Industrial Location and
Globalization of Enterprise
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Review
 Questions
 Term paper topics and prospectus
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The State is Dead…Long Live the State
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due one month from today!
Definitions
Emergence of the State – a new idea
States as containers
States as regulators
Defining some terms I
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State: portion of geographical space
within which, the resident population is
organized by an authority structure
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Externally recognized sovereignty over their
territory
Ambiguity! ‘State’ is commonly used to
refer to subnational regions e.g.
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Montana, Durango, New South Wales
Defining some terms II
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Nation: large group of people with a common
culture, sharing traits such as language, values,
institutions, historical experience and shared sense
of identity.
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A nation does not necessarily have a territory.
E.g. Kurds, Roma, Palestinians, Blackfoot Confederacy
Ambiguity! ‘Nation’ is often used to refer to a
sovereign state that contains many national groups
Defining some terms III
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Nation-state: a nation with a state wrapped
around it.
A nation with its own state.
 A state in which there is no significant group that
is not part of the nation.
 E.g. Japan, Denmark
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Ambiguity! ‘Nation-state’ may be used to
refer to a sovereign state to distinguish it from
a sub-national state
Defining some terms IV
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Multinational state:
There is no accepted definition!
 Any state that contains more than one nation
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E.g.?
When there were no states…
Class identity
 Religious identity
 Reciprocal obligations
 Loyalty to superiors in rank
 “L’État, c’est moi!” Louis XIV
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Industrial Location and
Globalization of Enterprise
Review
 Questions
 Term paper: How to have an idea!
 The State is Dead…Long Live the State
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Emergence of the State – a new idea
States as containers
 States as regulators
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Westphalia Model
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Peace of Westphalia, 1648
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End of Thirty Year’s War
Recognition of sovereign states
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with clear geographical boundaries
recognized governments
and exclusive jurisdiction
Territoriality and autonomy
States emerge in the enlightenment
 Mercantilism: protectionism, imperialism,
evangelism
How to Conceive of the State?
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As containers of distinctive business practices
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As a regulator of economic activities within its
boundaries and beyond
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national - cultural contrasts
Extraterritoriality issue e.g. treaty ports
As competitors by developing the skills and
technology that underpin competitive
advantage
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Michael Porter
States as ‘Containers’
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‘Around 190 states’ according to text
191 members of the UN,
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Vatican City is not a member (Population 771)
Most recent members are Switzerland and East
Timor
Thorny problems:
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Greenland (Self-governing Overseas Administrative
Division of Denmark: Kalaallit Nunaat
Puerto Rico (Territory of the US)
Taiwan (founding UN member, expelled in 1971)
Pitcairn Island with population of 50, overseas
territory of UK
States as ‘Containers’
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Containers of distinctive cultures, practices,
and institutions.
 Supposed behavioural traits:
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Individualism vs. collectivism
Power
Risk aversion
Masculinity
Varieties of capitalism
 Stereotyping
Industrial Location and
Globalization of Enterprise
Review
 Questions
 The State is Dead…Long Live the State
 States as regulators
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States as regulators
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Trade Policy
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FDI Policy
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Exports and imports
Inward and outward
Industry Policy
Trade: Import Policies
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Tariffs
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Ad valorem duties (percent of FMV)
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Specific duties (fixed amount per unit)
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Could be CIF, FOB, or FAS
Weight, number, length, volume e.g. 10¢ per kg
Compound tariff: ad valorem and specified duties - combo
Tariff schedules
Harmonized Commodity Coding and Classification System
Non-tariff barriers (NTBs)
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Quotas
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Imposition of VERs
Import licenses
Rules of origin
Anti-dumping measures
Labelling & packaging
Customs procedures & documentation
Trade: Import Policies II
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Non-tariff barriers (NTBs)
Subsidies to domestic producers of importcompeting goods
 Countervailing duties on subsidized imports
 Local content requirements
 Preferential procurement policies
 Exchange rate manipulation
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Trade: Export Policies
Financial incentives to export producers
 Export credits
 Export promotion agencies
 Free trade zones
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Export processing zones
VER
 Export embargo on strategic products
 Exchange rate manipulation
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FDI Policy: Inward
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Screening of investment proposals
 Exclusion of foreign firms from strategic
sectors
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Banking
Culture industries
Local employment provisions
 Local content
 Minimum level of exports
 Technology transfer
FDI Policy: Inward II
Locational restrictions on FDI
 Restricted repatriation of profits
 Differential corporate tax rates
 Encouragement of inward FDI
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Turnkey services
 Investment incentives
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FDI Policy: Outward
Restrictions on export of capital
 Government approval requirements for
FDI
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Industrial Policies: Investment Incentives
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Investment incentives
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Accelerated depreciation allowance
Procurement policies
 Technology policies
 Small firm policies
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Industrial Policies: Investment Incentives
Merger and competition policies
 Taxation policies
 Labour market regulation
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Employment standards
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Minimum wage legislation
Labour relations legislation
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‘Right to work’
Environmental regulations
 Health and Safety
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Targeted Industrial Policy
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Particular sectors
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Particular types of firms
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Sunset industries
Sunrise industries
Strategic sectors
New and small firms
Attract foreign firms
Particular regions
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Depressed regions
Buoyant regions
Industrial Location and
Globalization of Enterprise
Review
 Questions
 Midterm – Thursday
 Prospectus - Tuesday
 Dumping
 The State is Dead…Long Live the State
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Supranationalism-Regional Economic Blocs
 Examples from Japan, China and Mexico
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Midterm
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A. 10 multiple choice questions, 5 choices no penalty for incorrect
responses 10@2=20
B. 5 short answer questions from a choice of 8. 5@10=50
One concise paragraph."
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C. Essay 1 essay from a choice of three. 1@30=30
three paragraphs
You are responsible for:
1. Field trip
2. All lecture material up to and including March 1 but excluding
Mahindra tractor.
3. Textbook Chapters 1-5 and Chapter 6 pp. 164-170 and China
pp. 188-191
AND pp. 171-175, 191-193
Dumping
Sale in a foreign country at a price less
than charged in the country of origin
 May be encouraged by hidden subsidies
or surplus production
 WTO specifies antidumping duties if the
dumping injures or threatens to injure
producers in the importing country
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Regional Economic Integration
Free
trade
area
Removal of trade
barriers between
members
Common external
trade barriers
Free movement of
factors of
production
Harmonization of
all economic
policies
Customs Common Economic
union
market
union
Impacts of Economic Integration
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Trade diversion:
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trade with an outsider is replaced by trade
with an insider
Trade creation:
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trade created in lieu of import substitution
Foreign investment may also be diverted
or created
 Tariff factories may close, rationalization
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Free Trade Area
Association of South-East Asian Nations
 1967: ASEAN Declaration, Bangkok
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APEC (Tangent)
Asia-Pacific Economic Cooperation
Forum
 “A Perfect Excuse to Chat”
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Customs Union
Zollverein - Customs Union of all the
German states, led by Prussia in 1833
 Andean Community – Ancom
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Bolivia, Colombia, Ecuador, Peru,
Venezuela
 1969, revived in 1990
 Common Market by 2005
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Common Market
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Mercado Comun del Sur (Mercosur/Mercosul)
1991: Treaty of Ascunción
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Argentina, Brazil, Paraguay, Uruguay
eliminated tariffs on 90% of the goods traded within the bloc,
Established an average common external tariff of 14% on 85% of the
goods imported from nonmembers.
Customs Union
Common Market by 2006
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express passport lanes for MERCOSUR citizens
regional passports
liberalize migration
market of 190 million people
Montevideo has become the capital
Itaipu Dam
Mercosur
Economic Union
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EU from EEC: Treaty of Rome, 1957
 Removal of Barriers
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Physical barriers
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Technical barriers
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Customs
Factors of production
Product standards
Business law and capital flow
Fiscal barriers e.g. VAT
Public procurement
But natural barriers remain!
Japan
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Western approach: “market imperfections” corrected by the state
Japan Inc.
Historical roots:
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Small resource base
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Post World War II: Manufacturing.
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Meiji restoration 1868: Emperor restored to political power
Imperialism
State and capital are united in goal to build up a powerful industrial base
Ownership is private
State guides enterprise in a highly competitive domestic economy &
Trade, international focus
Post bubble economy
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Restructuring
Financial sector
Japan =- MITI
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MITI - Ministry of Industry and Trade
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1. Planning to achieve long term goals (visioning)
based on strengths
2. Allocates capital to strategic industries (targeting)
via commercial banks
3. Protection against imports
4. Imports technology for domestic use.
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The guiding hand.
Licensing, not FDI is measure for technology transfer
5. Intense internal competition keeps costs down.
6. Targets industries for capacity reduction,
rationalization and closure
Geography of the Open Policy
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Special Economic Zones – 1979
Shenzhen – Hong Kong
 Zhuhai – Macau
 Shantou – S-E Asian connections
 Xiamen – Taiwan links
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Incentives include:
Tax concessions
 Freeport – duty-free imports
 Infrastructure
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A New Megalopolis-Pearl River
Shanghai
China
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Dual Economy
Foreign-owned enterprise
 State-owned enterprise
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WTO membership in 2001
 Massive migration
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Rural to urban
 Agriculture to manufacturing
 West to east
 Interior to coast
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