The General Agreement on Tariffs and Trade (GATT), established in 1947 and modified in 1994, was designed to promote world trade by reducing tariffs and other international trade barriers. It established the World Trade Organization (WTO), which replaced GATT in 1995 and now oversees the original GATT provisions. WTO and GATT member nations (currently numbering 162) have met in eight rounds of negotiations to reassess trade barriers and establish new rules for international trade. The WTO also imposes international trade sanctions and mediates global trade disputes. Its actions have been productive. The first seven rounds of negotiations reduced the average worldwide tariffs on manufactured goods from 45 percent to just 5 percent.8

The most recently completed negotiations, dubbed the Uruguay Round, took a long seven years before concluding in 1994. The benefits of the Uruguay Round will be felt for many years, as the accord promoted long-term global trade growth, reduced the world’s remaining merchandise tariffs by 30 percent, extended the WTO to cover trade in agriculture and a wide range of services, and toughened the international protection of copyrights, patents, trademarks, and other intellectual property. A new round of global WTO trade talks, the Doha Round, began in Doha, Qatar, in late 2001 and was set to conclude in 2005; however, the discussions still continued through 2016. The Doha round covers a gamut of trade issues from intellectual property to agriculture.9

Certain countries have formed free trade zones or ­economic communities. These are groups of nations organized to work toward common goals in the regulation of international trade. One such community is the European Union (EU). Formed in 1957, the EU set out to create a single European market by reducing barriers to the free flow of products, services, finances, and labor among member countries and developing policies on trade with nonmember nations. Today, the EU represents one of the world’s largest single ­markets. Currently, it has 28 member countries containing more than half a billion consumers and accounting for almost 16 percent of the world’s imports and exports.10 The EU offers tremendous trade opportunities for U.S. and other non-European firms.

Over the past decade and a half, 19 EU member nations have adopted the euro as a common currency. Widespread adoption of the euro decreased much of the currency risk associated with doing business in Europe, making member countries with previously weak currencies more attractive markets. However, the adoption of a common currency has also caused problems, as European economic powers such as Germany and France have had to step in recently to prop up weaker economies such as those of Greece, Portugal, and Cyprus. This recent ongoing “euro crisis” has led some analysts to predict the possible breakup of the euro zone as it is now set up.11

It is unlikely that the EU will ever go against 2,000 years of tradition and become the “United States of Europe.” A community with more than two dozen different languages and cultures and a history of sometimes strained relationships will always have difficulty coming together and acting as a single entity. For example, in a 2016 national referendum, the people of the United Kingdom voted to exit the European Union. Although actual British separation from the EU could take many forms and require years of negotiations, the “Brexit” vote sent aftershocks across Europe and the world, raising substantial concerns about the future of European economic and political unity. Still, with a combined annual GDP approaching $20 trillion, the EU remains a potent economic force.12

In 1994, the North American Free Trade Agreement (NAFTA) established a free trade zone among the United States, Mexico, and Canada. The agreement created a single market of 478 million people who produce and consume $20.75 trillion worth of goods and services annually. Over the past 20 years, NAFTA has eliminated trade barriers and investment restrictions among the three countries. Total trade among the NAFTA countries nearly tripled from $288 billion in 1993 to more than $1.1 trillion a year.13

Following the apparent success of NAFTA, in 2005 the Central American Free Trade Agreement (CAFTA-DR) established a free trade zone between the United States and Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. Other free trade areas have formed in Latin America and South America. For example, the Union of South American Nations (UNASUR), modeled after the EU, was formed in 2004 and formalized by a constitutional treaty in 2008. Consisting of 12 countries, UNASUR makes up the largest trading bloc after NAFTA and the EU, with a population of more than 418 million and a combined economy of more than $4.1 trillion. Similar to NAFTA and the EU, UNASUR aims to eliminate all tariffs between nations by 2019.14

Two other major world trade agreements are the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). The recently signed TPP promises to lower trade barrier and increase economic cooperation among twelve Pacific Rim countries: the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The companion TTIP agreement between the United States and the European Union is still under negotiation. These major trade agreements will have a significant and sometimes controversial economic and political impact. For example, the 12 TPP countries have a collective population of 800 million people, nearly double that of the EU, and account for 40 percent of all world trade.15

Each nation has unique features that must be understood. A nation’s readiness for different products and services and its attractiveness as a market to foreign firms depend on its economic, political-legal, and cultural environments.

Sellers must understand the ways that consumers in different countries think about and use certain products before planning a marketing program. There are often surprises. For example, the average French man uses almost twice as many cosmetics and grooming aids as his wife. The Germans and the French eat more packaged, branded spaghetti than Italians do. Some 49 percent of Chinese eat on the way to work. Most American women let down their hair and take off makeup at bedtime, whereas 15 percent of Chinese women style their hair at bedtime and 11 percent put on makeup.19

Companies that violate cultural norms and differences can make some very expensive and embarrassing mistakes. Here are just two examples:20

Nike inadvertently offended Chinese officials when it ran an ad featuring LeBron James crushing a number of culturally revered Chinese figures in a kung fu–themed television ad. The Chinese government found that the ad violated regulations to uphold national dignity and respect the “motherland’s culture” and yanked the multimillion-dollar campaign. With egg on its face, Nike released a formal apology.

Coca-Cola recently stumbled with a Christmas ad posted on Russia’s most popular social media site showing a map of Russia decorated with Christmas trees, snowflakes, and wrapped Christmas presents and the message “Ring in the New Year Together with Coca-Cola.” However, the map didn’t at first include Crimea, which Russia annexed controversially from Ukraine in 2014. When the ad drew strong criticism from Russians, Coca-Cola quickly redrew the map to include the disputed territory, saying, “We apologize . . . the map is fixed.” The new map, of course, set off a new flurry of protest in neighboring Ukraine, where lawmakers called for a boycott of Coke. Coca-Cola finally pulled the offending ad altogether.

Business norms and behaviors also vary from country to country. For example, American executives like to get right down to business and engage in fast and tough face-to-face bargaining. However, Japanese and other Asian businesspeople often find this behavior offensive. They prefer to start with polite conversation, and they rarely say no in face-to-face conversations. As another example, firm handshakes are a common and expected greeting in most Western countries; in some Middle Eastern countries, however, handshakes might be refused if offered. Microsoft founder Bill Gates once set off a flurry of international controversy when he shook the hand of South Korea’s president with his right hand while keeping his left hand in his pocket, something that Koreans consider highly disrespectful. In some countries, when being entertained at a meal, not finishing all the food implies that it was somehow substandard. In other countries, in contrast, wolfing down every last bite might be taken as a mild insult, suggesting that the host didn’t supply enough quantity.21 American business executives need to understand these kinds of cultural nuances before conducting business in another country.

By the same token, companies that understand cultural nuances can use them to their advantage in global markets. For example, when British clothing retailer Marks & Spencer decided to open its first standalone lingerie and beauty store, to the surprise of many it bypassed Paris, London, and New York and instead chose Saudi Arabia. Operating in Saudi Arabia requires some significant but worthwhile cultural adjustments:22

The Saudi retail market is booming, and the country has a fast-growing and affluent consumer class. However, the conservative Islamic kingdom has no end of restrictive cultural and religious rules, especially when it involves retailing to women. In Saudi Arabia, women cover themselves in full-length black cloaks—called abaya—when they go out in public and must have a male chaperone, usually a relative. However, because they typically wear Western clothes at home or when traveling abroad, Western-style fashion stores are still very popular.

When selling to Saudi women, Marks & Spencer must adhere to rigorously enforced religious and cultural strictures. For example, by government decree, its lingerie stores must employ an exclusively female sales staff. Because women’s faces can’t be shown and certain public dress is prohibited, Marks & Spencer uses tamer in-store marketing photos and video displays requiring separate photo shoots. Music is forbidden in Saudi malls and stores, so Marks & Spencer has eliminated the usual background compositions. Thanks to these and many other cultural adaptations, Saudi Arabia has become one of Marks & Spencer’s highest-grossing emerging markets, well worth the additional costs of operating there. Marks & Spencer now has six lingerie and beauty stores in Saudi Arabia along with 16 full department stores. It has even gone so far as to use headless female mannequins to display its lingerie. “Unfortunately,” says one Marks & Spencer marketer, “even the mannequins are not allowed to show faces.”

Thus, understanding cultural traditions, preferences, and behaviors can help companies not only avoid embarrassing mistakes but also take advantage of cross-cultural opportunities.

Whereas marketers worry about the impact of global cultures on their marketing strategies, others may worry about the impact of marketing strategies on global cultures. For ­example, social critics contend that large American multinationals, such as McDonald’s, Coca-Cola, Starbucks, Nike, Google, Disney, and Facebook, aren’t just globalizing their brands; they are Americanizing the world’s cultures. Other elements of American culture have become pervasive worldwide. For instance, more people now study English in China than speak it in the United States. If you assemble businesspeople from Brazil, Germany, and China, they’ll likely transact in English. And the thing that binds the world’s teens together in a kind of global community, notes one observer, “is American culture—the music, the Hollywood fare, the electronic games, Google, Facebook, American consumer brands. The . . . rest of the world is becoming [evermore] like us—in ways good and bad.”23

“Today, globalization often wears Mickey Mouse ears, eats Big Macs, drinks Coke or Pepsi, and does its computing with Windows,” says Thomas Friedman in his book The Lexus and the Olive Tree: Understanding Globalization. “Some Chinese kids’ first English word [is] Mickey,” notes another writer.24

Critics worry that, under such “McDomination,” countries around the globe are losing their individual cultural identities. Teens in Turkey watch MTV, connect with others globally through Facebook and Twitter, and ask their parents for more Westernized clothes and other symbols of American pop culture and values. Grandmothers in small European villas no longer spend each morning visiting local meat, bread, and produce markets to gather the ingredients for dinner. Instead, they now shop at Walmart. Women in Saudi Arabia see American films, question their societal roles, and shop at any of the country’s growing number of Victoria’s Secret boutiques. In China, most people never drank coffee before Starbucks entered the market. Now Chinese consumers rush to Starbucks stores because it symbolizes a new kind of lifestyle. Similarly, in China, where McDonald’s operates more than 80 restaurants in Beijing alone, nearly half of all children identify the chain as a domestic brand.

Such concerns have sometimes led to a backlash against American globalization. Well-known U.S. brands have become the targets of boycotts and protests in some international markets. As symbols of American capitalism, companies such as Coca-Cola, McDonald’s, Nike, and KFC have been singled out by protestors and governments in hot spots around the world, especially when anti-American sentiment peaks. For example, following Russia’s annexation of Crimea and the resulting sanctions by the West, Russian authorities initiated a crackdown on McDonald’s franchises (even though most were Russian-owned), forcing some to close for uncertain reasons. McDonald’s flagship store in Moscow was shut down for several weeks by the Russian Food Safety Authority. And the three McDonald’s in Crimea were permanently shuttered, with at least one becoming a nationalist chain outlet called Rusburger, serving “Czar Cheeseburgers” where Quarter Pounders once flowed.25

Despite such problems, defenders of globalization argue that concerns of Americanization and the potential damage to American brands are overblown. U.S. brands are doing very well internationally. In the most recent Millward Brown BrandZ brand value survey of global consumer brands, 19 of the top 25 global brands were American owned, including megabrands such as Google, Apple, IBM, Microsoft, McDonald’s, Coca-Cola, GE, Amazon.com, and Walmart.26

Many iconic American brands are soaring globally. For example, most international markets covet American fast food. Consider KFC in Japan. On the day that KFC introduced its outrageous Double Down sandwich—bacon, melted cheese, and a “secret sauce” between two deep-fried chicken patties—in one of its restaurants in Japan, fans formed long lines and slept on the sidewalks outside to get a taste. “It was like the iPhone,” says the CMO of KFC International, “people [were] crazy.” The U.S. limited-time item has since become a runaway success worldwide, from Canada to Australia, the Philippines, and Malaysia. More broadly, KFC has become its own cultural institution in Japan. For instance, the brand has long been one of Japan’s leading Christmas dining traditions, with the iconic Colonel Sanders standing in as a kind of Japanese Father Christmas:27

Japan’s KFC Christmas tradition began more than 40 years ago when the company unleashed a “Kentucky for Christmas” advertising campaign in Japan to help the brand get off the ground. Now, eating Kentucky Fried Chicken has become one of the country’s most popular holiday traditions. Each KFC store displays a life-size Colonel Sanders statue, adorned in a traditional fur-trimmed red suit and Santa hat. A month in advance, Japanese customers order their special Christmas meal—a special bucket of fried chicken with wine and cake for about $40. Some 3.6 million Japanese households had a KFC Christmas feast last year. Those who don’t preorder risk standing in lines that snake around the block or having to go without KFC’s coveted blend of 11 herbs and spices altogether. Christmas Eve is KFC’s most successful sales day of the year in Japan, and December monthly sales run as much as 10 times greater than sales in other months.

More fundamentally, the cultural exchange goes both ways: America gets as well as gives cultural influence. True, Hollywood dominates the global movie market, but British TV originated the programming that was Americanized into such hits as House of Cards, Dancing with the Stars, and Hell’s Kitchen. Although Chinese and Russian youth are donning NBA superstar jerseys, the increasing popularity of soccer in America has deep international roots.

Even American childhood has been increasingly influenced by European and Asian cultural imports. Most kids know all about imports such as Hello Kitty, Pokemon, or any of a host of Nintendo or Sega game characters. And J. K. Rowling’s so-very-British Harry Potter books shaped the thinking of a generation of American youngsters, not to mention the millions of American oldsters who fell under their spell as well. For the moment, English remains the dominant language of the internet, and having web and mobile access often means that third-world youth have greater exposure to American popular culture. Yet these same technologies let Eastern European students studying in the United States hear webcast news and music from Poland, Romania, or Belarus.

Thus, globalization is a two-way street. If globalization has Mickey Mouse ears, it is also talking on a Samsung smartphone, buying furniture at IKEA, driving a Toyota Camry, and watching a British-inspired show on a Panasonic OLED TV.