Welcome to class of
International Government
Relations
by
Dr. Satyendra Singh
www.uwinnipeg.ca/~ssingh5
Govt. Can Impose Nontariff Barrier
• WTO identifies 600 such barriers
– Quota
– Antidumping accusations
– Countervailing duty by law
– Labeling restrictions
– Licensing mandatory
– Product standards  health and safety
– Custom inspection procedure  host’ll do it
– Government procurement regulations
– TRIM  Trade Related Investment Measure
• WTO: DSB Dispute Settlement Board
So Form Govt. Relations
• Governments take actions
– Regulate
– Taxation
– Expenditure
– Privatize
– Consultation
• It impacts MNCs
• Govt. actions  threats
opportunities for MNCs
and
Government Actions:
Threats and Opportunities
Threats
Government Actions
Opportunities
↑ costs
Regulation
Control competition
↓ ROI
Taxation
Competitive advantage
Competitive disadvantage
Expenditure
Subsidies, grants, customer
↑ competition
Privatization
Level playing field
Co-opt
Consultation
Influence policy
• Given threats, MNCs need to
formulate political strategy in both host
and home countries  relations
Political Strategy – Elements
• Formulation
– Objectives (form IJV, buy govt. assets, get permit, influence
MPs to have favorable legislations)
– Issues (current or emerging)
– Stakeholders (allies, opponents, targets)
– Position/Case (“public interest”)
• Implementation
– Timing
– Techniques
• Direct (negotiate, litigate)
• Indirect (advocacy advertising, political contributions)
– Vehicles (association coalition, Government Relations
department, consultants)
– Style (confrontation or conciliation  depends on objective)
Objectives: MNCs, SoE, Govt
MNC’s objectives in Business – Govt.
Interactions
MNCs Strategic approach to Govt. Policy
MNC Can NOT influence Govt
To achieve
Benefits of
integration
To achieve
Benefits of
National
Responsiveness
MNC Can influence Govt
1
3
“Government Policy as lever for
Firm specific characteristics in
global competitiveness” approach MNC government interaction
base/cluster concept
Use of strategic trade policy
arguments to obtain government
favors.
2
“Good corporate citizen”
approach
4
Firm specific characteristics in
MNC government interaction
Government policy not viewed as
a major determinant of
international competitiveness
Influenced through lobbying,
i.e., a proactive strategy
Strategy: Choose one (say 4); determine who has the bargaining power: Govt or MNC
Bargaining Power
• Governments may discriminate
• Due to differing characteristics of subsidiaries
• Force MNCs to have IJV, impose taxes, fix prices
• Or they can give MNCs 100% foreign ownership
and financial support!
• Sources of Bargaining power for host country
• Growing capability to replace the MNC’s products
• Control access to raw materials, labor and capital
• Sources of Bargaining power for MNC
• Global structure, Vertical integration
• MNCs avoid dealing with govts  unstable
• Globalization has made govt. FDI friendly
Govts Create Business Linkages