MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 1 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Secondary international market information /data resources Brief review of –International economics –Trade policy The political environment Legal systems

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 2 Useful Periodicals Heavily internationally focused –Economist –Journal of Commerce –Forbes –Business America (U.S. Dept. of Commerce) –World Press Review Some international coverage –Wall Street Journal, New York Times, Washington Post –Business Week, Fortune –Time, Newsweek

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 3 Other Academic country specialists (e.g., anthropologists, economists) Consultants Expatriates Own experience

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 4 Data Availability and Reliability Availability/ ability to collect data Motivations for releasing data –Wishful thinking vs. reality –The Web--accessible to any fool or group Comparability of data/Arbitrary differences in measurements Recency --is the data up-to-date?

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 5 Cost of Data Much “raw” data is free from –U.S. Gvt. –United Nations –Research institutions Commercial directories Consulting services

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 6 Library Databases Book –Library catalogs (e.g., SDSU PAC) –Books in Print –Amazon.com Indexing Collaborative filtering suggestions Periodical –Business & Industry –Lexis-Nexis –ABI/Inform –Factiva (formerly Dow Jones) Foreign language –HAPI Online (Hispanic American Periodicals Index) –Lexis-Nexis Government reports –Stat-USA Other country info –Countrywatch.com –Specialty Latin America Database HAPI Online (Hispanic American Periodicals Index) Academic research (usually theoretical, hard to read) –Behavioral: PsychInfo –Economics: Econlit See handouts for details

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 7 University of Texas Library Resource Lists International business source list: siness/internat.html siness/internat.html Marketing source list: siness/marketing.html siness/marketing.html

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 8 VERY BRIEF REVIEW OF ECONOMICS Exchange rates –Floating (supply and demand) –fixed Trade balances and their impact on exchange rates Measuring country wealth –gross domestic product –“purchase parity” vs. nominal

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 9

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 10 Demand for Currency Depends On Trade deficit (demand for foreign currency to fund this) or trade surplus (demand for country’s currency) Interest rates: Higher interest rates (real) attract foreign investors (especially for “stable” U.S. bonds and equities) Inflation: Reduces the attractiveness of holding the currency

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 11 Nominal vs. Purchase Parity Adjusted GNPs— Examples (2004) Source: World Bank

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 12

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 13

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 14 Cautions on Interpreting Per Capita Figures Averages are not very meaningful! –Regional variations –Socio-economic differences Comparison to U.S. dollar and U.S. costs is arbitrary

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 15 Obstacles to Trade: Protectionism Differing interests of consumers and manufacturers Benefits of trade tend to be more diffused than benefits to specific groups of protectionism

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 16 Approaches to Protectionism Tariffs Quotas “Voluntary” export restrictions Subsidies to domestic producers/exporters Non-tariff barriers –legal obstacles –differential treatment

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 17 U.S. Protectionism--justified or not... Defense industry Agricultural products--e.g., beef, sugar Textiles Automobiles (“voluntary” import restrictions) Steel

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 18 Justifications for Protectionism Protect infant industry Resist “unfair” or inappropriate competition Protect home market (ensure that product can be produced domestically)--defense Intervene into temporary imbalance Maintain domestic living standards Preserve jobs Bargaining power/retaliation (Super-301 provision in U.S.)

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 19 Effects of Protectionism Reduced competition ---> inflation More tariffs Weaken balance of payments (have to pay more in own currency) Reduce choice to consumers May induce global trade wars (vicious cycle)

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 20 THE POLITICAL AND LEGAL ENVIRONMENTS Political history and stability Political relations between countries -- impact on business Legal differences between countries Extra-territorial application of laws

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 21 The Legal Environment Which laws apply when doing business between countries? –contractual specifications –treaties –extra-territorial applications of laws –“compulsion” as a defense

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 22 Some Political Risks Confiscation, expropriation, and domestication Economic risks –Exchange controls –Local content requirements –Import restrictions –Tax controls –Price controls –Labor problems

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 23 Development of Legal Systems Laws on the books vs. laws enforced (transparency) –Japan: “Administrative guidance” The ability to sue--a blessing or a curse? –Means of litigation –Implications for contract initiation and enforcement Evolving nature of legal systems

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 24 Approaches to Law Common law (U.S., Britain, and many English speaking countries) Code law (much of Europe and Louisiana) Islamic law Socialist based law Asian laws

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 25 Common Law Gradually evolved in British courts, settling issues as they arose Emphasis on precedent Recognized by U.S. Constitution Standards –criminal: “Innocent until proven guilty” –civil: “Preponderance of evidence”

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 26 Code (Napoleonic) Law Law governed by explicit statutory codes--”match” codes to issues as well as possible Somewhat different standards in contracts --what constitutes an “act of God” canceling contractual obligations? Criminal law: “Guilty until proven innocent” but difficult to bring to trial

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 27 Islamic Law Note that different varieties exist Traditions of Islamic countries are not all tied to Islamic religion per se Purpose of promoting justice –assets are thought to be held in “trust” –interest is frowned upon Much wider scope than Western law: Shar’ia: the way

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 28 Socialist Law Basis for law in China, former Soviet Republics, and countries influenced by Communist allies Based on the view that the government owns productive resources ---> –contract and intellectual property laws are typically not well developed Legal scholars from the West are helping to reform

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 29 Asian Law Based on compromise and accommodation Less emphasis on abstract principles Less emphasis on consistent application across circumstances Emphasis on informal resolution

MKTG 376 ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Lars Perner, Instructor 30 U.S. Laws of Interest to firms with U.S. Involvement Anti-trust Foreign Corrupt Influences Anti-boycott laws Trading With the Enemy