trade existed and other countries bought our resources. Instead of conservation, there is depletion of natural resources; therefore, this argument is invalid.
Infant Industry
theoretically this argument has a considerable degree of validity. However, practically, the argument is carried too far. How do you determine which particular potential industries would develop a comparative advantage and be able to withstand foreign competition? When protection is a mistake, it is difficult to remove the protection. Unless there is a definite timetable, the incentive to develop increasing efficiency is weakened. This argument for tariffs has validity if it is used very carefully and controlled closely.
Protection of the home market
this argument asserts that low costs of production in other countries pauperizes American labor, and foreign goods would flood the American markets. For example, American producers would be forced to lower wage rates approximating foreign wage rates. This argument is invalid because low money wages do not necessarily mean low wage costs per unit of output. The latter is a function of two elements-money wage rates and the productivity of labor. Therefore, since free trade raised productivity rather than lower it, the above argument is invalid.
Maintain employment and reduce
this argument becomes useless upon retaliation of other countries. The problem compounds itself. Also, if countries don't retaliate, there is still a gross inefficient allocation of resources in the tariff-setting country. Alternative policies are available which would relieve unemployment at home while encouraging greater employment abroad and a larger volume of international trade. Therefore, this argument is invalid.
Standard of living and real wage
this argument is parallel to number Capital Accumulation, except that the imposition of tariffs eventually leads to a lower national income and wage level due to retaliation. This argument is self-defeating and invalid.
Keep money at home
this fallacious reasoning is based on the mercantilist identity of money and wealth. A higher volume of money makes no direct contribution to the real income and wealth of a country. If a country is experiencing monetary problems, central bank and fiscal policies are much more potent weapons of monetary control than is manipulation of trade balance. Therefore, this argument is invalid.
Increase business size
with fully employed resources, aggregate domestic production can't be expanded by protective tariffs; expansion in one area of the economy must be at the expense of reduced output in other fields. Tariffs tend to draw resources away from previous employments into protected industries; hence, an inefficient allocation of resources. Also, some of these reallocated resources are likely to be drawn away from production of export goods. Domestic expansion would be at the expense of the export market. Therefore, this argument is invalid
