Section 5.1 Governmental Influences on Trade

Government and International business Government policies play a major role in international trade. They affect all aspects of importing and exporting.

Types of government Democracy = a government system in which the nations citizens hold political power. A republic is a kind of democracy; it’s leaders are elected representatives. Democratic political characteristics: Freedom of opinion, expression, press Elections in which voters choose officers of the government Limited terms of elected officials Independent and fair court system Nonpolitical bureaucracy and defense infrastructure Access to the decision making process available to citizens

Totalitarian government Citizens have no influence on the government's policies and laws. Governments control all aspects of life, including attitudes, values and beliefs. Deny religious freedoms.

tHEOCRACY Type of totalitarian government whose leaders claim to be inspired by divine guidance. Leaders rule according to the religious principles of the dominant faith. Citizens of other faith are looked down upon as second class citizens.

Political ENVIRONMENTS A nations values, attitudes, and actions shape the nations political environment. 2 factors that guide government actions: Isolationism= a foreign policy that combines an avoidance of political and military alliances with a policy of economic nationalism and protectionism. Conservative and Liberal Values = attitudes and opinions that shape and guide a nations trade policies.

Conservative vs Liberal Limit government activities Promote private ownership of business Allow market to operate freely Fewer government controls and regulations LIBERAL More government involvement in business Stronger quality and safety regulations Consumer protection

INTERNATIONAL TAXES INCOME TAX SALES TAX EXCISE TAX PAYROLL TAX VALUE ADDED TAX Do American flight attendants pay US federal and state tax on all of their earned income?

ENTERPRISE ZONES BUSINESS TAX RATES ARE LOWER FAVORABLE TAX CREDITS FINANCING INCENTIVES TO PROMOTE ECONOMIC DEVELOPMENT

FREE TRADE Free Trade Zone= a place where people can buy goods from other countries without paying extra taxes. Free Trade Agreement = is a treaty between countries in which the countries agree to not charge taxes, duties or tariffs on goods that they trade.

Political Risk Trade Sanctions Expropriation Economic Nationalism Political Turbulence War

Government Regulation Video https://www.youtube.com/watch?v=sDqGzMdhL1M

Legal influences on trade 5.2 page 115

Legal systems and international business COMMON LAW = a set of laws based on local customs, traditions, and precedent. Gives a judge flexibility to reach a fair and just decision. PRECEDENT = something that precedes or has come before. A judge who follows precedent looks at decisions made by other judges in the past when judging a current case.

Civil law A set of codes based on broad legal principles. It is the basis of law in many countries, including Germany, France, Japan, and Russia. Decisions are made based on codes that have been written over time. Judges in common law systems interpret the laws, whereas in civil systems they apply the civil codes. Judges in civil law countries have less flexibility.

Theocratic law A set of laws based on religious teachings. The law regulates moral behavior, and to a lesser extent, business. The most common form of theocratic law is found in Islamic Law. Islamic Law bans paying or accepting interest on a debt. Therefore doing business with a country such as Saudi Arabia, that is guided by Islamic Law can provide challenges.

Product safety and consumer protection Individual countries have widely different laws regarding consumer protection. Manufacturers must consider the safety of the products that they create. Those injured by unsafe or poorly made goods can sue violators for damages. LIABILITY = is legal responsibility for the financial cost of another persons loses or injuries.

Product liability lawsuit A settlement has been reached in lawsuits filed by three people who had parts of fingers snipped off by Martha Stewart lounge chairs sold at Kmart stores.

Labor laws Minimum wage rates Length of the work week and overtime Hiring, firing, and layoff policies The age at which a person can work The right to form a labor union The right to strike

Labor laws Each government forms its position on labor laws In countries with few or no protective labor laws, businesses may exploit workers

Intellectual property laws INTELLECTUAL PROPERTY = is an original work fixed in a tangible medium of expression that can be copyrighted, patented or trademarked. COPYRIGHT a legal protection of a creators intellectual property or product. (Author, Composer, Publisher, Artist) TRADEMARK a device that legally identifies ownership of a registered brand or trade name. (McDonalds, POLO) PATENT gives an inventor exclusive rights to manufacture, sell or use an invention which can be a new physical product or something that improves an existing product.

Licensing Requirements Multinational companies must comply with licensing requirements of other countries and international organizations when importing and exporting products. A business may need to obtain different types of licenses for different goods and services. 3 issues that must be addressed: Knowing the requirements Meeting the requirements in a cost effective way Successfully completing the paperwork

Resolving Legal disputes Litigation = a legal process used to resolve a dispute through the court system Mediation = a process of intervention between conflicting parties that promotes resolution of their conflict outside the court system. Arbitration = a process to resolve disputes in which each side presents its case to an independent individual, the arbitrator, who makes decisions that are binding.

Globalization / law / labor laws https://www.youtube.com/watch?v=9MpVjxxpExM&list=PL8dPuuaLjXtPNZwz5_o_ 5uirJ8gQXnhEO&index=16