Development in Trade and FDI Indexed: 1950 100

Presentation Transcript

Development 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 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

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

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?

Free Trade Doubletalk

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

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

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

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

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

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?

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

FDI: Host Country Perspective

FDI: Home Country Perspective

Porter's Diamond of "National Competitive Advantage"

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…