Development in Trade and FDI Indexed: 1950 100

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Worldwide Linkages. CountryA. CountryB. . . . Administration Linkages. Arrangement Linkages. Exchange and Investment Linkages. CountryA. CountryB. . . . Supervisors decide to

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Slide 1

Development in Trade and FDI Indexed: 1950 = 100 1600 1200 800 400 100 Trade FDI GDP 1950 1960 1970 1980 1990 2000

Slide 2

Global Linkages Management Linkages Country A Country B Policy Linkages Trade and Investment Linkages

Slide 3

Managers assault… new markets Entry modes Shift fabricating Alliances, Mergers, and so forth. Governments attempt … Tariffs, shares FDI Regulations Country A Country B Effects are … Persistent Trade Deficit Loss of Jobs Higher Domestic Prices

Slide 4

Policy Exemplars . . . Buyout Bid of Fairchild Semiconductor Buyout hindered by DoD - national security Big-3 Automakers VERs of 1980s Lobbying amid Bush organization Kodak in Japanese Market SII Talks § 301 Filing GE's Acquisition of Honeywell Blocked by EU

Slide 5

How Nations Influence Trade and Investment Activity Through Policy Overt/Visible Policies Supporting/Strategic Policies Follow-up Questions: How well to these arrangements work? What are the reactions? Striking back? By what method may directors of MNCs react?

Slide 6

Free Trade Doubletalk

Slide 7

USTR Definition of Trade Barriers Government laws, strategies, or practices that either: Protect residential items from rivalry Artificially animate fares of specific local items

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Overt Policy Alternatives Restrict Imports (duties, standards, VERs) Restrict FDI Incoming (F/X controls, nearby substance) Outgoing (duty code, exile disincentives) Restrict Exports (DoD prohibitive weapons) Export Promotion (endowments, assess credits) Import Promotion (impose credits, favors) FDI Incentives (appropriations for foundation, preparing & improvement, advertise get to) Preferential Govt. Obtainment

Slide 9

Cost of Import Protection Japanese Rice Market Domestic Supply World Price Domestic Demand Domestic Quantity Produced Domestic Quantity Consumed

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Cost of Import Protection Japanese 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 Protection Japanese Rice Market Domestic Supply Deadweight Loss Tariff Price Extra Revenue Tariff World Price Domestic Demand New Domestic Quantity Produced New Domestic Quantity Consumed

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Cost of Import Protection Japanese Rice Market Domestic Supply Deadweight Loss Tariff Price Extra Revenue Tariff World Price Domestic Demand New Domestic Quantity Produced New Domestic Quantity Consumed # Jobs spared? At what cost?

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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 occupations = $80,000/work

Slide 14

FDI: Host Country Perspective

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FDI: Home Country Perspective

Slide 16

Porter's Diamond of "National Competitive Advantage"

Slide 17

The Economy, Stupid! Key "Supporting" Policies: Free exchange and FDI Infrastructure Education Antitrust and rivalry Intellectual Property Protection Tax Incentives on R&D Technical Standards Many others…

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