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Growth in Trade and FDI Indexed: 1950 = 100 PowerPoint PPT Presentation


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Growth in Trade and FDI Indexed: 1950 = 100. 1600 1200 800 400 100. Trade. FDI. GDP. 1950 1960 1970 1980 1990 2000. Global Linkages. Management Linkages. Country A. Country B. Policy Linkages. Trade and Investment Linkages. Managers choose to…

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Growth in Trade and FDI Indexed: 1950 = 100

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Growth in trade and fdi indexed 1950 100 l.jpg

Growth in Trade and FDIIndexed: 1950 = 100

1600

1200

800

400

100

Trade

FDI

GDP

1950 1960 1970 1980 1990 2000


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Global Linkages

Management Linkages

Country

A

Country

B

Policy Linkages

Trade and Investment Linkages


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Managers choose to…

Attack new markets

Entry modes

Shift manufacturing

Alliances, Mergers, etc.

Governments try …

Tariffs, quotas

FDI Regulations

Country

A

Country

B

Effects are …

Persistent Trade Deficit

Loss of Jobs

Higher Domestic Prices


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Policy Exemplars . . .

  • Buyout Bid of Fairchild Semiconductor

    • Buyout blocked by DoD -- national security

  • Big-3 Automakers

    • VERs of 1980s

    • Lobbying during Bush administration

  • Kodak in Japanese Market

    • SII Talks

    • § 301 Filing

  • GE’s Acquisition of Honeywell

    • Blocked by EU


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How Nations Influence Trade and Investment Activity Through Policy

  • Overt/Visible Policies

  • Supporting/Strategic Policies

    Follow-up Questions:

    • How well to these policies work?

    • What are the side effects?

    • Retaliation?

    • How might managers of MNCs respond?


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Free Trade Doubletalk


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USTR Definition of Trade Barriers

  • Government laws, policies, or practices that either:

    • Protect domestic products from competition

    • Artificially stimulate exports of particular domestic products


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Overt Policy Alternatives

  • Restrict Imports (tariffs, quotas, VERs)

  • Restrict FDI

    • Incoming (F/X controls, local content)

    • Outgoing (tax code, expatriation disincentives)

  • Restrict Exports (DoD restrictive munitions)

  • Export Promotion (subsidies, tax credits)

  • Import Promotion (tax credits, favors)

  • FDI Incentives (subsidies for infrastructure, training & development, market access)

  • Preferential Govt. Procurement


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Cost of Import ProtectionJapanese Rice Market

Domestic

Supply

World Price

Domestic

Demand

Domestic

Quantity

Produced

Domestic

Quantity

Consumed


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Cost of Import ProtectionJapanese Rice Market

Domestic

Supply

Tariff Price

World Price

Domestic

Demand

New

Domestic

Quantity

Produced

New

Domestic

Quantity

Consumed


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Cost of Import ProtectionJapanese Rice Market

Domestic

Supply

Deadweight

Loss

Tariff Price

Extra Revenue

Tariff

World Price

Domestic

Demand

New

Domestic

Quantity

Produced

New

Domestic

Quantity

Consumed


Cost of import protection japanese rice market12 l.jpg

Cost of Import ProtectionJapanese Rice Market

Domestic

Supply

Deadweight

Loss

Tariff Price

Extra Revenue

Tariff

World Price

Domestic

Demand

New

Domestic

Quantity

Produced

New

Domestic

Quantity

Consumed

# Jobs saved?

At what price?


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Cost to Domestic Consumers per Job Saved

Extra Revenue for Firm

Tariff Revenue to Government

Deadweight Loss

+

$800 million

$800 million

10,000 jobs

=

$80,000

/job


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FDI: Host Country Perspective


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FDI: Home Country Perspective


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Porter’s Diamond of “National Competitive Advantage”


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The Economy, Stupid!

Strategic “Supporting” Policies:

  • Free trade and FDI

  • Infrastructure

  • Education

  • Antitrust and competition

  • Intellectual Property Protection

  • Tax Incentives on R&D

  • Technical Standards

  • Many others…


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