Developed by Cool Pictures and MultiMedia Presentations Copyright 2004 by South-Western, a division...

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

What We Are Striving To Accomplish

1. To see how trade and investment policies have historically been a subset of domestic policies.

2. To see how global links in trade and investment have made policymakers less able to focus solely on domestic issues.

3. To understand the challenges of international trade institutions.4. To gain broad perspective on conflicts between emerging and

industrialized nations.5. To examine policy responses to changing conditions, including import and

export restrictions.6. To examine the positive and negative impacts of foreign direct investments

on both the host nation and the home nation.7. To understand the purpose of investment policies, including investment

restrictions and promotion.


Trade and Investment Policies

Stimulate Protect

Domestic PolicyDomestic Policy

Quality of Life

Standard of

Living

Government PoliciesGovernment Policies

DirectRegulateE

mploym

ent

National

Developm

ent

Foreign PolicyForeign Policy

Foreign Influence


Post-War Global Trade Regulation

1947 - General Agreement on Tariffs and Trade (GATT)• 144 members• most -favored Nation (MFN)

1995 - World Trade Organization (WTO)• General Agreement on Trade in Services (GATS)• fast track authority


World Trade Organization

Agreements negotiated and signed by world’s trading nations - providing legal ground rules for international commerce.


Changes in Global Policy Environment

• Reduction of domestic policy influences.

• Weakening of traditional international institutions.

• Conflict between industrialized and developing nations.

Policy


Reduction of Domestic Policy Influences

Effects of growing global influences on domestic economies have been significant.

It is difficult to isolate domestic economic activity from international market events.


Weakening International Institutions

World Trade World Trade OrganizationOrganization

International International Monetary Monetary

FundFund

World BankWorld Bank

The WTO has its origins in GATT. The creation of the WTO has greatly increased the scope of international trade agreements.

Its mission, the facilitation of international trade and investment, while ensuring that an effective forum exists to afford a hearing and subsequent achievements for concerns surrounding the core.

Designed to provide stability for the international monetary framework.

The original goal of the IMF was to provide for a fixed exchange rates between countries.

http://www.worldbank.org/


Import Restrictions

• Along with well know methods of restricting trade such as Tariffs, Quotas, and Non-tariff Barriers the following table provides a number of other methods.


Effects of Import Restrictions

• Huge domestic price impact to consumers

• Import composition change

• Efficiency

• Corporate response

• Shifting of activities to circumvent restrictions


Reasons for Export Restrictions

•National security

•Foreign policy

•Short supply

•Desire to retain capital


Investment Policies

Pros

• Improved capital flows

• Technology transfer

• Regional development

• Increased competition, benefiting economy

• Favorable balance of payments

• Increased employment opportunities

Cons

• Low levels of research and development

• Risk of increased capital outflows

• Stifling of domestic competition and entrepreneurship

• Erosion of host culture

• Disruption of domestic business practices

• Risk of interference by foreign governments


Home-Country Perspective on Investment Policies

Foreign direct investment:

•Facilitated by fiscal, financial, and nonfinancial incentives offered by policymakers.

•Addition to GDP through profits, royalties and fees.

•Means to stimulate economic growth.

•Employment is negatively impacted in the home-country.

•Technological advantages may occur.


Strategic Considerations

• Keep in mind the U.S. economy has become intertwined with world trade.

• Important to develop trade policies in a positive fashion instead of a restrictive one.

• Hold “protectionist legislation at bay.• A new perspective on government-business relations is a

key to enhanced competitiveness.

Developed by Cool Pictures and MultiMedia Presentations Copyright 2004 by South-Western, a division...

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