Political and Legal Forces in International Business CHAPTER 5 Wang Shen TFSU

Learning Objectives Problems with the World Trade Organization Political measures affecting international business The two legal systems of the world National trade and investment policies and their effects The risks for international business Ways to cope with the international risks

International Perspective International Organization Concerning Trade and Investment—WTO Globalization and Regionalization International Trade GATT

The Cartoons of WTO

Source: http://www.rightgrrl.com/cartoons/wto.jpg; http://www.cartoonwork.com/archive/socio-economic/WTO.gif; http://www.kirktoons.com/permanent_images/10_wto.jpg; http://www.lrna.org/cartoons/wto.gif; http://www.rfb.it/wto/images/deriva.jpg.

Source: http://content.lib.washington.edu/wtoweb/index.html Note: The protests depicted in this collection took place between November 29, 1999 and December 3, 1999, when the World Trade Organization (WTO) held its ministerial meeting in Seattle.

International Perspective International Political Forces Embargos and economic sanctions Export Control Domestic Policies 1. boycotts 2. antitrust laws 3. anti-bribery 4. anti-corruption regulations 5. labor standard 6. environmental laws

Iraq Under UN sanction

International Perspective Two International Legal Systems The Common Law System The Code Law System Their role in solving international economic disputes

Country Perspective Four Goals of National Policies To stimulate the economic growth To guarantee the full employment To enhance the standard of living To improve the quality of life for its citizens

Country Perspective International Trade and Investment Policies Policy measures restricting/promoting imports/exports Policy measures restricting/promoting the inflows/outflows of foreign direct investments

The U.S. Embargo against Cuba and the Resolution against the US Embargo Source: http://www.toddpnyc.com/bloqueo/main.html; http://www.cubasolidarity.net/blockade.html.

The Exchange Rate of RMB versus the US Dollar Source: http://www.jhfe.com/yjzx/zt/rmb/main/meiyuan.htm; http://news.xinhuanet.com/english/2006-04/06/content_4393135.htm.

Websites for Haier and Huawei Group Source: http://www.haier.com/index.asp; http://www.huawei.com/.

Company Perspective International Risks Political Risks 1. ownership risk 2. operating risk 3. transfer risk Economic Risks Exchange controls, tax policy changes, price controls, restriction in access to local financial, labor, or material markets, value-added and export performance requirements

Company Perspective Cope with International Risks First, international firms should show enough concern for their host countries and their people. Second, international firms should always be cautious of the bilateral political and economic relations between their home nations and host nations. Third, international firms can take out insurance against the international risks they may encounter. Last, international firms can seek to influence government policies by developing coalitions and constituencies and providing input to the trade negotiators of their home countries.

The website for the PRS Group

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