Chapter McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. 18 International Law

18-2 International Trade Factors  Treaties/Agreements  Each Country Wants To Make Its Goods/Services More Competitive  Rule Of Law/Property Rights Apply To Businesses Businesses Nation-States Nation-States  Treaties/Agreements  Each Country Wants To Make Its Goods/Services More Competitive  Rule Of Law/Property Rights Apply To Businesses Businesses Nation-States Nation-States

18-3 U.S. Trading Partners RegionExportsImports Asia 26.5% 36.3% West. Europe North America Latin America Middle East Africa C./E. Europe/ Baltic States/CIS Baltic States/CIS Total100% 100% Source: World Trade Organization, 2001

18-4 U. S. Trade in Goods & Services ($ Billions) Source: U.S. Department Of Commerce Balance of Payments (Trade Deficit)

18-5 Sources Of International Law- Public  Statute Of The International Court Of Justice (World Court)  Non-Binding Decisions  Applies To Disputes International Conventions International Conventions International Custom International Custom General Principles Of Law General Principles Of Law Judicial Decisions/Teachings Of Qualified Publicists Judicial Decisions/Teachings Of Qualified Publicists  Statute Of The International Court Of Justice (World Court)  Non-Binding Decisions  Applies To Disputes International Conventions International Conventions International Custom International Custom General Principles Of Law General Principles Of Law Judicial Decisions/Teachings Of Qualified Publicists Judicial Decisions/Teachings Of Qualified Publicists

18-6  Laws Of Nations  Multilateral Agreements  Conflicting/Differing Laws Create Instability  International Commerce Is Complex  Determining Proper Forum (Court) Difficult  Laws Of Nations  Multilateral Agreements  Conflicting/Differing Laws Create Instability  International Commerce Is Complex  Determining Proper Forum (Court) Difficult Sources Of International Law- Private

18-7 United Nations  Security Council – 15 Members (5 Permanent)  United Nations Commission On International Trade Law (1966)  International Monetary Fund  World Bank  Security Council – 15 Members (5 Permanent)  United Nations Commission On International Trade Law (1966)  International Monetary Fund  World Bank

18-8 Uruguay (1994)  Created World Trade Organization  Principles All Members Equal In Trade All Members Equal In Trade No Favoring Of Domestic Over Imported Goods/Services No Favoring Of Domestic Over Imported Goods/Services Eliminate Trade Barriers Eliminate Trade Barriers  Created World Trade Organization  Principles All Members Equal In Trade All Members Equal In Trade No Favoring Of Domestic Over Imported Goods/Services No Favoring Of Domestic Over Imported Goods/Services Eliminate Trade Barriers Eliminate Trade Barriers Montevideo, Uruguay Harbor Courtesy of C. Bowles

18-9 World Trade Organization  Regulates World Trade- 125 Countries  Benefits Promote Peace Promote Peace Resolves Disputes Resolves Disputes Cut Cost Of Living Cut Cost Of Living Stimulate Economic Growth Stimulate Economic Growth Encourages Good Government Encourages Good Government  Recent US/European Concerns  Regulates World Trade- 125 Countries  Benefits Promote Peace Promote Peace Resolves Disputes Resolves Disputes Cut Cost Of Living Cut Cost Of Living Stimulate Economic Growth Stimulate Economic Growth Encourages Good Government Encourages Good Government  Recent US/European Concerns

18-10 Conventions On International Sale Of Goods  Effective 1988  Applies To Contracts For Commercial Sale Of Goods  Supercedes U.S. Commercial Code Freedom In Contract Negotiation- Not In Writing  Effective 1988  Applies To Contracts For Commercial Sale Of Goods  Supercedes U.S. Commercial Code Freedom In Contract Negotiation- Not In Writing

18-11 European Union  Treaty Of Rome (1957)  Single European Act (1987)- Remove Barriers To European Trade  Maastricht Treaty (1992)- Create Federal Government Commission Of Entire Union Commission Of Entire Union Coordinate Policies Of Members Coordinate Policies Of Members  Nice Summit (2000)- Added (2007) 12 Members To Original 15  Treaty Of Rome (1957)  Single European Act (1987)- Remove Barriers To European Trade  Maastricht Treaty (1992)- Create Federal Government Commission Of Entire Union Commission Of Entire Union Coordinate Policies Of Members Coordinate Policies Of Members  Nice Summit (2000)- Added (2007) 12 Members To Original 15

18-12 North American Free Trade Agreement (1993)  Between US/Mexico/Canada  Free Trade  Dispute Settlement  U.S. Has Trade Deficit With Both  Between US/Mexico/Canada  Free Trade  Dispute Settlement  U.S. Has Trade Deficit With Both

18-13 U.S. NAFTA International Trade Source: CIA World Factbook & U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch US$ Billions U.S. Trade Deficit U.S. Trade Deficit

18-14 Transacting International Business  Foreign Sales Irrevocable Letter Of Credit- Buyers Issuing Bank Irrevocable Letter Of Credit- Buyers Issuing Bank Bill Of Lading- Seller’s Confirming Bank Bill Of Lading- Seller’s Confirming Bank  License/Franchise  Direct Foreign Investment Foreign Subsidiary Foreign Subsidiary Joint Venture Joint Venture  Foreign Sales Irrevocable Letter Of Credit- Buyers Issuing Bank Irrevocable Letter Of Credit- Buyers Issuing Bank Bill Of Lading- Seller’s Confirming Bank Bill Of Lading- Seller’s Confirming Bank  License/Franchise  Direct Foreign Investment Foreign Subsidiary Foreign Subsidiary Joint Venture Joint Venture

18-15 Sources Of Foreign Direct Investment In The U.S. US$ Million Source: U.S. Bureau Of Economic Analysis

18-16 International Trade Risks  Loss Of Investment Expropriation- Confiscation Expropriation- Confiscation Nationalization- Power Of Eminent Domain Nationalization- Power Of Eminent Domain  Export Controls  Bribes- Foreign Corrupt Practices Act (1977)  U.S. Antitrust Conflicts  Loss Of Investment Expropriation- Confiscation Expropriation- Confiscation Nationalization- Power Of Eminent Domain Nationalization- Power Of Eminent Domain  Export Controls  Bribes- Foreign Corrupt Practices Act (1977)  U.S. Antitrust Conflicts

18-17  Suing Foreign Governments - Sovereign Immunity  Suing Foreign Firms- Hague Service Convention  International Arbitration  Suing Foreign Governments - Sovereign Immunity  Suing Foreign Firms- Hague Service Convention  International Arbitration Resolving International Disputes

18-18 Business Decision  Does XYZ Have Any Moral Or Legal Responsibility In This Case?  How Should XYZ Protect Itself Under These Circumstances?  Should American Business Practices Be Impacted By Conflicts Between Governments?  Does XYZ Have Any Moral Or Legal Responsibility In This Case?  How Should XYZ Protect Itself Under These Circumstances?  Should American Business Practices Be Impacted By Conflicts Between Governments?

Chapter McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. 18 End of Chapter 18