2. Trade Risks and Related Issues Tariffs – taxes on imported goods Non-tariff barriers – i.e. “fit and finish” rules on cars Quotas – voluntary or mandatory Embargoes – on countries such as Cuba Boycotts – refusal to trade with a country or firm Export Controls – i.e. EAR (see “Don’t Let This Happen to You” from the USDoCommerce’s BIS) www.bis.doc.gov/complianceandenforcement/dontletthishappentoyou-2008.pdf
3. Trade Liberalization The efforts of governments to reduce tariffs and non-tariff barriers. Primarily GATT and its successor the WTO (see www.wto.org): “The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.” Key concepts: “most favored nation status” (mfn) and its successor “normal trade relations”
4. Intellectual property rights – the heart of information-based economies TRIPS stands for trade-related aspects of intellectual property rights and it is part of the WTO (see http://www.wto.org/english/tratop_e/trips_e/trips_e.htm ) WIPO stands for The World Intellectual Property Organization (WIPO), which is a specialized agency of the United Nations. It is dedicated to developing a balanced and accessible international intellectual property (IP) system, which rewards creativity, stimulates innovation and contributes to economic development while safeguarding the public interest. (see http://www.wipo.int/portal/index.html.en) See Case Study at http://www.wto.org/english/res_e/booksp_e/casestudies_e/case3_e.htm “In the present case, both India and Bangladesh as members of the WTO are bound by its rules. When some nationals or business firms of India infringed the copyright (included in the IPR) of the Bangladesh nationals —members of the band Miles — it was possible for the latter to seek legal redress for the injury caused by such infringement of copyright. And this was particularly provided for in the WTO rules (National Treatment Principle of TRIPS).”
5. IP, Technology, and International Trade See the recent WTO case brought by the U.S. against China at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds362_e.htm See the recent case brought by Antigua against the U. S. at http://www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds285sum_e.pdf
6. Franchising (Domestic/Global) Business Format Franchising is a form of business license where the franchisor is licensing an entire way of doing business, or, as the book says, “a proven plan of business operation, in return for royalties, fees, or commissions.” The book refers to this as business operations franchising. Examples include most popular fast food eateries. Product or Tradename Franchising is an older form and occurs when the franchisor licenses the franchisee to sell its products and use its name. Examples include car dealerships, hardware store chains, and gas stations.
7. Franchising is a Marketing Method Who pays for the construction of facilities, etc. ? What does the franchisee get from the franchisor? What does the franchisor get in return? What is the legal liability of the franchisor?
8. FDI – foreign direct investment 1. Check out the Web site for UNCTAD at www.unctad.org FDI = MNC How to structure the FDI Subsidiaries Joint Ventures Mergers Acquisitions
9. FDI Risks Abound Protectionist policies, here and abroad Local participation requirements Repatriation of profits restrictions Technology transfer requirements Nationalization, expropriation, and confiscation Deep pockets litigation, see In re Union Carbide (Bhopal) Transaction risks from sales contracts Payment, delivery, marine, and pilferage risks Currency (or exchange rate) risk Language and cultural risks Legal and political risks
