International Trade Case Study

This article that we have chosen is related to international trade. The company that is affected by international trade is Nestle. High levels of lead were found in the Maggi noodles that Nestle India produced, and they are harmful to the human body. Because of this issue, Agri-Food & Veterinary Authority of Singapore (AVA) has suspended Singapore importers from importing Maggi noodles from India. Sales of Maggi noodles in Singapore have also been temporary withheld. In addition, India has banned the manufacturing of Maggi Noodles.

This report will analyse the challenges that Nestle faced, and we will recommend possible remedies for the company to overcome the challenges that they faced. Lastly, we will provide learning points from this article.

Government regulations

Government regulations normally refer to rules enforced by the law or by those that has authority to do so. Government regulations include trade embargoes, import quotas, import duties or taxes and other government regulations. In this case, the challenges that Nestle India faced under government regulations are legal standards of health and trade embargoes.

Trade embargoes and legal standards of health (Other government regulations)

Different country develops different sets of food safety standards, traders are having the effect of “technical barriers to trade” for both importing and exporting countries. Singapore has strict rules and regulations pertaining to food products imported into the country, and more than 90 percent of the food we consume is imported. Thus, Agri-Food and Veterinary Authority of Singapore (AVA) is responsible for ensuring that imported food products are safe for consumption. AVA has a set of uniform criteria or regulations that exporters must fulfil before their goods can be imported into the country. In this case, high contents of lead is found in Maggi manufactured by Nestle India, and these products are imports of Singapore importers. Furthermore, having high levels of lead in food products is harmful to the human body, and it will not satisfy AVA’s regulations. The technical barrier to trade for Nestle India would be the high lead content. A small batch of Maggi was imported into Singapore,

Government regulations

Due to trade embargoes and food contamination, the importer will not accept the goods. To overcome this challenge of non-acceptance of goods, Maggi should engage in taking on various tests, on samples for MSG and level of lead. It should be undertaken in a lab that is reputable globally and some in their own labs as ratification by external experts provide more credibility. Each country will determine what it deems fit for consumption within its borders. As for this case between Singapore and Nestle India, we need to satisfy the AVA’s regulations.

Furthermore, The ICC (International Chamber of commerce) publish uniform rules or practices in conduct if international trade, this could be implemented to alleviate the import and export restrictions.

2. Foreign Exchange risk

Nestle needs to buy and sell in the same currency which is Swiss francs to minimise foreign exchange risk. In addition, Nestles has also purchased currency futures, swaps and options.

If you're exporting, you must decide whether it's best to price your goods or services in the local currency of the country with which you're trading, in this case with