国际商务International Business_Week 5 Lecture (Chapter

InternationalBusiness:Strategy,Management,andtheNewRealities1InternationalBusinessStrategy,Management&theNewRealitiesbyCavusgil,KnightandRiesenbergerChapter7GovernmentInterventioninInternationalBusinessInternationalBusiness:Strategy,Management,andtheNewRealities2TheNatureofGovernmentIntervention•Animportantdimensionofcountryrisk.•Governmentsinterveneintradeandinvestmenttoachievepolitical,social,oreconomicobjectives.•Interventionaltersthecompetitivelandscapebyhinderingorhelpingtheabilityoffirmstocompeteinternationally.•But,interventionisatoddswiththetheoryofcomparativeadvantage,whicharguesformoreinternationaltrade,notlessPart1IntroductionInternationalBusiness:Strategy,Management,andtheNewRealities3KeyConcepts•Protectionism:nationaleconomicpoliciesthatrestrictfreetrade,usu.intendedtoraiserevenueorprotectdomesticindustriesfromforeigncompetition.•Governmentinterventionarisesinvariousforms:Tariff--ataxonimports(e.g.,citrus,textiles)Nontarifftradebarrier--governmentpolicy,regulation,orprocedurethatimpedestradeQuota--quantitativerestrictiononimportsofaspecificproduct(e.g.,importsofJapanesecars)Investmentbarriers–rulesorlawsthathinderFDI(e.g.,Mexico’srestrictionsinitsoilindustry)InternationalBusiness:Strategy,Management,andtheNewRealities4ExampleofProtectionism:U.S.SteelIndustry•BushadministrationimposedtariffsonimportsofforeignsteeltoprotectU.S.steelmanufacturersfromforeigncompetition,aimingtogivetheU.S.steelindustrytimetorestructureandreviveitself.•Resultinghighersteelcosts:increasedproductioncostsforfirmsthatusesteel,suchasFord,WhirlpoolandGeneralElectricreducedprospectsforsellingproductsinworldmarketsmadeU.S.steelfirmslesscompetitive•Thesteeltariffswereremovedwithintwoyears.InternationalBusiness:Strategy,Management,andtheNewRealities5ExampleofProtectionism:AutoIndustry•In1980s,theU.S.governmentimposed‘voluntary’exportrestraints(quotas)onimportsofcarsfromJapan,toinsulateU.S.autoindustry.•Result1:Detroitautomakershadlessofanincentivetoimprovequality,design,andoverallproductappeal.•Result2:Detroit’sabilitytocompeteintheglobalautoindustrywasweakened.InternationalBusiness:Strategy,Management,andtheNewRealities6ConsequencesofProtectionism•Reducedsupplyofgoodstobuyers•Priceinflation•Reducedvariety,fewerchoicesavailabletobuyers•Reducedindustrialcompetitiveness•Variousadverseunintendedconsequences(e.g.,whiletheU.S.dithers,othercountriescanraceahead)InternationalBusiness:Strategy,Management,andtheNewRealities7RationaleforGovernmentIntervention1.Tariffsandotherbarrierscangenerategovernmentrevenue.2.Safety,security,andwelfareofcitizens(e.g.,FDAbarriersondrugimports;barriersintendedtoprotectnationalsecurity)3.Broad-basedeconomic,political,orsocialobjectives(e.g.,jobcreation)4.Reduceforeigncompetition5.Protectinfantindustries6.PreservenationalcultureandidentityInternationalBusiness:Strategy,Management,andtheNewRealities8SpecialInterestGroupsTriggerProtectionism•Inatradedispute,theU.S.governmentimposeda$50pertondutyontheimportofMexicancementafterU.S.cementmakerslobbiedtheU.S.Congress.•Mexicanimportscanreach10percentofU.S.domesticcementconsumption.•TheU.S.isoneoftheworld’slargestcementconsumersand,suffersfromshortages,whichareexacerbatedbyimportrestrictions.•Mexicoproposedsubstitutingimportquotasinsteadofthehighcementimporttariffs.InternationalBusiness:Strategy,Management,andtheNewRealities11TariffsareWidespread•Developingeconomies--tariffsarecommon.•Advancedeconomies--tariffsstillafactormainlyintextiles,clothing,andagriculturalproducts(e.g.,theU.S.recentlycollectedmoretariffrevenueonshoesthanoncars;$1.63billionvs.$1.60billionin2001).•TheEuropeanUnionappliestariffsofupto236percentonmeat,180percentoncereals,and17percentontennisshoes.•UnitedNationsestimatesthattradebarriersingeneralcostdevelopingeconomiesover$100billioninlosttradingopportunitieswithdevelopedcountrieseveryyear.Part2TariffsInternationalBusiness:Strategy,Management,andtheNewRealities14WTO:AForceforReducingTariffs•Governmentshavetendedtoreducetariffsovertime.•TariffreductionwastheprimarygoaloftheGeneralAgreementonTariffsandTrade(GATT)•In1995,theGATTbecametheWorldTradeOrganization(WTO).•CountriesasdiverseasChile,Hungary,Turkey,andSouthKoreahaveliberalizedtheirpreviouslyprotectedmarkets,loweringtradebarriers.InternationalBusiness:Strategy,Management,andtheNewRealities15Non-tariffTradeBarriersGovernmentpoliciesthatrestricttradewithoutimposingadirecttaxorduty.•Quotasrestrictthephysicalvolumeorvalueofproductsthatfirmscanimportintoacountry.•Voluntaryexport/importrestraintsarevoluntaryquotasimposedbygovernmentswherebyfirmsagreetolimitexportsorimportsofcertainproducts.•Importlicense–aformalpermissiontoimport,whichrestrictsimportsinawaythatissimilartoquotas-acomplicated,bureaucraticprocessinsomecountries•Governmentregulationsandtechnicalstandards–e.g.,safetyregulationsformotorvehicles,healthregulationsforhygienicfoodpreparation,labelingrequirementsidentifyingcountryoforigin,etc.•AdministrativeorbureaucraticproceduresPart3Non-tariffBarriersInternationalBusiness:Strateg