CHAPTER 3 • REGIONAL MARKET CHARACTERISTICS AND PREFERENTIAL TRADE AGREEMENTS 81TABLE 3-4 NAFTA Income and Population2006 GNI(in millions)2006 Population(in thousands)2006GNI per CapitaUnited States $13,386,875 299,398 $44,710Canada 1,196,626 32,649 36,650Mexico 815,841 104,221 7,830Total/Mean GNI per capita $15,399,342 436,268 $35,298**Indicates meanSource: Reprinted by permission of Warren Keegan Associates, Inc.elimination and expanded trade and investment. At present, however, there are no commonexternal tariffs nor have restrictions on labor and other factor movements been eliminated. Theissue of illegal immigration from Mexico into the United States remains a contentious one. Thebenefits of continental free trade will enable all three countries to meet the economic challengesof the decades to come. The gradual elimination of barriers to the flow of goods, services, andinvestment, coupled with strong protection of intellectual property rights (patents, trademarks,and copyrights), will further benefit businesses, workers, farmers, and consumers.The agreement does leave the door open for discretionary protectionism, however. For example,California avocado growers won government protection for a market worth $250 million; Mexicanavocado growers can only ship their fruit to the United States during the winter months, and only tostates in the northeast. Moreover, Mexican avocados are subject to quotas so only $30 million worthof avocados reach the United States each year. Mexican farmer Ricardo Salgado complained, “TheCalifornia growers want to control all of the supply—that way they get the best prices. We’d love tohave a bigger selling season, but right now we have to wait for the U.S. Congress to give us permission.”3 Mexico engages in some protectionism of its own; for example, in 2003, a 98.8 percent tariffwas imposed on chicken leg quarters beyond the first 50,000 metric tons imported. In addition,Mexico imposed a 46.6 percent tariff on red and golden delicious apples.FIGURE 3-2Map of NAFTACountriesCanadaUnited StatesMexico0002000102707406233 Joel Millman, “Bitter Fruit: Spats Persist Despite NAFTA,” The Wall Street Journal (June 19, 2000), p. A23.Global Marketing, Sixth Edition, by Warren J. Keegan and Mark C. Green. Copyright © 2011 by Warren J. Keegan. Published by Prentice Hall.
82 PART 2 • THE GLOBAL MARKETING ENVIRONMENTCULTURE WATCHThe United States and CanadaThe United States and Canada are bound together by manythings, including a trade agreement, a shared border, and acommon language. Still, the two nations do not always see eyeto-eye,as evidenced by various trade-related issues that havearisen in recent years. Take, for example, U.S. exports of itemsrelated to popular culture. On one side is the American entertainmentindustry. Exports of music, print publications, televisionshows, and Hollywood movies all contribute to the U.S. tradesurplus in services. In Canada, policymakers, arts organizations,and cultural activists point with concern to statistics indicatingthat 95 percent of the movies shown in theaters are notCanadian and that 84 percent of the recorded music thatCanadians buy is foreign.Competition is one facet of the issue; Canadians fear thattheir own national industries will not be able to survive the globaljuggernaut originating south of the border. Canadians are alsoconcerned about cultural preservation. In the late 1990s, Arthur C.Eggleton, Canada’s minister for international trade, said, “There isa very strong dominance in the cultural industries of the Canadianmarketplace by the United States. We come at this from the pointof preserving culture and identity, while the U.S. comes at it fromthe standpoint of wanting to do business in our country.”Since the 1960s, Canada has enacted various pieces of legislationthat restrict foreign ownership in the book publishing,telecommunications, and broadcasting industries. There are alsoregulations governing the percentage of Canadian programmingthat is broadcast by radio and television stations. In the negotiationsleading to NAFTA, Canada was successful in excluding cultureindustries from the liberalized trade and investment framework.The issue came to a head in 1995, when Canada’s Parliamentimposed an 80 percent excise tax on advertising in the Canadianedition of Time Warner’s Sport’s Illustrated. The dispute focused onsplit-run magazines, in which the U.S. and Canadian editions arevirtually identical in terms of editorial content but carry differentadvertising. Canadian publishers complained that Time Warner andother U.S. media companies possessed the resources to dominateCanadian culture. The United States took the matter to the WorldTrade Organization; a trade panel ruled that Canada’s actionsviolated international trade agreements. After the initial ruling wasissued, Canada filed an appeal but did not receive a favorableruling. The U.S. trade representative Charlene Barshefsky hailed thedecision, saying it “makes clear WTO rules prevent governmentfrom using ‘culture’ as a pretense for discriminating againstimports.”Despite the WTO’s ruling in this case, France and othernations share Canada’s concerns. OECD member nations haveconducted meetings to discuss a multilateral agreement oninvestment (MAI) that would eliminate barriers to foreign investment;France, Canada, and other nations are seeking to excludecultural industries from the pact. In 1998, Canada convened aconference of 20 culture ministers in Ottawa in the hope of draftinga trade agreement that would ensure that culture industriesreceived special treatment in trade rules. The agreement would benegotiated in Geneva at the World Trade Organization. SheilaCopps, Canadian heritage minister and host of the meeting, saidattendees had agreed to establish a permanent network. In thefuture, she said, steps would be taken so that “culture is nottreated simply like every other commodity.” Copps also notedthat the United States was not invited to take part in the conferencebecause it does not have a culture minister.Sources: Roger Ricklefs, “Canada Fights to Fend Off American Tastesand Tunes,” The Wall Street Journal (September 24, 1998), pp. B1, B8;Anthony DePalma, “Happy 4th of July, Canada!” The New York Times(July 5, 1998), p. 3; Rosanna Tamburri, “Canada to Promote Pact to CurbU.S.’s Cultural Exports,” The Wall Street Journal (June 29, 1998), p. B5;Tamburri, “Canada Considers New Stand Against American Culture,”The Wall Street Journal (February 4, 1998), p. A18; Bernard Simon,“Canada Scrambles to Protect Magazines,” Financial Times (July 2,1997), p. 6; John Urquhart, “Canada Appealing Panel Ruling BackingU.S. Complaints on Magazines,” The Wall Street Journal (March 17,1997), p. B8; Anthony DePalma, “Trade vs. Cultural Identity in Canada,”The New York Times (October 7, 1996), p. D9.LATIN AMERICA: SICA, ANDEAN COMMUNITY, MERCOSUR,CARICOMLatin America includes the Caribbean and Central and South America (because of NAFTA,Mexico is grouped with North America). The allure of the Latin American market has been itsconsiderable size and huge resource base. After a decade of no growth, crippling inflation,increasing foreign debt, protectionism, and bloated government payrolls, the countries of LatinAmerica have begun the process of economic transformation. Balanced budgets are a priorityand privatization is underway. Free markets, open economies, and deregulation have begunto replace the policies of the past. In many countries, tariffs that sometimes reached as much as100 percent or more have been lowered to 10 to 20 percent.000200010270740623Global Marketing, Sixth Edition, by Warren J. Keegan and Mark C. Green. Copyright © 2011 by Warren J. Keegan. Published by Prentice Hall.
Change language