International Business Interacts Domestic International Police

International Business Interaction With Domestic And International Policy.
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International business interaction with domestic and international policy.
Throughout history, commercial interests have played a key role in establishing foreign relations. The interaction between international business with domestic and international policies has become the focus of discussions among many stakeholders. In the 21st century, decision-making process by one state greatly affects other countries. Therefore, it is important to understand foreign policy decisions and what motivates countries in making such policies, which at times negatively affects other nations.[Smith Steve, Amelia Hadfield, Tim Dunne. Foreign policy: theories, actors, cases. (Oxford University Press 2016).]
Politics is a key determinant in policy formulation. Lobbyists and interest groups, including the corporate sector play a key role in developing foreign policies. Trade policies at the international level impacts on domestic and its foreign investments, policies can shape and affect the behavior of firms in different forms.Since international trade depends on state policies, policy choices have become the main agenda among state governments. Investment is seen as a key ingredient in the country's economic growth and future development. Policies related to trade have undergone a major significant shift from just focusing on offering goods and services to more complex negotiations among different countries.[Spar Debora.National Policies and Domestic Politics. Business and Management, Social Issues, Public and Nonprofit Management. (The Oxford Handbook of International Business 2009).] [Ibid 78] [Ibid 43]
This essay examines some of the important domestic policies that can affect operations at the international levels. These policies include trade policies that deal with control, protection and developing strategies, the foreign direct investment that deals with capital controls and regulation and competition policies . The essay will describe how policies are generated and the purpose they serve and how they affect international business processes. The essay analyzes the politics behind certain policies, examining how the policies affect international trade. In this case, examining key international trading organization like the GATT and WTO.[Ibid 66]
International business interacts with domestic and international policy.
There is a growing recognition that labor market policies and other trade related policies like market regulations can significantly affect business interaction at the international levels.That is why it is important to understand the role of between multi-national corporations’ operations. Multinational Corporation has always benefited many countries; however, the same institutions come with relaxed policies that mostly exploits the host countries rather than provide them with the necessary support for future economic development.[Snyder Jack. Myths of empire: Domestic politics and international ambition. (Cornell University Press 2013).] [Ibid 91]
Multinational Corporation invests in host countries and their impact is likely to bring significant changes in both the host countries and home country. Government offer incentives to these firms in forms of grants, subsidies and many other forms to attract more foreign investment.Foreign direct investment is used by firms to expand its operations to other borders in overseas. International firms produce locally in the host nation, products that were being exported from the home nation.Operating in host countries means following specific rules and trade regulations of these host countries, which at times might not favor these firms.[Narula Rajneesh, André Pineli. Multinational Enterprises and Economic Development in Host Countries: What We Know and What We Don’t Know. (Palgrave Macmillan 2017).] [Ibid 40] [Ibid 42]
Trade policies can help a country to foster investment and growth or cause constraints. High trade barriers can discourage foreign investment.Border policies and labor market arrangements significantly impacts on Foreign direct investment patterns. Labor tax wedge has been the most influential of the labor market arrangements.Tariff barriers between host and investors have always discouraged foreign investment. Labour market arrangement influence restriction to trade and Foreign direct investment patterns.Since the arrangements are mostly driven by policy objectives, they have other side effects in foreign direct investments patterns flow.[Hoskisson Robert . "Emerging multinationals from mid‐range economies: The influence of institutions and factor markets." Journal of Management Studies. (2013) 1295.] [Ibid 1296] [Ibid 1297] [Ibid 1299]
Strict employment protection policies like high labor tax wedge, turn away foreign direct investments patterns to other locations where labor market arrangement is not expensive. Protection policies are likely to affect foreign direct investment patterns, reducing returns expected from direct investment, increasing the risk of investing in the host country. Production market regulations can also affect the production cost and entry barriers for multi-National Corporation at home and in the host, country markets.Production regulation affects both local and foreign firms and causing distorted effects on the Foreign direct investments patterns flows since it affects market access and revenue expected from investing in foreign locations.[Hoenen Anne Kristin, Tatiana Kostova. "Utilizing the broader agency perspective for studying headquarter subsidiary relations in multinational companies." Journal of International Business Studies (2015) 104.] [Alfaro Laura, Andrew Charlton. Growth and the Quality of Foreign Direct Investment." The Industrial Policy Revolution. (Palgrave Macmillan UK 2013).] [Hoenen Anne Kristin, Tatiana Kostova. "Utilizing the broader agency perspective for studying headquarters subsidiary relations in multinational companies." Journal of International Business Studies (2015) 104.] [Ibid 1301]
International policy that shape and constrain the behavior of firms
International trade policies including foreign direct investment, competition policies converge at several points because they all aim at increasing world wealth and opening markets to foreign services and products, including capital . These places can be reinforced when only pursued with a common goal that is to promote cross-border competition. Enacting liberal policies means eliminating or lowering trade barriers, opening foreign markets, bringing competition to domestic producers. Eliminating trade barriers can significantly affect competition by reducing anti-competitive behaviors.[Gopinath Gita, Elhanan Helpman, and Kenneth Rogoff. (Handbook of international economics Elsevier 2014).] [Ibid 53] [Ibid 65]
Liberalized of trade
Most countries agree that policies that open up market and encourage investment in foreign countries are needed for sustained economic growth. Trade expansion has been the most powerful ways for countries to promote economic growth. It is not surprising to understand why organizations like the General Agreement on Tariffs and Trade (GATT) was created in 1947 to serve this purpose. With the eight rounds of multilateral trade liberalization, GATT has succeeded in promoting trade among its members.However, GATT members believed a new effort could be reinforced and can be used to extend the multilateral system of trade. This discussion was presented during the Uruguay Round, known as the Marrakesh Declaration that created the World Trade Organization.[Webber Mark, Michael Smith. Foreign policy in a transformed world. (Routledge 2014).] [Wilkinson Rorden. "Changing power relations in the WTO–why the India–US trade agreement should make us worry more, rather than less, about global trade governance." Geoforum 61 (2015) 13.] [Wilkinson Rorden. "Changing power relations in the WTO–why the India–US trade agreement should make us worry more, rather than less, about global trade governance." Geoforum 61 (2015) 13.]
The role of General Agreement on Tariffs and Trade and World Trade Organization (GATT-WTO) system has facilitated various agreements on competition policy. The main role of (GATT-WTO) to encourage trade liberalization and minimize anti-competitive practices, by developing appropriate competition laws.Competition laws promote the elimination or reduction of government barriers to trade to reduce the market power of firms. The main aim of GATT-WTO is to share the common objectives of promoting economic growth and welfare through non- discriminatory, transparent; rules-based management.[Abdur Chowdhury, Xuepeng Liu, Miao Wang, M.C. Sunny Wong. Institutions in International Trade: The Effect of GATT/WTO Membership on Trade Volatility and Trade Volatility Co-movement. (Marquette University 2014).] [Ibid 107] [Ibid 545]
In the absence of effective competition laws, the many gains from a liberated trade can be undermined since multinational firms can prevent access to foreign goods and service. Liberalized trade policies seek to remove barriers, but also raise revenue, protecting producers and competitors. Trade and competition share similar economic objectives of removing barriers and ensuring that the international market is open to all. The two policies are crucial factors for future economic growth.[Ibid 546] [Gopinath Gita, Elhanan Helpman, and Kenneth Rogoff. (Handbook of international economics Elsevier 2014).]
Despite the close relationship and common objectives to maximize wealth, these policies have some points of divergence and have resulted in contradictory actions. The trade policies are two-sided; they can promote trade and protect producers and competitors. Trade policies like anti-dumping and are aimed at correcting the market disequilibrium due to unfair and damaging import pricing practices.The same laws have served the protectionist purpose , raising barriers to market entry by foreign competitors.[Gopinath Gita, Elhanan Helpman, and Kenneth Rogoff. (Handbook of international economics Elsevier 2014).] [Ibid 110] [Ibid 111]
For example, the auto spare negotiations between Japan and the US in the 1990s opened the Japan market for the US auto parts manufacturers. The US complained that the market was not opened enough. The US used the GATT laws under the Article XXIII of GATT, arguing that the japans antitrust authorities imposed the laws, hence impairing the trade benefits between the two counters. Trade liberalization laws have created different trade relations among member's bringing new trade issues like intellectual property. As globalization continues, international trade has greatly shifted from just manufactured goods and services to commercial transactions and foreign direct investment. The balance between the domestic economy and politics has affected trade in various ways. Countries with large national economies have better internal trade compared to those with smaller national economies.[Perri Alessandra, Enzo Peruffo. "Knowledge spillovers from FDI: a critical review from the international business perspective." International Journal of Management Reviews. (2016) 3.] [Preston Lee E, and Duane Windsor. The rules of the game in the global economy: Policy regimes for international business. (Springer Science & Business Media 2013).] [Ibid 27]
The US is considered as the most dominant state in shaping GATT and WTO institutions. It is not surprising that the WTO is accused of being trade –biased. The main aim of the WTO is to facilitate negotiations of liberalized trade policies. However, the WTO representatives have adopted a mercantile system.The decisions by the WTO are meant to enrich the US and other EU countries by siding with these countries that restrict imports and encourage exports. The WTO has instead strived to expand national exports of specific countries at the same time limiting imports from other countries in a way that satisfies individual countries as compared to others.[Preston Lee E, and Duane Windsor. The rules of the game in the global economy: Policy regimes for international business. (Springer Science & Business Media 2013).] [Ibid 33] [Ibid 36]
The bargaining process in the WTO has resulted in developing countries, raising important issues in the practice of the US and EU because they impose trade restrictions on labor and environmental activities to satisfy domestic producer interests but not member countries. The most controversial case is the Shrimp-Turtle Case. The US served the interest of its domestic producers using environmental. Even though arguments have been presented about the role of the World Trade Organization, WTO believes that trade itself is not the end, but sustained economic growth is key, especially where environmental concerns are being addressed.[Preston Lee E, and Duane Windsor. The rules of the game in the global economy: Policy regimes for international business. (Springer Science & Business Media 2013).] [Brutger Ryan, Julia C. Morse. "Balancing law and politics: Judicial incentives in WTO dispute settlement." The Review of International Organizations (2015) 179.]
In the Shrimp/Turtle case, the US prohibited the import of shrimp from countries that did not adopt a turtle conservation program that is similar to the US measure. However, this ban affected certain Asian countries as compared to the western countries.Such action was criticized by many member nations claiming that the US had engaged in unjustified discrimination. Environmentalist argue that the WTO has been overtaken by bigger powers who want to benefit the domestic producers blocking other country's imports without compensation[Gilpin Robert. The political economy of international relations. (Princeton University Press 2016).]
Developing countries are the most affected because they have had different priorities as compared to the developed countries. Power politics have affected international economic relations. The WTO Shrimp-Turtle case is an example of domestic politics and how it can affect international trade, environmental policy choices.The US legislation was passed because it was meant to appease the US shrimp industry. The move has forced developing countries to adopt similar standards as required by the US or suffer the consequences that are to face an import ban. Such policies can easily be passed as compared to serious environmental issues like sea turtle problem in developing countries.[Kucik Jeffrey, Krzysztof J. Pelc. "Measuring the cost of privacy: A look at the distributional effects of private bargaining." British Journal of Political Science. (2016) 861.] [Ibid 119]
By conditioning access to the US markets, the US forced their regulatory framework that made developing countries assume the cost.The US or the WTO has not addressed the financial costs related to such regulations, ignoring the fact that the enforcing such regulations have minimal costs.The most difficult issue confronting the WTO is the trade and environment dispute is whether the trade restriction can be effective...