Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. What We Are Striving To Accomplish 1.To see how trade and investment policies have historically been a subset of domestic policies. 2.To see how global links in trade and investment have made policymakers less able to focus solely on domestic issues. 3.To understand the challenges of international trade institutions. 4.To gain broad perspective on conflicts between emerging and industrialized nations. 5.To examine policy responses to changing conditions, including import and export restrictions. 6.To examine the positive and negative impacts of foreign direct investments on both the host nation and the home nation. 7.To understand the purpose of investment policies, including investment restrictions and promotion.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Trade and Investment Policies Stimulate Protect Domestic Policy Quality of Life Standard of Living Government Policies Direct Regulate Employment National Development Foreign Policy Foreign Influence

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Post-War Global Trade Regulation General Agreement on Tariffs and Trade (GATT) 144 members most -favored Nation (MFN) World Trade Organization (WTO) General Agreement on Trade in Services (GATS) fast track authority

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. World Trade Organization Agreements negotiated and signed by world’s trading nations - providing legal ground rules for international commerce.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Changes in Global Policy Environment Reduction of domestic policy influences. Weakening of traditional international institutions. Conflict between industrialized and developing nations. Policy

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Reduction of Domestic Policy Influences Effects of growing global influences on domestic economies have been significant. It is difficult to isolate domestic economic activity from international market events.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Weakening International Institutions World Trade Organization International Monetary Fund World Bank The WTO has its origins in GATT. The creation of the WTO has greatly increased the scope of international trade agreements. Its mission, the facilitation of international trade and investment, while ensuring that an effective forum exists to afford a hearing and subsequent achievements for concerns surrounding the core. Designed to provide stability for the international monetary framework. The original goal of the IMF was to provide for a fixed exchange rates between countries.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Import Restrictions Along with well know methods of restricting trade such as Tariffs, Quotas, and Non-tariff Barriers the following table provides a number of other methods.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Effects of Import Restrictions Huge domestic price impact to consumers Import composition change Efficiency Corporate response Shifting of activities to circumvent restrictions

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Reasons for Export Restrictions National security Foreign policy Short supply Desire to retain capital

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Investment Policies Pros Improved capital flows Technology transfer Regional development Increased competition, benefiting economy Favorable balance of payments Increased employment opportunities Cons Low levels of research and development Risk of increased capital outflows Stifling of domestic competition and entrepreneurship Erosion of host culture Disruption of domestic business practices Risk of interference by foreign governments

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Home-Country Perspective on Investment Policies Foreign direct investment: Facilitated by fiscal, financial, and nonfinancial incentives offered by policymakers. Addition to GDP through profits, royalties and fees. Means to stimulate economic growth. Employment is negatively impacted in the home-country. Technological advantages may occur.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Strategic Considerations Keep in mind the U.S. economy has become intertwined with world trade. Important to develop trade policies in a positive fashion instead of a restrictive one. Hold “protectionist legislation at bay. A new perspective on government-business relations is a key to enhanced competitiveness.