economies,political and social

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ECONOMICS, POLITICAL, AND LEGAL SYSTEMS Secondary international market information /data resources Brief review of International economics Trade policy The political environment Legal systems

Useful Periodicals:

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


Other Academic country specialists (e.g., anthropologists, economists) Consultants Expatriates Own experience

Data Availability and Reliability:

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?

Cost of Data:

Cost of Data Much “raw” data is free from U.S. Gvt. United Nations Research institutions Commercial directories Consulting services

Library Databases:

Library Databases Book Library catalogs (e.g., SDSU PAC) Books in Print 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 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

University of Texas Library Resource Lists:

University of Texas Library Resource Lists International business source list: Marketing source list:


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

Demand for Currency Depends On:

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

Nominal vs. Purchase Parity Adjusted GNPs—Examples (2004):

Nominal vs. Purchase Parity Adjusted GNPs—Examples (2004) Source: World Bank

Cautions on Interpreting Per Capita Figures:

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

Obstacles to Trade: Protectionism:

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

Approaches to Protectionism:

Approaches to Protectionism Tariffs Quotas “Voluntary” export restrictions Subsidies to domestic producers/exporters Non-tariff barriers legal obstacles differential treatment

U.S. Protectionism--justified or not...:

U.S. Protectionism--justified or not... Defense industry Agricultural products--e.g., beef, sugar Textiles Automobiles (“voluntary” import restrictions) Steel

Justifications for Protectionism:

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.)

Effects of Protectionism:

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)


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

The Legal Environment:

The Legal Environment Which laws apply when doing business between countries? contractual specifications treaties extra-territorial applications of laws “compulsion” as a defense

Some Political Risks:

Some Political Risks Confiscation, expropriation, and domestication Economic risks Exchange controls Local content requirements Import restrictions Tax controls Price controls Labor problems

Development of Legal Systems:

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

Approaches to Law:

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

Common Law:

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”

Code (Napoleonic) Law:

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

Islamic Law:

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

Socialist Law:

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

Asian Law:

Asian Law Based on compromise and accommodation Less emphasis on abstract principles Less emphasis on consistent application across circumstances Emphasis on informal resolution

U.S. Laws of Interest to firms with U.S. Involvement:

U.S. Laws of Interest to firms with U.S. Involvement Anti-trust Foreign Corrupt Influences Anti-boycott laws Trading With the Enemy