© 2014 Routledge, Inc., Taylor and Francis Group. All rights reserved. PowerPoint Presentation Design by Charlie Cook CHAPTER 11 Competing in the Global Economy © Routledge

Learning Outcomes After studying this chapter, you should be able to: 1.Compare and contrast the types of businesses in the global economy 2.Contrast U.S. business ownership and government–business relations with those in the EU, China, and Japan 3.Discuss who benefits and who pays the cost of protectionism 4.Compare and contrast types of trade barriers and explain why they are not always successful 5.Compare and contrast the World Trade Organization (WTO), World Bank, and International Monetary Fund (IMF) 6.Describe the systems of free trade that the EU has in common with the United States 7.Compare and contrast grease payments, bribes, and offsets 8.Define the key terms in this chapter

© Routledge Globalization The integration of national economies into one free-trading global economy allows firms to conduct business in multiple countries without boundaries and with few trade barriers. GlobalizationGlobalization

© Routledge Arguments For and Against Globalization 1.Increases business sales and profits 2.Increase productivity, economies of scale, and lower cost 3.Promotes greater competition 4.Leads to a net increase in jobs 5.Makes more variety of products available 6.Results in lower consumer prices 7.Increases standard of living in other countries 8.Improves human rights 9.Provides technology to improve the environment 1.Increases business sales and profits 2.Increase productivity, economies of scale, and lower cost 3.Promotes greater competition 4.Leads to a net increase in jobs 5.Makes more variety of products available 6.Results in lower consumer prices 7.Increases standard of living in other countries 8.Improves human rights 9.Provides technology to improve the environment 1.Feeds business greed 2.Benefits business; not so for society 3.Helps foreign businesses 4.Outsources jobs to other countries 5.Replaces U.S. products with ones that are foreign-made 6.Lowers wages that aren’t offset by lower prices 7.Exploits employees with low wages and poor working conditions (MNCs) 8.Shows little care for human rights and even exploits them (MNCs) 9.Destroys the environment (MNCs) 1.Feeds business greed 2.Benefits business; not so for society 3.Helps foreign businesses 4.Outsources jobs to other countries 5.Replaces U.S. products with ones that are foreign-made 6.Lowers wages that aren’t offset by lower prices 7.Exploits employees with low wages and poor working conditions (MNCs) 8.Shows little care for human rights and even exploits them (MNCs) 9.Destroys the environment (MNCs) Arguments for Globalization Arguments against Globalization

© Routledge Why Business Has Gone Global

© Routledge Figure 11.2Types of Business in the Global Economy are based primarily in one country but transact business in other countries— imports and exports. conduct business in one country. International Companies Domestic Companies have significant direct investment operations in more than one country. Multinational Companies (MNCs) Increasing Globalization

© Routledge Comparative Political and Economic Systems Types of Primary Political Systems DemocracyDemocracy Single party Military dictatorship

© Routledge Globalization: Political and Economic Issues Human rights Business ownership Free market enterprise Centralized state-control Conflict of interest

© Routledge Issues Affecting Global Business Trade The Politics of International Trade International Business Regulations Free Trade vs. Protectionism Conflicting Laws Between Countries

© Routledge Trade Barriers

© Routledge Trade Surplus and Deficit Trade SurplusTrade Deficit ImportsExports Imports

© Routledge U.S. Trade Policy and Law Executive Branch actions Antidumping/ LTFV protection Temporary relief and safeguards Presidential retaliation Trade Act of 1974: regulating commerce with foreign nations

Effective Global Business Regulations A World Bank study recommended five major steps to effective global business regulation:A World Bank study recommended five major steps to effective global business regulation: 1. Simplify and deregulate competitive market business. 2. Focus on enhancing property rights. 3. Expand the use of technology. 4. Reduce court involvement in business matters. 5. Make reform a continuous process. © Routledge

International Trade Administration Organizations Setting international rules of trade World Trade Organization (WTO) (WTO) World Bank International Monetary Fund (IMF)

© Routledge The European Union (EU) Adoption EU law and alignment of individual member state laws Use of the euro as a common currency in eurozone markets Creation of a central banking system (the ECB) EU Trading Agreement Systems

The United States and Free Trade Agreements North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA)  United States, Canada, and Mexico The Dominican Republic–Central America– United States Free Trade Agreement (CAFTA-DR)The Dominican Republic–Central America– United States Free Trade Agreement (CAFTA-DR)  Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, Dominican Republic and the United States © Routledge

Ethical Issues in International Business

© Routledge The Cost and Consequences of Corruption Costs businesses revenue and efficiency by undermining competition Distorts government allocation of expenditures and its services Discourages the investments needed for economic progress CorruptionCorruption

© Routledge Figure 11.6Law and Organizations that Fight Corruption Foreign Corrupt Practices Act (FCPA) U.S. law making payments to foreign government officials to assist in obtaining or retaining business illegal U.S. Department of Justice (DOJ) Responsible for enforcing FCPA law United Nations Global Compact Has 10 Principles for corporate participants to follow. Organization for Economic Cooperation and Development (OECD) Somewhat like the UN 10 Principles, the OECD has the Guidelines for Multinational Enterprises, which also fosters global business ethics Transparency International (TI) Works so government, politics, business, civil society, and the daily lives of people are free of corruption; measures corruption with three indexes Social Accountability Accreditation Services (SAAS) Gives SA8000 accreditation that certifies compliance with social standards for ethical working conditions

© Routledge Global Codes of Ethics Ethical Imperialism Cultural Relativism Ethical Quandary? Global Codes of Ethics Ethical Impact Statements and Audits

© Routledge Key Terms antidumpingbribes central state control competitive advantage of nations ethical impact statements free enterprise globalization grease payments international company International Monetary Fund (IMF) multinational company (MNC) offsetstariffs trade bans trade deficit trade quotas trade subsidies World Bank World Trade Organization (WTO)