Globalization of companies and liberalization of trade
PART ONE: Short Essays
You are expected to write up to 300 words for every short essay question
1. Discuss with examples how responsibility to protect the common good affects an international business’ assessment of risks involved in international operation (10 Marks)
2. How would the political system of a country affect internationalization of its firms? Discuss with examples from two different political systems (10 Marks)
PART TWO: MINI CASE WITH SHORT ANSWER QUESTIONS
You are expected to write 150-200 words for every short answer question
Mini case: Non-governmental organizations and political power
When the topic of politics in the international business arena is discussed, one is likely to hear about such things as the impact of the government on international trade and the regulation of multinational enterprises (MNEs). In recent years another topic that has become more popular is the role of non-governmental organizations (NGOs) that have been gaining an increasing amount of political power. An NGO is a non-profit organization run by volunteers with a specific mandate at a local, national, or international level. As such, NGOs take a number of different forms. Some are very large, such as the environmental group Greenpeace, the World Wildlife Fund (WWF), and Amnesty International, whereas others are smaller and less well known. NGOs’ positions on international trade issues are as diverse as their mandates. For example, Oxfam, whose mandate is the long-term alleviation of poverty, suffering, and injustice, does not oppose trade itself. Indeed, it considers “fair trade” a means to achieve development in poorer countries and promotes other organizations that engage in this type of trade. The Institute for Leadership Development actively seeks to promote trade and the development of entrepreneurial skills in poorer countries.
The US NGO Consumers for World Trade points out that protectionism is equivalent to a hidden tax and actively lobbies for free trade. Environmental and animal rights NGOs, on the other hand, lobby their governments and international bodies for trade rules that protect the natural environment. For example, in December 1997 at the Kyoto Summit, NGOs were instrumental in getting standards for the reduction of greenhouse gas emissions put into the agreement, even though the United States and other major economic powers refused to accept this standard because the technology was not available and the standard could not be met. Protection or anti-trade, NGOs often grab the headlines. For example, the American Farm Bureau seeks to improve the financial well-being and quality of life for farmers and ranchers in the United States and opposes government policies to liberalize agricultural trade by reducing subsidies to US farmers. Yet other NGOs are more generally opposed to free trade and investment. In the 1997–1998 period, for example, NGOs were extremely effective in defining the Multilateral Agreement on Investment (MAI).
The MAI was designed to make it illegal for signatory states to discriminate against foreign investors and to liberalize rules governing foreign domestic investment among the members of the Organization for Economic Cooperation and Development. NGOs contributed to riots in Seattle in December 1999 and violent clashes with the police in Genoa in July 2001. The NGOs influenced the Clinton admin******ration to add two side agreements to NAFTA: setting up an environmental body in Montreal and a labor standard body in Dallas. In a nutshell, these NGOs managed to work outside the NAFTA agreement to get provisions incorporated into the overall contract. In the process, they showed that NGOs were becoming an important force in the international political arena. Notwithstanding the variety of views emanating from NGOs, a select group is portraying MNEs as big, bad, and ugly. But is it an accurate portrayal? Starbucks, for instance, has been heavily criticized for not selling fair trade coffee, yet it directly pays farmers a price higher than that received by farmers involved in fair trading. Being the best-known brand in North America was enough to make it the target of NGOs.
In general, MNEs improve the well-being of workers across the world while manufacturing goods and providing services that improve the quality of life of consumers around the world. Given its rise in popularity over the last five years, NGOs are likely to be the focus of continuing interest by both international business analysts and local voters.
1. Question 1: Briefly explain how NGOs can affect the choice of market entry for an MNE? (10 Marks)
2. Are NGOs a force against globalization of companies and liberalization of trade? Discuss from an ethical perspective (10 Marks)