1. 5. Political and Legal Environments
Slides 11, 18 & 21 need new and/or updated art.

2. Chapter Overview Political Environment--Individual Governments
Political Environment--Social Pressures and Political Risk
Terrorism and the World Economy
International Agreements
International Law and Local Legal Environment
Issues Transcending National Boundaries

3. Introduction
International marketers should be aware that the economic interests of their companies can differ widely from those of the countries in which they do business.
International marketers must abide by various international agreements, treaties and laws.
Political and legal climates are inherently related and inseparable because laws are generally a manifestation of a country’s political processes.

4. 1. Political Environment - Individual Governments
Government affects almost every aspect of business life in a country.
National politics affect business environment directly, through changes in policies, regulations, and laws.
The political stability and mood in a country affect the actions a government will take.
Home Country versus Host Country.

5. 1. Political Environment - Individual Governments
Structure of Government
Ideology
Communism
Capitalism
Socialism
Political Parties
Single-party-dominant country
Dual-party system
Multi-party system
Government Policies and Regulations It is the role of government to promote a country’s interests in the international arena for various reasons and objectives such as: national security, developing new industries, and protecting declining industries.

6. 1. Political Environment - Individual Governments
Incentives and Government Programs
Government Procurement
Trade Laws
Tariff and Nontariff Barriers (Exhibit 5-1)
Embargoes and Sanctions
Export License Requirements
Investment Regulations (ownership and financial controls)
Macroeconomic Policies (governments’ monetary and fiscal policies such as the cost of capital, level of economic growth, rates of inflation and international exchange rates)

7. Exhibit 5-1: Tariff and Nontariff Barriers

8. 2. Political Environment - Social Pressures and Political Risk
Social Pressures and Special Interests Foreign companies also have to consider social factors as part of the political environment of host countries, e.g., feelings of nationalistic sentiment.
Managing the Political Environment
Expropriation
Confiscation
Nationalization
Domestication Policy/Phase-Out Policy
Countertrade (See Exhibits 5-2 and 5-3.)

9. Exhibit 5-2: Government Policy Areas and Instruments

10. Exhibit 5-3: Country Risk Assessment Criteria

11. Exhibit 5-4: Examples of Country Risk Ratings

12. Exhibit 5-4: Examples of Country Risk Ratings, cont.

13. Exhibit 5-4: Examples of Country Risk Ratings, cont.

14. Sovereign Credit Rating
S&P
Moody's
Fitch
KOREA
AA-
Aa3
JAPAN A+ A1 A
Aug, 2015
Sep, 2015

15. 3. Terrorism and the World Economy
According to an IMF study, the September 11, 2001 terrorist attacks in New York and Washington D.C. resulted in major losses for the U.S. economy.
The short-term lost economic output was estimated as $47 billion.
The stock market lost $1.7 trillion. In addition, 125,000 workers were laid off for 30 days.
Terrorist activities disrupt international movement of supplies and merchandise and financial flows.

16. 4. International Agreements
G7 (Group of Seven) is an economic policy coordination group made up of political leaders from Canada, England, France, Germany, Italy, Japan, and the United States.
G8 (Group of Eight) consists of G7 and Russia.
COCOM (The Coordinating Committee for Multilateral Controls) was founded in 1949 to stop the flow of Western technology to the former Soviet Union; members countries include Australia, Japan and the NATO countries except Iceland.

17. 5. International Law and Local Legal Environments
International Law (the law of nations) comes from three main sources:
Customs
International treaties
Court decisions

18. 5. International Law and Local Legal Environments
Local Legal Systems and Laws
Business Practices and the Legal Systems

19. 5. International Law and Local Legal Environments
Regulations on e-Commerce - privacy issues
Types of Legal Systems
Common Law
Code (written) Law
Islamic Law
Socialist Laws
Civil Law
Commercial Law

20. 5. International Law and Local Legal Environments
Cultural Values and Legal Systems
Japan’s population of lawyers is low.
In the U.S., emphasis is on explicit contracts and a reliance on the legal system is high.
In China, relationships (guanxi) and verbal contracts are important.
In Brazil, Jeitinho is used to find solutions outside the legal system.
Planning Ahead
Arbitration and Enforcement

21. Exhibit 5-6: The Number of Lawyers per 100,000 Residents

22. 6. Issues Transcending National Boundaries
ISO 9000 certification has become an essential marketing tool for firms.
ISO is based on the principle of self –regulation, thereby minimizing surveillance and sanctions.
Intellectual Property Protection
TRIPs (Trade-Related Aspects of Intellectual Property Rights)
Patent (first-to-file & first-to-invent principles)

23. 6. Issues Transcending National Boundaries
Copyright
The Digital Millennium Copyright Act (DMCA)
Trademark (prior-use, first-to-use & first-to-file principles)
Trade Secret
Paris Convention
Patent Cooperation Treaty
Patent Law Treaty (See Exhibit 5-7.)

24. Exhibit 5-7: Ratings for the Level of Intellectual Property Protection in Various Countries

25. 6. Issues Transcending National Boundaries
European Patent Convention
Berne Convention
WIPO Copyright Treaty
Anti-Counterfeiting Trade Agreement
Antitrust Laws of the United States
The Sherman Act
The Clayton Act
Extraterritorial application of U.S. antitrust laws
Export Trading Company (ETC) Act of 1982

26. 6. Issues Transcending National Boundaries
Antitrust Laws of the European Union
Foreign Corrupt Practices Act (FCPA) of 1977
The FCPA was designed to prohibit the payment of any money or anything of value to a foreign official, foreign political party, or any candidate for foreign political office for purposes of obtaining, retaining, or directing business.

27. 6. Issues Transcending National Boundaries
The FCPA does not prohibit so-called facilitating or grease payments.
Small payments to lower level officials are allowed to expedite the process.
FCPA does not prohibit bribery payments to nongovernmental personnel.