Chapter 4 Politics and Law Learning Objectives

A New Environment for Export Controls

• Focus of export controls on the Third World
• A loosening of mutual bonds among allied nations
• The increased foreign availability of high-tech products

• The speed of change and the rapid dissemination of information and innovation around the world
• The issue of equipment size

Implementation and Enforcement of Export Controls

• Export controls are increasingly difficult to implement and enforce.
• The number of countries that are able to manufacture products of strategic importance has increased.
• Products that are in need of control are developed and disseminated very quickly.
• It is difficult to control the transfer of technology and know-how.

Regulation of International Business Behavior

• Regulations on firms varies substantially among nations.
• Nations may employ boycotts to govern business activities.
• Antitrust Laws are a regulatory activity.

Bribery

• Firms operating abroad are affected by laws against bribery and corruption.
• International businesses may bribe to counterbalance poor product quality, to create a market for goods, or to stay competitive with other firms that bribe.

Host Country

• Political Action and Risk
• Varies widely from country to country
• Economic Risk
• Less dangerous, but more common

Three Types of Political Risk

• Ownership Risk
• Exposes property and life
• Operating Risk
• Interference with the ongoing operations of a firm
• Transfer Risk
• Limitations on the outflow of funds

Political Risk May Involve

• Confiscation
• The government takeover of a firm without compensation to the owners.
• Expropriation
• A form of government takeover in which the firm’s owners are compensated.
• Domestication
• The government demands transfer of ownership and management responsibility.