ECONOMICS,
POLITICAL, AND LEGAL
SYSTEMS
• Secondary international
market information /data
resources
• Brief review of
– International economics
– Trade policy
• The political environment
• Legal systems
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
1
Useful Periodicals
• Heavily
internationally
focused
–
–
–
–
Economist
Journal of Commerce
Forbes
Business America (U.S.
Dept. of Commerce)
– World Press Review
MKTG 376
• Some international
coverage
– Wall Street Journal,
New York Times,
Washington Post
– Business Week,
Fortune
– Time, Newsweek
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
2
Other
• Academic country
specialists (e.g.,
anthropologists,
economists)
• Consultants
• Expatriates
• Own experience
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
3
Data Availability and
Reliability
• Availability/ ability to collect
data
• Motivations for releasing data
– Wishful thinking vs. reality
– The Web--accessible to any
fool or group
• Comparability of data/Arbitrary
differences in measurements
• Recency--is the data up-to-date?
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
4
Cost of Data
• Much “raw” data is
free from
– U.S. Gvt.
– United Nations
– Research institutions
• Commercial
directories
• Consulting services
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
5
Library Databases
See handouts for details
• Book
–
–
–
• Government reports
Library catalogs (e.g., SDSU PAC)
Books in Print
Amazon.com
• Indexing
• Collaborative filtering
suggestions
–
• Other country info
–
–
Business & Industry
Lexis-Nexis
ABI/Inform
Factiva (formerly Dow Jones)
Countrywatch.com
Specialty
• Latin America Database
• HAPI Online (Hispanic American
Periodicals Index)
• Periodical
–
–
–
–
Stat-USA
• Academic research (usually
theoretical, hard to read)
–
–
Behavioral: PsychInfo
Economics: Econlit
• Foreign language
–
–
MKTG 376
HAPI Online (Hispanic American
Periodicals Index)
Lexis-Nexis
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
6
University of Texas Library
Resource Lists
• International business source list:
http://www.lib.utexas.edu/subject/bu
siness/internat.html
• Marketing source list:
http://www.lib.utexas.edu/subject/bu
siness/marketing.html
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
7
VERY BRIEF REVIEW OF
ECONOMICS
• Exchange rates
– Floating (supply and demand)
– fixed
• Trade balances and their
impact on exchange rates
• Measuring country wealth
– gross domestic product
– “purchase parity” vs. nominal
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
8
U.S./Euro Exhange Rate
Euros per Dollar
1.4
1.2
1
0.8
0.6
0.4
0.2
0
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
1/1/2005
7/1/2004
1/1/2004
7/1/2003
1/1/2003
7/1/2002
1/1/2002
7/1/2001
1/1/2001
7/1/2000
1/1/2000
7/1/1999
1/1/1999
Rate
Lars Perner, Instructor
9
Demand for Currency Depends On
• Trade deficit (demand for foreign currency
to fund this) or trade surplus (demand for
country’s currency)
• Interest rates: Higher interest rates (real)
attract foreign investors (especially for
“stable” U.S. bonds and equities)
• Inflation: Reduces the attractiveness of
holding the currency
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
10
Nominal vs. Purchase Parity Adjusted GNPs—
Examples (2004)
Country
Nominal GNP
PPA
$56,230
$61,220
Norway
52,030
38,550
United States
41,400
41,400
Japan
37,180
30,040
Argentina
3,720
12,460
Czech Republic
9,150
18,400
Mexico
6,770
9,590
China
1,290
5,530
Luxemburg
Source: World Bank
http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
11
Nominal vs. Purchasing Power Parity GNPs
40,000
35,000
30,000
25,000
20,000
15,000
10,000
PPA
5,000
0
0
MKTG 376
10,000
20,000
30,000
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
40,000
Lars Perner, Instructor
12
Nominal GNP vs. Ratio
8.00
7.00
6.00
5.00
4.00
3.00
Ratio
2.00
1.00
0.00
0
MKTG 376
10,000
20,000 30,000
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
40,000
Lars Perner, Instructor
13
Cautions on Interpreting Per
Capita Figures
• Averages are not very meaningful!
– Regional variations
– Socio-economic differences
• Comparison to U.S. dollar and U.S.
costs is arbitrary
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
14
Obstacles to Trade:
Protectionism
• Differing interests of consumers and
manufacturers
• Benefits of trade tend to be more
diffused than benefits to specific
groups of protectionism
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
15
Approaches to Protectionism
• Tariffs
• Quotas
• “Voluntary” export
restrictions
• Subsidies to domestic
producers/exporters
• Non-tariff barriers
– legal obstacles
– differential treatment
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
16
U.S. Protectionism--justified
or not...
• Defense industry
• Agricultural products--e.g.,
beef, sugar
• Textiles
• Automobiles (“voluntary”
import restrictions)
• Steel
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
17
Justifications for
Protectionism
• Protect infant industry
• Resist “unfair” or inappropriate competition
• Protect home market (ensure that product can
be produced domestically)--defense
• Intervene into temporary imbalance
• Maintain domestic living standards
• Preserve jobs
• Bargaining power/retaliation (Super-301
provision in U.S.)
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
18
Effects of Protectionism
• Reduced competition ---> inflation
• More tariffs
• Weaken balance of payments (have to
pay more in own currency)
• Reduce choice to consumers
• May induce global trade wars (vicious
cycle)
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
19
THE POLITICAL AND LEGAL
ENVIRONMENTS
• Political history and
stability
• Political relations
between countries -impact on business
• Legal differences
between countries
• Extra-territorial
application of laws
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
20
The Legal Environment
• Which laws apply
when doing
business between
countries?
– contractual
specifications
– treaties
– extra-territorial
applications of laws
– “compulsion” as a
defense
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
21
Some Political Risks
• Confiscation,
expropriation, and
domestication
• Economic risks
– Exchange controls
– Local content
requirements
– Import restrictions
– Tax controls
– Price controls
– Labor problems
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
22
Development of Legal
Systems
• Laws on the books vs. laws enforced
(transparency)
– Japan: “Administrative guidance”
• The ability to sue--a blessing or a
curse?
– Means of litigation
– Implications for contract initiation and
enforcement
• Evolving nature of legal systems
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
23
Approaches to Law
• Common law (U.S.,
Britain, and many
English speaking
countries)
• Code law (much of
Europe and
Louisiana)
• Islamic law
• Socialist based law
• Asian laws
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
24
Common Law
• Gradually evolved in British courts,
settling issues as they arose
• Emphasis on precedent
• Recognized by U.S. Constitution
• Standards
– criminal: “Innocent until proven guilty”
– civil: “Preponderance of evidence”
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
25
Code (Napoleonic) Law
• Law governed by explicit statutory
codes--”match” codes to issues as
well as possible
• Somewhat different standards in
contracts --what constitutes an “act of
God” canceling contractual
obligations?
• Criminal law: “Guilty until proven
innocent” but difficult to bring to trial
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
26
Islamic Law
• Note that different varieties exist
• Traditions of Islamic countries are not
all tied to Islamic religion per se
• Purpose of promoting justice
– assets are thought to be held in “trust”
– interest is frowned upon
• Much wider scope than Western law:
Shar’ia: the way
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
27
Socialist Law
• Basis for law in China, former Soviet
Republics, and countries influenced by
Communist allies
• Based on the view that the
government owns productive
resources --->
– contract and intellectual property laws
are typically not well developed
• Legal scholars from the West are
helping to reform
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
28
Asian Law
• Based on compromise and
accommodation
• Less emphasis on abstract principles
• Less emphasis on consistent
application across circumstances
• Emphasis on informal resolution
MKTG 376
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
29
U.S. Laws of Interest to firms
with U.S. Involvement
•
•
•
•
MKTG 376
Anti-trust
Foreign Corrupt Influences
Anti-boycott laws
Trading With the Enemy
ECONOMICS, POLITICAL, AND LEGAL SYSTEMS
Lars Perner, Instructor
30