Laws that Affect Market Choice • US laws • Domestic policy • Foreign policy • Foreign laws • Legal systems • Risks • Regional laws and structures (Economic Integration) • International laws and structures
Home Country Laws • General Domestic Laws that Indirectly Affect International Matters (Domestic Policy) • Domestic Laws that Directly Affect International Matters (Foreign Policy)
Domestic Laws for International Matters • Embargos & Sanctions
Definitions • Embargo: Broad prohibition of trade as part of domestic law • Sanction: Similar, but usually focused on specific type of good or activity • Political reasons • Human rights • Nuclear controls • Antiterrorism • Unilateral/Multilateral
Negatives? • Economic cost ($20 billion?) • Effective? • Dangerous?
Domestic Laws for International Matters • Embargos & Sanctions • Export Controls
Export Control Goals • Prevent military use by enemies • Antiterrorism • Crime control • Protect short-supply products (EAR) • Part of embargo or sanctions
US Export Licensing Regulations • US Department of Commerce, Bureau of Industry & Security • “Soviet Union Time”
Export Licensing Steps Website • What is the product? (EAR) • Where is it going? (EAR) • Who will receive it? • What is its use?
Domestic Laws for International Matters • Embargos & Sanctions • Export Controls • Boycotts
Domestic Laws for International Matters • Embargos & Sanctions • Export Controls • Boycotts • Antibribery Laws
Foreign Corrupt Practices Act • Prohibits payment of bribes to foreign government officials • “Grease” payments are OK • Requires bookkeeping measures • OECD: Treaty system to criminalize bribery • World Bank: Helping to enforce
Cultural & Ethical Differences • China prison labor • Malaysian sweatshops • Japan and Norway and whaling • Brazilian rain forest
Import Restrictions • Tariffs: Taxes on imports • Quotas: Numerical restriction on imports • Nontariff barriers: Noneconomic barriers • Voluntary restraint agreements
Pros & Cons pros cons Consumers bear the brunt – prices Downstream effects False sense of security Escalating barriers Ineffective – can be circumvented • Protect domestic business • Save jobs
Other Government Trade Policies • Export Promotions • US Export Assistance Center • Business Oregon • SBITO • Import Promotions 手を結んで輸入しよう
Foreign Direct Investment • Definition: Investment by one country in another • More and more in US (instead of OUT of US)
Pros & Cons pros cons Increased competition? Negative cultural impact? Overcrowding and lower quality of life? • Job creation • Technology transfer • Increased competition?
How to Promote FDI? • Mainly, government function • Prospect “mining” • Hand-holding • Financial incentives (tax breaks)