Regional trading blocs, such as the EU and NAFTA, are growing in importance. What are the implications of these trading blocs for international business policies? Are they helpful or harmful to the regions? How may they affect global investments? – Trading blocks such as the North American Free Trade Agreement and the European Union stand to have a great impact on international business because they change the rules of trade and in some cases, investment, presenting new opportunities but also new threats to both foreign and domestic companies.
Whether they are harmful or helpful is difficult to state in just a paragraph or two, but will depend on the perspective of the particular company (or individual). For companies inside a trading block, such agreements can be seen as helpful since they can have the effect of keeping non-member companies out, thus providing a degree of protection to member companies. Moreover, member companies are helped by the increase in effective market size that is a result of such an agreement.
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On the other hand, since trading agreements essentially create one large market, member companies may find that they face increased competition within the block. For companies outside a trading block, particularly those that have had a strong trading relationship with a member country, trade agreements can be devastating. Companies may find that they face high tariff and nontariff barriers that prevent them from exporting to the companies within a trade bloc. This situation may lead firms to invest in a member country and essentially become an insider.
2) Ethnic ties; old colonial alliances, and shared languages appear to affect international trade. Why might this be so? If true, how does this affect international businesses and global business policies, especially which markets to enter? – They affect international business because they may provide the basis from which a nation emerged. For example, although the United States, a former colony of Great Britain, declared its independence years ago, it still shares with its former ruler the same language, cultural heritage, and many beliefs about issues such as democratic rule.
These ties with Britain have helped to shape the United States into the country it is today. For American companies, this relationship is beneficial because not only do American companies have easy access to the British market, and British firms to the American market, but they may also find it easier to enter other markets where for example, English is the spoken language. In addition, if the countries in question have maintained strong ties, it is likely that they will share enemy countries, a factor that could further impact the strategy of an international firm.
3) What is the impact of vigorous enforcement of intellectual property rights on the world economy? Who gains and who loses from strict enforcement of these laws? -Intellectual property rights could play a significant role in encouraging innovation, product development, and technical change. Developing countries tend to have IPRS systems that favor information diffusion through low-cost imitation of foreign products and technologies. Inadequate IPRS could stifle technical change even at low levels of economic development.
While strengthening IPRS bears potential for enhancing growth and development in the proper circumstances, it might also raise difficult economic and social costs. Developing economies could experience net welfare losses in the short run because many of the costs of protection could emerge earlier than the dynamic benefits discussed above. (4) After careful study of “closing case,” respond to case question 3, page 81, which states …
the price of oil has risen substantially since the contract was signed between the Kazakh government and the consortium of oil companies developing the Kashagan field. Is it appropriate for the Kazakh government to demand that the terms of the contract be renegotiated in light of the higher market price of oil? If you were a member of the consortium, would you be willing to let the contract be renegotiated? – Yes, if I were looking from the Kazakh government side a renegotiation would be a priority in order to maximize profit. If I were looking from consortium, then no.