1. © 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.4
chapter
Politics and Laws
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

2. Home-Country Perspective
Maintain or gain international market share
Manufacturing location
Legal and regulatory measures
Political environment

3. Home-Country Perspective
Government activity
The terms sanction and embargo refer to government actions that distort the free flow of trade in goods, services, or ideas for adversarial or political, rather than economic purposes.
Embargoes are much broader in that they prohibit trade entirely.
An export-control system is designed to deny or delay the acquisition of strategically important goods to adversaries.

4. Embargoes and Sanctions
Reasons for imposing embargoes and sanctions have varied:
Uphold Human
Rights
Terrorism
Nuclear
Proliferation

5. Export Control Systems
Decision Steps in the Export Licensing Process
Determinants of Export Controls
National Security
Foreign Policy
Short Supply
Nuclear Nonproliferation
Should a Given Product Be Exported?
To a Given Country?
For Use by a Given Firm?

6. Politics and Laws Government activity
Dual-use items are goods or services which are useful for both military and civilian purposes.
The Export Administration Act and the Munitions Control Act control all export of goods.
Export licenses are issued by the Department of Commerce, which administers the Export Administration Act.
Export license applications are matched with the critical commodities list, a file containing information about products sensitive to national security or controlled for other purposes.

7. Politics and Laws
Governments regulate the conduct of international firms through such means as boycotts that limit trade partners for political, or economic reasons.
Caught in a web of governmental activity, firms may be forced either to lose business or to pay substantial fines.
Antitrust Legislation prohibits monopolies, restraint of trade, and conspiracies to inhibit competition.

8. Politics and Laws Bribery and Corruption
In many countries, payments or favors to grease the wheels of business are a way of life, forcing firm to make payments to do business.
The Foreign Corrupt Practices Act makes it a violation of the United States’ law to bribe a foreign government official in order to obtain or maintain business over which the foreign official has authority, and requires all publicly traded countries to keep detailed records so that it is clear whether a violation of the act has occurred or not
Insert a map of your country.

9. Politics and Laws
“Managers argue that to compete, they must be free to use common methods of competition in host countries”

10. HOST-COUNTRY PERSPECTIVE
Political Action and Risk
In every nation, there is political risk, the risk of loss by an international corporation of assets, earning power, or managerial control as a result of political actions by the host country.
There are three major types of political risk:
Ownership risk—the risk of losing properties by companies with foreign subsidiaries.
Operating risk---the risk of interference by governments in in politically instable environment or setbacks to ongoing operations.
Transfer risk----the difficulty of shifting funds from troubled countries lead to potential losses.
Violence and Conflict pose the most dangerous of political risks to global firms.

11. Politics and Laws Expropriation, Confiscation, and Domestication
Expropriation is a government takeover of a company with compensation frequently at a level lower than the investment value of a company’s assets.
Confiscation is the forceful government seizure of a company without compensation for the assets seized.
Domestication is the government demand for partial transfer of ownership and management responsibility from a foreign company to local entities, with or without compensation
A government can impose local content regulations to ensure that a large share of the product is locally produced or demand that a larger share of profits is retained in the country.

12. Politics and Laws
Intellectual Property Rights (IPR) are legal rights resulting from industrial, scientific, literary, or artistic activity. In many countries these laws are not enforced by the authorities and property rights are violated.
Patents – 20 years
Copyrights – 50 years
Trademarks – Indefinite

13. Politics and Laws
Exchange Controls
Controls on the movement of capital in and out of a country, sometimes imposed when the country faces a shortage of foreign currency.
Tax Policy
A means by which countries may control foreign investors.
Price Controls
Government regulation of prices of goods and services; control of the prices of imported goods or services as a result of domestic political pressures.
Antidumping laws prevent foreign competitors from pricing their imports so low as to drive domestic competitors out of the market.

14. Risk Management Corporate Protection: Non-exploitative
Monitoring of political development
Insurance
Lobbyists
Basic Systems of Law:
Common law
Code law

15. Politics and Laws Different Legal Systems
The common law system (based on tradition, precedent, and custom) is found in most of Great Britain’s former colonies, including the United States
The civil law system is based on a very detailed set of laws organized into codes and is found in over 80 countries, including Germany, France, Japan, and Russia
Islamic law is the most widely practiced theocratic law system (based on religious teachings) in the modern world
Insert a map of your country.

16. Politics and Laws International Politics Bilateral Agreement
Multilateral Agreement
International Law is the body of rules governing relationships between sovereign states, also certain treaties and agreements respected by a number of countries.
Although no enforceable international law exists, certain treaties and agreements profoundly influence international business operations.
International organizations, such as the United Nations and the Organization for Economic Cooperation and Development, provide multilateral agreements that affect international business.