Welcome to class of

International Government Relations

byDr. Satyendra Singh

www.uwinnipeg.ca/~ssingh5

Govt. Can Impose Nontariff Barrier

• WTO identifies 600 such barriers– Quota– Antidumping accusations– Countervailing duty by law– Labeling restrictions– Licensing mandatory– Product standards health and safety– Custom inspection procedure host’ll do it– Government procurement regulations– TRIM Trade Related Investment Measure

• WTO: DSB Dispute Settlement Board

So Form Govt. Relations• Governments take actions

– Regulate– Taxation– Expenditure– Privatize– Consultation

• It impacts MNCs• Govt. actions threats and

opportunities for MNCs

Government Actions:Threats and Opportunities

Threats Government Actions Opportunities

↑ costs

↓ ROI

Competitive disadvantage

↑ competition

Co-opt

Regulation

Taxation

Expenditure

Privatization

Consultation

Control competition

Competitive advantage

Subsidies, grants, customer

Level playing field

Influence policy

• Given threats, MNCs need to formulate political strategy in both host and home countries relations

Political Strategy – Elements• Formulation

– Objectives (form IJV, buy govt. assets, get permit, influence MPs to have favorable legislations)

– Issues (current or emerging)– Stakeholders (allies, opponents, targets)– Position/Case (“public interest”)

• Implementation – Timing– Techniques

• Direct (negotiate, litigate)• Indirect (advocacy advertising, political contributions)

– Vehicles (association coalition, Government Relations department, consultants)

– Style (confrontation or conciliation depends on objective)

Objectives: MNCs, SoE, Govt

MNCs Strategic approach to Govt. Policy

1

“Government Policy as lever for global competitiveness” approach

base/cluster concept

3

Firm specific characteristics in MNC government interaction

Use of strategic trade policy arguments to obtain government favors.

2

“Good corporate citizen” approach

Government policy not viewed as a major determinant of international competitiveness

4

Firm specific characteristics in MNC government interaction

Influenced through lobbying,

i.e., a proactive strategy

MN

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– G

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To achieve Benefits ofintegration

To achieve Benefits ofNational

Responsiveness

MNC Can NOT influence Govt MNC Can influence Govt

Strategy: Choose one (say 4); determine who has the bargaining power: Govt or MNC

Bargaining Power

• Governments may discriminate• Due to differing characteristics of subsidiaries• Force MNCs to have IJV, impose taxes, fix prices• Or they can give MNCs 100% foreign ownership

and financial support!• Sources of Bargaining power for host country

• Growing capability to replace the MNC’s products• Control access to raw materials, labor and capital

• Sources of Bargaining power for MNC• Global structure, Vertical integration

• MNCs avoid dealing with govts unstable• Globalization has made govt. FDI friendly

Govts Create Business Linkages