Semiglobalization
ASEAN
Association of Southeast Asian Nations - fosters free trade between member countries and cooperation in their policies - Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Myanmar, Laos, and Cambodia
justice theories
attainment of a just distribution of economic goods and services - goal: push for equality - don't need equality if inequality results in unequal distribution which leads to equality, results in benefits for everyone
advantage of utilitarianism
attempts to be objective
what is unfair about the fact that 10 economies make up 2/3 of the global GDP?
a very small number of countries in the entire world have an insane amount of economic power b/c they control the global economy
morality
breaking previously agreed upon conceptions of what is accepted from the INDIVIDUAL perspective
ethics
breaking previously agreed upon conceptions of what is socially accepted in a COMMUNITY
administrative polices
bureaucratic rules that are designed to make it difficult for imports to enter a country
what type of attack is a tariff?
direct attack, more aggressive
import quotas
direct restrictions on the QUANTITY of some goods that may be imported into a country
what are the two kinds of fairness?
distributive fairness vs procedural fairness
if you call something an ethical dilemma, you
don't have to be held accountable because you recognize the different sides
what's the downside of economic integration: contagion?
economic contagion: when an (often small) negative occurrence that initially affects only one market, industry, or country spreads to other markets, industries, or countries whose economies were previously healthy (similar to the transmission of the medical disease)
Smoot-Hawley Tariff
eight months after the stock market crash of 1929, President Herbert Hoover signed the Smoot-Hawley tariff, sharply increasing already high tariffs on more than 20,000 imported items
what does a customs union do?
eliminates trade barriers between member countries and adopts a common external trade policy (MERCOSUR)
what are examples of protecting consumers/human rights/natural environment?
enforcing protectionist policies to PREVENT: - possible health detriments of genetically engineered seeds + crops/hormone-treated beef - tragedy of the commons
societal culture
ethical policies differ by country
equality rule
everyone receives an equal share, indepedent of contribution
can there be effective global coordination?
ex: WTO and global NGOs
what does "fair" mean in this context?
fair trade, ethics
naive moralist
follow lead of other firms, if it's okay for them, then okay w/ us
what does an economic union involve?
free flow of products and factors of production between member countries and the adoption of a common external trade policy, but it also requires a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy
what are the benefits of increasing global integration?
free trade theory and "we" instead of "us" vs. "them"
what does "free" mean in this context?
free trade, opening borders
personal ethics/morals
generally accepted principles of right and wrong that govern the conduct of a person - pressure is reduced when managers are geographically and psychologically close to home
who wins/loses?
globalization exposes a deep fault line btwn groups who have the skills + mobility to flourish in global markets and those who do not
unrealistic performance goals
goals that can be attained only by cutting corners
rights theories
human beings have fundamental rights and privileges that transcend national boundaries and culture
cultural relativism
if corruption is normalized, it's okay to engage in corruption, ethical b/c it is culturally relative
free trade theory
increasing the size of the pie for everyone
define the concept of infant industries
infant industries are industries that can/should be protected until they are strong enough to compete (countries can succeed but only if they develop their industry first!)
leadership
lead by example/actions speak louder than words
how many trade agreements are there in Asia?
less trade agreements in Asia EVEN THOUGH Asian countries are more collectivist. COUNTERINTUITIVE
enlargement of the EU
many countries, particularly from Eastern Europe, have applied for membership
an example of fairness/unfairness in international business
marking up prices of water bottles after a disaster - side A: setting price so high to protect businesses and making sure one person doesn't buy it all - side B: unethical to take away necessities from ppl when they need it, socialist perspective
Mercosur
members: Brazil and Argentina, Paraguay, Uruguay, Venezuela (not a full member)
what kind of attack is a subsidy?
more protective, DEFENSIVE
GATT
multilateral agreement to liberalize trade and gradually eliminate trade barriers after WWII - tariff reduction - emphasized services, intellectual property, and agricultural subsidies
why might some countries put restrictions on "free" trade?
nationalism, security, fairness, public good problem
what is the problem with regional trade blocs in Africa?
not real unification, too many fragments, shows some development but progress is slow
how often are voluntary export restraints used? why?
not v common, foreign strategic tool that discourages competition
kantian
only goal = make sure you don't violate inherent dignity of another person, can never do something that takes someone's dignity away
Friedman Doctrine
only responsibility of firm is to earn profit w/in the rule of law, allow shareholders to embark on social contributions
during times of uncertainty, what do people tend to do?
revert away from free trade
Court of Justice
supreme appeals court for EU law
which two forms of government intervention have the incentive to make consumers buy LOCAL?
tariffs and subsidies
explain the concept of a positive-sum position
the concept that there is NOT a finite amount of economic resources, profiting off of trade from one country DOES not necessarily mean harming another country or taking away from their profit
regional economic integration
refers to agreements among countries in a geographic region to reduce, and ultimately remove, tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other
what is difficult about a common market?
requires harmony of fiscal, monetary, AND employment policies (ex: CARICOM, CACM, MERCOSUR is trying, but not there yet)
what is difficult about an economic union?
requires sacrificing a significant amount of national sovereignty, EU
what is the EU a result of?
the devastation of the two world wars and a need for Europe to hold their own on the world's political and economic stage
what is another way to understand semi-globalization?
the fundamental source of uncertainty in the world because we are neither completely globalized or localized, and tension btwn global and local pressures
what are reasons to advocate for infant industries?
the gov't should use subsidies to protect local firms with potential in newly emerging industries
explain the concept of a zero-sum position
when you view the world as having a finite amount of economic resources
if you call something morally wrong, then
you must act on it b/c it's ethically wrong
AFTA (2003): ASEAN Free Trade Area
- FTA btwn the 6 original members of ASEAN came into full effect to reduce import tariffs among members - Vietnam, Laos, Myanmar, and Cambodia have all joined - ASEAN signed a free trade agreement w/ China to remove tariffs on 90% of all traded goods
NAFTA - North American Free Trade Agreement
- abolished tariffs on 99% of goods traded - removed barriers on the cross-border flow of services - protects intellectual property rights - application of national environmental standards - established two commissions to impose fines and remove trade privileges when environmental standards or legislation involving health and safety, minimum wages, or child labor are ignored
Leon Sullivan: Sullivan Principles
- based on seven principles for conducting business - states that as firms internationalize, they have a responsibility to uphold principles - they have an economic lever and are responsible for applying pressure
what were the effects of the Smoot-Hawley Tariff?
- between 1929 and 1934, the volume of both US and global trade fell by 2/3s - anti-immigration sentiments and restrictions grew - world inequality increased - PROTECTIONISM at an all time high
according to trade theory, what are the economic benefits of free trade?
- concept of comparative advantage (in terms of both tangible and opportunity cost) - allows countries to specialize in particular goods - from an economist's perspective, everyone benefits from free trade
what are the benefits of a positive-sum game?
- countries have comparative advantages in specific goods and can specialize - when trading, all countries benefit from a larger amount of these goods with lower prices as well
recent trends in the global economy
- economic benefits of free trade easier to reach with fewer countries - greater interdependence reduces wars and increases political strength against non-integrated members - could lead to major losses if insider free trade is offset by competition and reduction of free trade between regional blocs
what are some ethical issues in international business?
- employment practices - human rights --> freedom of speech, assembly mvmt - environmental regulations --> tragedy of commons - corruption --> foreign corrupt practices act - moral obligations
why does globalization lead to conflict within and between nations over domestic norms and the social institutions that embody them?
- globalization means more interaction, and b/c these nations all have v different sets of values, norms, institutions, and collective preferences, they compete head-on in markets for similar goods - residents of industrial countries are uncomfortable w/ weakening domestic institutions through trade when standards for labor/environment/competition policy/corruption developed home are not met abroad
benefits of the euro
- handling one currency, rather than many - increased competition --> more efficient - pan-European capital market should develop further - range of investment options both to individuals + institutions should increase
arguments in favor of NAFTA in US and Canada
- larger market & lower consumer prices: access to a large and increasingly prosperous market and lower prices for consumers from goods produced in Mexico - production sites in Mexico: US and Canadian firms with production sites in Mexico are more competitive in world markets
arguments against NAFTA for Mexico
- loss of sovereignty - as gun laws become stricter in the US, guns are smuggled in from Mexico instead, which increases violence in Mexico
costs of the euro
- membership implies a loss of control over monetary policy - EU is not an optimal currency area: an area where similarities in the underlying structure of economic activities make it feasible to adopt a single currency and use a single exchange rate as an instrument of macroeconomic policy - countries may react differently to changes in the euro
John Rawls: Theory of Justice
- needs-based rule - have to make sure positions that allocate equal distribution are procedurally fair
what are political reasons for intervention?
- protecting domestic jobs/industries (bailouts and subsidies) - national security (defense industries, energy companies) - retaliation vs. unfair foreign competition (punitive sanctions) - protecting consumers (GMO, hormone-treated beef) - protecting human rights/natural environment (most favored nation)
current issues in the EU
- rampant xenophobia - greece's economic difficulties - russian enlargement - brexit - de-integration
what was the first reason they removed tariffs?
- the world used to run on coal + steel - believed that removing tariffs made it easier to rebuild Europe to allow coal + steel to move freely
what does the future look like for Africa?
- there are talks of a UNIFIED African agreement - 4 countries refuse to join, one being Nigeria (hub of innovation) - detriment for African trade union to not have the hub of innovation be a part of the African trade union
realities of NAFTA
- trade increased by 250% - Mexican immigrants decreased, more central (southern American immigration to US, come through Mexico)
what to know about the EU/Brexit
- working model for regional integration - wanted SOVEREIGNTY - IMMIGRATION (all caps = main issues) - effects on UK - effects on EU
political structure of EU
1. European Commission 2. European Council 3. European Parliament 4. Court of Justice
governments intervene in trade primarily through...
1. tariffs 2. subsidies 3. import quotas 4. voluntary export restraints 5. local content requirements 6. antidumping duties 7. administrative polices
Regional Trade Blocs in Africa
17 trade blocs on the African continent
Eurozone countries
19 EU countries using the Euro (common currency)
European Union (EU)
28 members (Britain has voted to exit)
European Free Trade Association (EFTA)
4 members: Norway, Iceland, Liechtenstein, Switzerland
what makes it harder for Africa to be unified?
Africa was colonized, lines drawn not ethnically organic, make it harder to unify
what are examples of the tragedy of the commons?
Amazon rainforest, office microwave
the higher you get integrated, the harder it is to
DEINTEGRATE
what are the main two reasons people oppose free trade?
ECONOMIC and POLITICAL reasons
what are the two trade blocs in Europe?
European Union and European Free Trade Association
what is an example of the needs-based rule?
FAFSA, financial aid
who is an outlier?
Friedman, believes that businesses are not individuals and therefore, do not have responsibilities - responsibility is to conduct the business in accordance w/ their desires, end goal: most profit possible
since WWII, an international trading framework has evolved to govern world trade... what are two examples of this?
GATT (General Agreement on Tariffs and Trade) and WTO (World Trade Organization)
according to Friedman, is the firm the individual?
NO
what is John Rawls theory in nature?
POLITICAL in nature
what are some countries that have increased their protectionism?
Russia, EU, US, Egypt, Mercosur, China
example of rights theories
UN's Universal Declaration of Human Rights
WTO
WTO encompassed GATT and TRIPS - members accounted for 98% of world trade - provides recommendations and mechanisms for trade disputes
equity rule
YOU GET WHAT YOU PUT IN, prescribes distribution should be proportional to a person's contribution
what occurs in a political union?
a political union occurs when a central political apparatus coordinates the economic, social, and foreign policy of the member states (USA)
"free" and "fair" markets in the global context have both...
a procedural and distributive component to it
what did the combination of increased inequality and decreased growth lead to?
a rise in poverty
emergency clause
according to WTO, countries can use the clause if the following two are true 1. country must be under an identifiable threat, must be in clear need 2. country must prove that use of clause will result in peace and stability for the country's citizens
what is an infant industry in the context of semi-globalization?
an ECONOMIC reason to oppose free trade
changing role of firms
as firms continue to internationalize, have a responsibility to be ethical
role of a firm
as we become more global, we become more aware of diff countries' ethics
decision making processes
ask the relevant questions/not just economic logic
in the context of semi-globalization, what does "intervention" mean?
blocking/opposing free trade
legal
breaking formally written rules of a community
procedural fairness
case by case, judgements over the fairness of the procedure of the allocation
detriments of utilitarianism
clear limitations --> how do you actually measure? do you actually know ALL the reasons for why it's the best option? there will always be losers (experience injustices)
explain the tragedy of the commons
communal resource where everyone wants to use it, but no one wants to help take care of it so the resource becomes depleted
what makes antidumping duties controversial?
consumers LOVE low prices, so seems like a positive to them - such low prices make all consumers drawn to one company, steal all consumers - difficult to enforce b/c how can you prove a company went in another country with the incentive to sell well below the fair market value?
growing protectionism since the 2009 crisis
countries continue to impose protectionist policies when things get bad every though G-20 leaders pledge to "refrain from raising new barriers to investment or to trade in goods and services"
how do punitive sanctions work?
countries get competitive with each other, if one places a punitive sanction on a country, that country will retaliate by putting a punitive sanction back (ex: "Oh, you put a sanction on me?? Bet, I'll put one on you too.")
cons of Mercosur
critics worry that Mercosur may be diverting trade rather than creating trade, and local firms are investing in industries that are not competitive on a worldwide basis
challenge of culture
current quantitative measures of culture (that were designed to facilitate internationalization) don't determine if a firm will act ethically
what is Mercosur?
customs union
European Parliament
debates legislation proposed by the commission and forwarded to it by the council (Treaty of Lisbon increased power)
utilitarian
determined by the sum of the consequences, choose the best overall
what was the next step after this?
got together and signed a treaty, made a commitment to become the EU after five years --> got a common currency (euro), got an official name change, before it was more so just a logistic/economic
what is an economic reason that government should intervene?
gov't should use subsidies to PROTECT firms
subsidies
government payouts to domestic producers
pros of Mercosur
has been successful at reducing trade barriers between member states
righteous moralist
home country ethics should always be followed, typical for MNE's from developed countries
why would believing a zero-sum position make a country not incentivized to trade?
if you believe the size of economic pie remains the same, you will not be incentivized to trade b/c you will fear other ppl will get a bigger slice of pie and profit more than you
arguments in favor of NAFTA for Mexico
increased jobs as low cost production moves south and more rapid economic growth
needs-based rule
prescribes that benefits should be proportional to need
criticism of kantian
is there a place for moral and ethical differences on dignity?
how does the concept of a positive-sum game affect competition?
it PROMOTES competition b/c it only allows for the most productive firm to stay around (consumers also benefit from lower prices)
how does the concept of a zero-sum position affect competiton?
it would DISCOURAGE countries from trading because, in a zero-sum position, it is impossible to profit/gain without it being at the expense of another country
what is a political reason against regional integration?
job loss, loss of sovereignty
arguments against NAFTA for US and Canada
jobs: could be lost and wage levels could decline in the US and Canada immigration: Mexican workers could emigrate north pollution: could increase due to Mexico's more lax standards
distributive fairness
judgements over the fairness of the final allocation of resources
what is NAFTA?
just a free trade area
what is the Andean community?
just a free trade area - based on the EU model - Latin American governments began to adopt free market economic policies - current members: Bolivia, Colombia, Ecuador, and Peru
how did the Smoot-Hawley Tariff affect other countries?
other countries quickly implemented their own barriers as well
levels of regional integration
political union, economic union, common market, customs union (NAFTA), free trade area
European Commission
proposes EU legislation, implements it, and monitors compliance
voluntary export restraints
quotas on trade imposed by the exporting country (SELF-IMPOSED), typically at the request of the importing country's government
what does a common market do?
same as customs union but ALSO allows factors of production to move freely btwn members
what was the next step for the EU to become the EU?
saw the success of removing tariffs on coal + steel, decided to lift tariffs on ALL goods --> and it works, SUCCESS
antidumping duties
selling goods in a foreign market at below their costs of production or below their "fair" market value
determinants of ethical/unethical bahavior
societal culture, decision-making processes, leadership, unrealistic performance goals, organizational culture, personal ethics
local content requirements
some specific fraction of a good must be produced domestically
tariffs
taxes levied on imports (specific goods/services)
customs union
the above AND common external trade policy (ex: MERCOSUR)
common market
the above AND free movement of factors of production (ex: CARICOM, CACM)
economic union
the above and common currency, harmonized tax rates, and a common monetary and fiscal policy (ex: EU)
political union
the above and independent are combined into a single union (ex: USA)
institutional voids
the absence of intermediaries like market research firms and credit card systems to efficiently connect buyers and sellers
semiglobalization
the uncertainty that exists due to forces of both global and local pressures happening concurrently (globalization vs. localization)
why can protection harm an industry?
there will be a lack of competition because of the country's protection and from a consumer standpoint, they will lose interest - also, no incentive to IMPROVE and NOT EFFICIENT
what was the purpose of the Smoot Hawley Tariff?
to PROTECT struggling farmers and manufacturers
why does EU say the European area needs to become united?
to stand their ground
free trade area
trade barriers removed (ex: NAFTA, EFTA)
European Council
ultimate controlling authority within the EU
philosophical approaches to ethics
utilitarian, kantian, rights theories, justice theories
organizational culture
values and norms in the organization
