Week 2: CheckPoint - Ch. 4 Questions

1. 

    International organizations can be an excellent resource for companies operating internationally.  A key benefit to these organizations is the financing available to companies operating internationally.  Conversely, these organizations can be a major hindrance to doing business internationally.  An example of these difficulties is the additional legislation, and rules, that are imposed on businesses which operate globally.  It is key for businesspeople, and students, to be aware of these organizations and their strengths and weaknesses so they are prepared to work in the modern, global, environment.  (Ball, McCulloch, Frantz, Geringer, Minor, 2006, p. 117)
 

2. 

    There is a very strong political aspect to international trade that private trade groups are not equipped to handle.  An aspect of the political problem is the subsidies that many governments offer their producers.  To deal with the subsidy issue requires an organization that is focused on political issues and thus is better equipped to negotiate a compromise.  Secondarily, even with trade becoming more fair the financial prosperity gap between wealthy and poor countries continues to grow.  This suggests problems deeper than trade issues that again can best be handled by an organization that has significant political strength.  Fundamentally, the UN offers a unique mix of political and trade strengths that cannot be replaced by private trade groups.  (Ball, et al., 2006, p. 121,124-125)


3. 

     The WTO has at its root the concept of the International Trade Union that never materialized following World War II.  After some suggestions by the United States, that were accepted, GATT became the de facto international trade organization.  The GATT was eventually superseded, and replaced, by the WTO.  (Ball, et al., 2006, p. 123-125) 
    Bilateral trade agreements are generally thought as a contributing factor towards WWI and exacerbating the effect of the Great Depression.  A key negative component of those bilateral agreements was rising tariffs which were greatly minimized with the move to multilateral trade agreements.  While there has been clear benefits from multilateral trade agreements these tend to work heavily to the benefit of industrialized nations.  Special bilateral agreements would probably be a beneficial to the global economy when dealing with less industrialized nations.  (Bilateralism, para. 2-4)
 

 4.

    The Commission is the executive branch of the European Union.  It oversees the day to day administrative functions of the government and "ensuring proper implementation of the provisions of the Treaty of Rome" (Ball, et al., 2006, p. 132).
    The Council of Ministers is where policy decisions are made for the European Union.  The presidency of the Council of Ministers is held for six months and is rotated among the member countries. (Ball, et al., 2006, p. 132-133)
    The Parliament is the body, and forum, that allows a country's issues and requests to be made apparent to the Council of Ministers.  The Parliament has very little authority, though that is slowly changing. (Ball, et al., 2006, p. 133)
    The European Court of Justice is the judicial body of the European Union.  This body presides over issues resulting from the Treaty of Rome.  In reagards to treaty issues the court's jurisdiction supersedes that of the member nation's judicial systems.  (Ball, et al., 2006, p. 133)


5. 

    The EU has had a very powerful impact on foreign business.  Due to the large population that the EU now represent it forces companies to comply with their rules.  Historically being in compliance with United States laws was sufficient to do business anywhere in the world.  Now the EU, due to their size and more restrictive laws, has forced companies to comply with their policies.  A large impact was seen with Microsoft in their software contracts.  (Ball, et al., 2006, p. 134)
    By the EU having more power than the national government in business-regulation it has been able to leverage their combined buying power.  In turn this has resulted in much more favorable trading than would otherwise be possible.
 

6. 

    There was concern by organized labor that jobs would be lost, especially to Mexico, as labor was much cheaper in that country.  There was the additional concern in Canada of losing their national identity.  As is stands now the concerns were unfounded.  With the two-way trading among the members growing over 111% in ten years this has benefited all of the members, and probably resulted in the creation of new jobs to meet demand.  (Ball, et al., 2006, p. 137)
 

7. 

    The most significant aspect of OECD is their publishing of business and economic reports on member countries.  This can be extremely beneficial for companies who are considering doing business within one of these countries, or are already doing business there and want to monitor their investment strategy.  Secondarily OECD offers a means for proposing legislation to member countries.  This could be a very large benefit if the current legislation within a member country is unfavorable for trading and investment.  (Ball, et al., 2006, p. 127)
 

 8. 

     There needs to be a significant amount of international trade before it is worthwhile to participate in an economic integration agreement.  If the county is in extreme poverty there would be few exports and very few imports.  Furthermore, if a country is very isolationist, such as the United States in the early 1900's, than there would not be a need to have economic integration agreements.  Furthermore, any such agreements would only undermine the country's isolationist policies.
 

9. 

    A significant reason for the trade arrangements between Mercusor and the EU is that they both get the benefit of establishing trade with a number of countries.  This minimizes the hassle and overhead while also maximizing return.  The most significant reason probably has to do with poor relations with the United States and Brazil over crop subsidies, especially cotton.  Since Brazil is the largest member country of Merecusor poor relations with Brazil would translate into poor relations with Mercusor.

 

10. 

    A small businessperson exporting agricultural products would find the section on OECD very useful.  With OECD they would find information that would help them determine the best place to export their goods.  Furthermore, these reports would also provide valuable insight into market conditions, as well as trade restrictions, that would impede the sale of their product.
    This chapter would also provide an overview of some of the international difficulties that face someone participating in international business.  A key aspect of this is trade restrictions and tariffs that may be imposed on their product limiting its appeal.
    The section on the European Union would also be a key aspect.  They are are major segment of the international community.  Dealing with them is not optional when dealing with European countries so it is important to understand the EU framework.  Even more so, due to their size, they can be a very large competitor on the international market and may be able to leverage more favorable trade agreements.  It is key to understand the EU so that you can understand this risk.
References
Ball, D. A., McCulloch, W. H. Jr., Frantz, P. L., Geringer, & J. M., Minor, M. S. (2006). International business: The challenge of global competition (10th ed.). New York: McGraw-Hill.
Bilateralism. Retrieved on July 5, 2005 from http://en.wikipedia.org/wiki/Bilateralism



© Erik Smith 2005
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