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This document provides an overview of global human resource management. It discusses topics such as the evolution of global business, global staffing approaches, compensation for expatriates and host country nationals, global human resource development, safety and health, and legal/political factors. The objectives are to describe the impact of globalization on HR and explain considerations related to areas like staffing, development, compensation and labor relations from a worldwide perspective.
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- 1. Copyright © 2014 Pearson Education, Inc. Human Resource Management 13th Edition Chapter 14 Global Human Resource Management 14-114-1 Copyright © 2014 Pearson Education, Inc.
- 2. Copyright © 2014 Pearson Education, Inc. Learning Objectives • Describe the impact of global bribery in the international arena. • Describe the evolution of global business and global strategic human resource management. • Explain some global issues confronting women. • Explain global staffing. • Describe global human resource development. 14-2
- 3. Copyright © 2014 Pearson Education, Inc. Learning Objectives (Cont.) • Explain global compensation. • Describe global safety and health. • Explain global employee and labor relations. • Describe legal and political factors affecting global human resource management. • Describe possible advantages and disadvantages related to globalization for small and medium sized businesses. 14-3
- 4. Copyright © 2014 Pearson Education, Inc. HRM in Action: Global Bribery, The Conviction List Grows • Foreign Corrupt Practices Act prohibits U.S. firms from bribing foreign officials • Not using bribery has been costly for American companies • Attacks of 9/11/2001 caused authorities to take closer look at financial data while searching for terrorists' funds – Found bribery corruption in the process • List of convictions under FCPA continues to grow 14-414-4
- 5. Copyright © 2014 Pearson Education, Inc. Evolution of Global Business • Not long ago, Mercedes-Benz was still a German company, General Electric was American, and Sony was Japanese • Many United States firms do most of their business and employ most of their workers outside U.S. • Many non-U.S. companies make products here 14-514-5
- 6. Copyright © 2014 Pearson Education, Inc. Evolution of Global Business • Exporting: Selling abroad retaining foreign agents and distributors • Licensing: Organization grants foreign firm right to use intellectual property • Franchising: Parent company grants another firm right to do business in prescribed manner 14-614-6
- 7. Copyright © 2014 Pearson Education, Inc. Evolution of Global Business (Cont.) • Multinational corporation: Firm based in one country that produces goods or provides services in one or more foreign countries • Global corporation: Corporate units in countries are integrated to operate as one organization worldwide • Transnational corporation: Moves work to places with talent to handle the job and time to do it at right cost 14-714-7
- 8. Copyright © 2014 Pearson Education, Inc. Global Professional in Human Resources • New certification for HRCI • Focuses on: – Strategic HR management – Global talent acquisition and mobility – Global compensation and benefits – Organizational effectiveness – Talent development – Workforce relations – Risk management 14-814-8
- 9. Copyright © 2014 Pearson Education, Inc. Global Human Resource Management • Functional areas similar to domestic HR • Manner in which they are implemented may differ 14-914-9
- 10. Copyright © 2014 Pearson Education, Inc. 14-10 Environment of Global Human Resource Management 1 Human Resource Managemen t Other Functional Areas OperationsMarketing Finance LegalConsiderationsEconomy Technology Society Shareholders Unions Customers Competition Labor Market Hum an Resource Developm ent Compensation Staffing Employeeand LaborRelations Safety and Health INTERNAL ENVIRONMENT EXTERNAL ENVIRONMENT UNITED STATES GLOBAL ENVIRONMENT Unanticipated Events PoliticalParties 14-10
- 11. Copyright © 2014 Pearson Education, Inc. Trends & Innovations: Global Issues Confronting Women • Some countries do not provide women equal access to jobs • Female talent is underutilized in emerging countries • Positive trends that have emerged regarding women working the global environment 14-11
- 12. Copyright © 2014 Pearson Education, Inc. Global Staffing • Types of global staff members • Approaches to global staffing 14-1214-12
- 13. Copyright © 2014 Pearson Education, Inc. Types of Global Staff Members • Expatriate: Employee working in firm who is not a citizen of country in which firm is located, but a citizen of country where organization is headquartered • Host-country national: Employee’s nationality same as location of subsidiary • Third-country national: Citizen of one country, working in second country, and employed by organization headquartered in third country 14-1314-13
- 14. Copyright © 2014 Pearson Education, Inc. Approaches to Global Staffing • Ethnocentric staffing: Primarily hiring expatriates for higher-level foreign positions • Polycentric staffing: More host- country nationals are used throughout the organization, from top to bottom 14-1414-14
- 15. Copyright © 2014 Pearson Education, Inc. Approaches to Global Staffing (Cont.) • Regiocentric staffing: Regional groups of subsidiaries reflect organization’s strategy and structure work as a unit • Geocentric staffing: Using worldwide integrated business strategy to hire the best person for the job 14-1514-15
- 16. Copyright © 2014 Pearson Education, Inc. Recruiting Host-country Nationals • Should not assume that recruiting approaches that worked in parent company will be effective in recruiting host-country nationals • Example: Error that many recruiters make is believing that all countries in Europe are similar or the same 14-16
- 17. Copyright © 2014 Pearson Education, Inc. Selecting Expatriates Four distinct stages: 1. Self-selection 2. Creating a candidate pool 3. Technical skills assessment 4. Making a mutual decision 14-1714-17
- 18. Copyright © 2014 Pearson Education, Inc. Background Investigation • Conducting background investigations in other countries is equally, or more, important than in U.S. • Differences across cultures and countries often create barriers • Each country has own laws, customs, and procedures for background screenings 14-1814-18
- 19. Copyright © 2014 Pearson Education, Inc. Global Human Resource Development • Pre-move orientation and training • Continual development: Online assistance and training • Repatriation orientation and training 14-1914-19
- 20. Copyright © 2014 Pearson Education, Inc. Expatriate Preparation and Development Program 14-20 Expatriate Preparation and Development Prior to Departure: Orientation and Training During Assignment: Continual Development Near Completion: Repatriation Orientation Training Language Culture History Local Customs Living Conditions Expanding Skills Career Planning Home-Country Development U.S. Lifestyle U.S. Workplace U.S. Employees 14-20
- 21. Copyright © 2014 Pearson Education, Inc. Pre-move Orientation and Training • Essential before global assignment begins • Expatriate need to understand cultural do’s and don’ts and be immersed in language • Employee’s global skills are fitted into career planning and corporate development programs 14-21
- 22. Copyright © 2014 Pearson Education, Inc. Continual Development: Online Assistance and Training • Companies now offer online assistance and training in areas such as career services, cross-cultural training, and employee assistance programs • Technology can be used to provide ongoing contact and support 14-22
- 23. Copyright © 2014 Pearson Education, Inc. Repatriation Orientation and Training • Repatriation: Process of bringing expatriates home • Too many returning managers report dissatisfaction with process • Some expatriates are not even guaranteed a job upon their return 14-23
- 24. Copyright © 2014 Pearson Education, Inc. Global E-Learning • Globalization has created special need for e-learning • Challenges for global e-learning implementation include language and localization issues • Companies that want to offer courses in several languages usually turn to translators 14-2414-24
- 25. Copyright © 2014 Pearson Education, Inc. Virtual Teams in Global Environment • Necessity of everyday working life • Enable companies to accomplish things more quickly and efficiently 14-2514-25
- 26. Copyright © 2014 Pearson Education, Inc. Difficulties that Virtual Teams Confront • Do not feel as connected or committed to team • Communication problems directly proportional to number of time zones separating them • Language and culture problems 14-2614-26
- 27. Copyright © 2014 Pearson Education, Inc. Compensation for Host-Country Nationals • Organizations should think globally but act locally • Normally slightly above prevailing wage rates in area • Variations in laws, living costs, tax policies, and other factors must be considered 14-2714-27
- 28. Copyright © 2014 Pearson Education, Inc. Compensation for Host-Country Nationals (Cont.) Factors to consider: –Minimum wage requirements –Working time information such as annual holidays and vacation time and pay –Hiring and termination rules –Regulations covering severance practices 14-2814-28
- 29. Copyright © 2014 Pearson Education, Inc. Compensation for Host-Country Nationals (Cont.) • Culture often plays a part • North American practices encourage individualism and high performance • Continental European programs typically emphasize social responsibility • Traditional Japanese approach considers age and company service as primary determinants of compensation 14-2914-29
- 30. Copyright © 2014 Pearson Education, Inc. Expatriate Compensation • Largest expatriate costs include overall remuneration, housing, cost-of-living allowances, and physical relocation • U.S. citizens living overseas can exclude up to $92,900 of income earned abroad • Additional challenges: Devaluation of U.S. dollar 14-3014-30
- 31. Copyright © 2014 Pearson Education, Inc. Global Safety and Health • Employees who work in safe environment and enjoy good health more likely to be productive • U.S.-based global operations are often safer and healthier than host-country operations • Not as safe as similar operations in U.S. 14-3114-31
- 32. Copyright © 2014 Pearson Education, Inc. Global Safety Programs • Global companies continue to face global safety risks • Bhopal Disaster of 1984 was worst industrial disaster in history • Companies have discovered way they treat their workers anywhere on planet can pose risk to their corporate reputation • Employers should also be concerned with health issues for host-country nationals 14-3214-32
- 33. Copyright © 2014 Pearson Education, Inc. Global Employees and Labor Relations Strength and nature of unions differ from country to country Ranges from nonexistent to relatively strong 14-3314-33
- 34. Copyright © 2014 Pearson Education, Inc. Global Employees and Labor Relations in European Countries • Codetermination: Requires firms to have union or worker representatives on their boards of directors • Laws make it hard to fire workers, so companies are reluctant to hire • Generous and lengthy unemployment benefits can discourage jobless from seeking new work 14-3414-34
- 35. Copyright © 2014 Pearson Education, Inc. Global Employees and Labor Relations in South American Countries • In countries such as Chile, collective bargaining for textile workers, miners, and carpenters is prohibited • Unions are generally allowed only in companies of 25 workers or more • Practice has encouraged businesses to split into small companies to avoid collective bargaining 14-3514-35
- 36. Copyright © 2014 Pearson Education, Inc. Global Legal and Political Factors • Nature and stability of legal and political systems vary throughout the world • Legal and political forces are unique to each country, and sometimes laws of one country contradict those of another • HR regulations and laws vary greatly among countries • Does operating under local laws and customs free a company of all ethical considerations? 14-3614-36
- 37. Copyright © 2014 Pearson Education, Inc. Tariffs and Quotas • Tariffs: Taxes collected on goods shipped across national boundaries • Quotas: Limits on the number or value of goods imported across national boundaries 14-3714-37
- 38. Copyright © 2014 Pearson Education, Inc. North American Free Trade Agreement (NAFTA) • Between Canada, Mexico, and United States • Facilitated movement of goods across boundaries within North America • Free-trade zone of over 400 million people • Combined gross domestic profit of about $12 trillion 14-3814-38
- 39. Copyright © 2014 Pearson Education, Inc. Central American Free Trade Agreement • Ratified after long political battle, and signed into law in 2005 • Could provide huge economic boost for region 14-3914-39
- 40. Copyright © 2014 Pearson Education, Inc. Globalization for Small to Medium- Sized Businesses • International sales have become vital and growing part of market for small to medium businesses • United States has goal of doubling exports in 5 years, from $1.57 trillion in 2009 to $3.14 trillion in 2014 14-40
- 41. Copyright © 2014 Pearson Education, Inc. 14-41
Editor's Notes
- The United States is rigorously enforcing the Foreign Corrupt Practices Act (FCPA), which prohibits U.S. firms from bribing foreign officials. However, countries other than the United States face far fewer constraints when dealing with bribery. Although the 35 signatories of the Organization of Economic Cooperation and Development’s 1997 convention made it a crime to bribe foreign officials, there has been little enforcement of laws by national governments, other than by the United States. Not having the ability to use bribery as a tool of doing business has been costly for American companies.
- Not long ago, Mercedes-Benz was still a “German” company, General Electric was “American,” and Sony was “Japanese,” but today these companies are truly global. Now, U.S. firms, such as Coca-Cola, Procter & Gamble, and Texas Instruments, do most of their business and employ most of their workers outside the United States. Today, globalization is not limited to large organizations—it is now an inevitable and important factor for most firms.
- Most companies initially become global by exporting, licensing, or franchising. Exporting entails selling abroad, either directly or indirectly, through foreign agents and distributors. It is the way that many small businesses enter the global market. Licensing is an arrangement whereby an organization grants a foreign firm the right to use intellectual property, such as patents, copyrights, manufacturing processes, or trade names, for a specific period of time. Franchising is an option whereby the parent company grants another firm the right to do business in a prescribed manner. Franchisees must follow stricter operational guidelines than do licensees. Franchising is popular with service firms, such as restaurants and hotels.
- A multinational corporation is based in a home (or parent) country and produces goods or services in one or more foreign (or host) countries. Many firms have evolved from being multinational to becoming global corporations, organizations that have corporate units in a number of countries that are integrated to operate as one organization worldwide. A transnational corporation goes one step further and moves the work to the places with the talent to do the job most cost effectively.
- The importance of human resource management in the global environment is illustrated by the fact that the Human Resource Certification Institute now has an international component. Their Global Professional in Human Resources certification focuses specifically on strategic HR management issues relevant to global and multinational organizations.
- While the functional areas associated with effective global human resource management may be similar to domestic HR issues, the manner in which they are implemented may differ significantly. As with domestic human resources, the functional areas are not separate and distinct, but are highly interrelated.
- The functional areas associated with effective global human resource management are shown in this figure, and an extra layer has been added to represent the added complexity of the global environment.
- Sexual harassment is only one concern facing women in the global environment. According to a recent United Nations study entitled Women, the United Nations Entity for Gender Equality and the Empowerment of Women, some countries do not provide women equal access to jobs because they are barred from working in the same industries as men or are forbidden to work at night. The report further estimates 603 million women live in countries where domestic violence is not considered a crime. The global assignment of women and members of racial/ethnic minorities can involve cultural and legal issues. Regrettably, female talent is under utilized in emerging countries. This may be partly explained by family-related constraints and pressures, as well as work-related issues that combine to force women to either settle for dead-end jobs or leave the workforce.
- Before the staffing process for an international assignment begins, a thorough understanding of what is involved in the job should be developed through job analysis. A global organization must systematically match the internal and external supply of applicants with anticipated job openings in the organization over a specified period of time. Individuals should be recruited and selected based on the specific qualifications identified. Without proper identification of the qualities needed for an overseas assignment, an outstanding worker in the United States may fail on a global assignment.
- An expatriate (or expat) is an employee who is not a citizen of the country in which the firm’s operations are located, but is a citizen of the country in which the organization is headquartered. The U.S. expat population has grown rapidly, mainly because of the large numbers of workers who are being sent to China and India. A host-country national is an employee who is a citizen of the country where the subsidiary is located. An example would be a U.S. citizen working for a Japanese company in the United States. Normally, the bulk of employees in international offices are host-country nationals. A third-country national is a citizen of one country, working in a second country, and employed by an organization headquartered in a third country. An example would be an Italian citizen working for a French company in Germany.
- With ethnocentric staffing, companies primarily hire expats to staff higher-level foreign positions. This strategy assumes that home-office perspectives and issues should take precedence over local perspectives and issues, and that expats will be more effective in representing the views of the home office. When host-country nationals are used throughout the organization, from top to bottom, it is referred to as polycentric staffing. The rationale for using this model is that host-country nationals are better equipped to deal with local market conditions.
- Regiocentric staffing is similar to the polycentric approach, but regional groups of subsidiaries reflect the organization’s strategy and structure work as a unit. Geocentric staffing is a staffing approach that uses a worldwide integrated business strategy. The firm attempts to always hire the best person available for a position, regardless of where that individual comes from. The geocentric staffing model is the most complex and likely to be used only by truly global firms.
- One of the biggest mistakes that can be made in the multinational arena is to assume that the recruiting approaches that work in the parent company will also be effective in recruiting host-country nationals. For example, an error that many recruiters make is believing that all countries in Europe are similar or the same. Thinking that Italy is similar to France simply because the countries are close to each other is like believing the United States is similar to Mexico because they are neighbors in North America. The use of technology in global recruiting also varies considerably. For example, while Scandinavian companies in Norway, Sweden, and Denmark were amongst the first to promote Internet use for recruiting. Recruiters in France, Italy and much of southern Europe do not use it as much.
- Expats are often selected from those already working within the organization, using a process with four stages: 1.In self-selection, candidates determine whether they are right for a global assignment, whether their spouses and children are interested in relocating internationally, and whether this is the best time for a move. 2.The next stage involves creating a candidate database organized according to the firm’s staffing needs. Included in the database is information such as availability, languages spoken, country preferences, and the jobs for which the employee is qualified. 3.Stage three involves assessing the technical and managerial readiness of all the potential candidates for the assignment. 4.In the final stage, one person is identified and is tentatively selected.
- Conducting background investigations when working in the global environment is equally, or more, important than in the U.S., but differences across cultures and countries often create barriers. Each country has its own laws, customs, and procedures for background screenings. For instance, the United Kingdom does not allow third parties to have direct access to criminal records held by local police. Instead, the job applicant and the recruiting organization must sign and submit a formal request, and it can take up to 40 business days to get information.
- Many U.S. businesses operate under the assumption that American ways and business practices are standard across the globe. Unfortunately, nothing could be further from the truth. Global training and development for expats is necessary because people, jobs, cultures, and organizations are different in every country.
- Pre-move orientation and training of expatriate employees and their families are essential before a global assignment begins. The orientation needs to be rigorous and thorough enough so that the expat understands cultural dos and don’ts and is immersed in the language. Merely providing a cultural “dummies” guide and a basic phrasebook for speaking won’t be enough. Next, relevant local and virtual support need to be provided for the duration of the assignment. Finally, orientation and training are also necessary prior to repatriation, which is the process of bringing expats home.
- Pre-move orientation and training of expatriate employees and their families are essential before the global assignment begins. The pre-move orientation needs to be aggressively undertaken so that the expatriate understands cultural dos and don’ts and is immersed in the language. Obviously providing an expatriate a cultural ‘dummies’ guide and a basic phrasebook for speaking the language is not enough. Continuing employee development, in which the employee’s global skills are fitted into career planning and corporate development programs, makes the eventual transition to the host home country less disruptive.
- Companies now offer online assistance and training in areas such as career services, cross-cultural training, and employee assistance programs. The Internet offers global employees assistance 24 hours a day, seven days a week. Technology is a time-saving and cost-effective solution for the stress experienced by employees who are on assignment or doing business travel. Even if the assignment is a short-term business trip, technology can be used to provide ongoing contact and support.
- Orientation and training are also necessary prior to repatriation, which is the process of bringing expatriates home. Repatriation is often the weak link in globall human resource management. Returning expatriates have not always had a pleasant experience. Even though a company may spend considerable money in sending managers overseas, too many returning managers report dissatisfaction with the process. Many companies do not specify in advance how the international experience will fit into an employee’s career progression. In fact, numerous expatriates were not even guaranteed a job upon their return.
- Globalization has created a special need for e-learning, and companies are embracing it to train the global workforce. In the past, a training program in the Far East for a U.S.-based company would likely cost between $250,000 and $500,000 for travel and related expenses. Many believe that live, instructor-led training is still more effective, but the question that must be asked is how much more effective it is. E-learning often allows companies to save money and still receive a good training product. The most obvious challenge for any global e-learning implementation is failure to recognize the impact of cultural differences on the programs’ success. Developing programs in partnership with locals is one of the best ways to ensure that the programs are relevant culturally and meet the firm’s needs.
- Virtual teams are becoming commonplace in many organizations. Intel Corporation recently conducted a study that revealed that approximately two-thirds of its employees collaborated with team members located at different sites and in different regions. With virtual teams, team members do not have to meet face-to-face to work, thereby eliminating “dead time” caused by traveling. These teams operate across boundaries of time and geography and enable companies to accomplish things more quickly and efficiently. However, global teams can be more difficult to manage effectively because they rarely come together for face-to-face sessions. Communication and trust are the keys to keeping virtual teams cohesive and working effectively together.
- Dispersed team members often do not feel as connected or committed to the team as they would to a team that was not dispersed. There may be a feeling of disconnect caused by communicating primarily through email, instant messaging, and audio conferencing. Communication problems among team members increase with the number of time zones that separate them. If their workdays overlap enough to allow phone calls, it is more manageable. If the workdays do not overlap at all, then they must rely exclusively on email and voice mail. Finally, there are language and culture problems. Those for whom English is a second language may be at a disadvantage. In addition, many Asians are concerned with saving face if they do not understand something. They may be hesitant to ask questions that would reveal their ignorance, thus widening the communication gap.
- Certainly, in compensation-related matters, organizations should think globally but act locally. One reason that organizations relocate to other areas of the world is to increase their ability to compete on a global basis. Globally, the question of what constitutes a fair day’s pay is not as complicated as it is in the United States; normally, compensation is slightly above the prevailing wage rates in the area. However, variations in laws, living costs, tax policies, and other factors must be considered when a company is establishing global compensation packages.
- In order to establish appropriate compensation practices in each country, an organization will want to get a precise picture of local employment and working conditions. Some of the factors that should be considered include: minimum wage requirements; working-time information such as holidays, vacation time, standard working hours, probation periods, and overtime regulations; and hiring and termination regulations.
- Culture often plays a part in determining compensation as well. North American compensation practices encourage individualism and high performance, whereas European programs typically emphasize social responsibility. The traditional Japanese approach considers age and company service as primary determinants of compensation. The bottom line is that there is no “one” universal compensation philosophy that can address all of these cultural variables equally.
- For expatriate managers, the situation is more complex than simply paying above local host-country compensation rates. The largest expat costs for a company include overall pay, housing, cost-of-living allowances, and physical relocation. One tangible benefit of expat compensation is that U.S. citizens living overseas can exclude up to $92,900 of gross income earned abroad from taxation in the U.S. In the past few years, additional challenges have hit companies as they have attempted to go global. The devaluation of the U.S. dollar and changes in tax codes have had major impacts on expat compensation. Meeting these challenges will affect how effectively the United States competes in the global market.
- U.S.-based global operations are often safer and healthier than host-country operations, but frequently not as safe as similar operations in the United States. Safety and health laws and regulations often vary greatly from country to country. Such laws can range from virtually nonexistent to as stringent as those in the United States.
- Global companies continue to face global safety risks. The worst industrial disaster in history was the 1984 disaster at Union Carbide’s Bhopal, India pesticide plant; this accident released tons of toxic chemicals and killed thousands of people. The Bhopal Disaster led many global companies to revaluate their operations and change to a “single safety management system” that applies to all their operations throughout the world. Companies have found that it can be difficult to find the right people with safety and health expertise in the host countries to operate these programs; however, most find it is easier to train locals in proper safety techniques than to try and teach expats the local customs and values.
- Obviously, the strength and nature of unions differ from country to country, with unions ranging from nonexistent to relatively strong. In fact, unionism in private companies is a declining phenomenon in nearly all developed countries.
- Codetermination, which requires firms to have union or worker representatives on their boards of directors, is very common in European countries. Even though they face global competition, unions in European countries have resisted changing their laws and removing government protections. Laws make it difficult to fire workers, so companies are reluctant to hire. A recent example is that Motorola had to pay $83 million in severance fees for jobs cut in Germany. In addition, wage bargaining remains centralized, and companies have little flexibility to create contracts that fit their needs.
- In some South American countries, such as Chile, collective bargaining for many workers is actually prohibited. Unions are generally allowed only in companies of 25 workers or more. This practice has encouraged businesses to split into small, separate companies to avoid collective bargaining, leaving workers on their own.
- Legal and political forces are unique to each country, and sometimes the laws of one country contradict those of another. Further, the nature and stability of political and legal systems vary around the world. U.S. firms enjoy relatively stable legal and political systems, and the same is true in many of the developed countries. In other nations, however, the legal and political systems are much less stable. Legal systems can sometimes become unstable unexpectedly, with contracts suddenly becoming unenforceable because of internal politics. Some have asked the question, “Does operating under local laws and customs free a company of all ethical considerations?” Google certainly understands the problems that can occur when attempting to go global. To do business in China, Google had to submit its search results to government censorship, an undesirable concession. Still, company leaders felt the benefits to the Chinese people would exceed the evils of the censored results and went ahead with it. But after repeated squabbling with the Chinese government and evidence of hacking into the Gmail accounts of dissidents in late 2009 and in March, 2010, Google removed its search engine from China.
- Tariffs are taxes collected on goods that are shipped across national boundaries. For example, in 2005, Mexico imposed tariffs of $21 million in three U.S. export categories, including a 30 percent duty on dairy products, a 20 percent duty on wine, and a 9 percent duty on candy. Recently, the United States ordered an additional tariff of 35 percent on Chinese tires on top of the 4 percent tariff the U.S. traditionally levies. Quotas are policies that limit the number or value of goods that can be imported across national boundaries. For example, the amount of textiles that can be imported to the United States is often limited by quotas.
- The North American Free Trade Agreement (or NAFTA) is an agreement between Canada, Mexico, and the United States that has facilitated the movement of goods in North America. Although no agreement is perfect, NAFTA has opened markets and established a record of growth and success that could prove key to strong future growth. It forms a free-trade zone of over 400 million people with a combined gross domestic profit of about $12 trillion dollars. Labor relations also took a major step forward, as NAFTA established a Commission for Labor Cooperation, governed by a council of labor ministers from Canada, Mexico, and the United States. This agreement protects workers in all three countries from the effects of competitive economic pressures.
- CAFTA, the Central American Free Trade Agreement, was signed into law in 2005. If increases like those that occurred in Mexico in the wake of NAFTA take place, it would provide a huge economic boost for a region whose infrastructure remains relatively undeveloped. However, there are those who believe that CAFTA has failed to live up to expectations. For example, there are claims of fraud from textile executives who are calling on Congress and the Administration to overhaul the textile enforcement division of U.S. Customs and Border Protection and to crack down on what they claim are soaring levels of fraud.
- International sales have become a vital and growing part of the market for small to medium businesses. A recent study found that nearly a quarter of U.S. small firms receive some sales from overseas, while another 6 percent expect to join their ranks for a combined total of approximately one million SMB owners who engage in international sales in the near future. Globalization, the Internet, and e-commerce have made it easier than ever for small businesses to reach the 95 percent of consumers that do not live in the United States. Exporting gives small businesses the opportunities to tap into new markets, increase sales, generate economies of scale, and improve inventory management, as well as help maintain American competitiveness and create jobs.