We all know the story about American trade disputes with Japan. Japan has so many trade barriers and high tariffs that U.S. 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 U.S. 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, the Japanese are not alone; every country seems to take advantage of the open U.S. market while putting barriers in the way of U.S. 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 U.S. 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 U.S. 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 exports to Russia grow from cartons to container loads, the 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 nontariff, 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 nontariff barriers. However, nations continue to use trade barriers for a variety of reasons: some rational, some not so rational.

Questions:

1.         Comment on the rationality of the Japanese Government to restrict the entry of American ski equipment and baseball into Japan.   (6 Marks)

2.         Do you think that the reason for the French to restrict the film and broadcasting industry from unlimited American influence, is primarily to create a non tariff barrier, or is there any other reason behind this move?

(6 Marks)

3.         Do you think that Neutrogena should modify its promotional strategy in the U.S. to qualify for the 5 per cent duty? Explain the pros and cons for such a modification.                                                        (6 Marks)

4.         A frequently used Non Tariff Barriers is ‘Voluntary Export Restraint’ commonly known as ‘VER’. Comment on the significance and use of such a barrier.                                                                      (6 Marks)

5.         The U.S. thinks of itself as a leader of Free Trade and brings actions against nations as unfair trade partners. But critics say that the U.S. is somewhat hypocritical in some of the stands taken, since it is as guilty of protecting its own markets with trade barriers. Are these critics correct? Explain with examples from real life.                               (6 Marks) (6X5=30 Marks)