GEO 330 Midterm Study Guide Class Notes
GEO 330 Midterm Study Guide Class Notes GEO 330
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This 8 page Study Guide was uploaded by jenlee on Sunday March 6, 2016. The Study Guide belongs to GEO 330 at University at Buffalo taught by Scott Ptak in Spring 2016. Since its upload, it has received 30 views. For similar materials see Dynamics Of Internat Bus in Geography at University at Buffalo.
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Date Created: 03/06/16
January 28-GEO 330 Geography: To “write” about the Earth 1. Political: Goods across national borders; tariffs (goods coming from another country) and other issues 2. Cultural: Goods and services from one country that may have a culture difference from the country it is sold 3. Legal: e.g. Enforcement of contracts in domestic versus international setting 4. Monetary: Because countries use different currencies, businesses need to be concerned about changes to the value of the currencies. E.g. Currencies in China are different compared to currencies in the U.S. Article: “Google seeks help defining ‘Right to be Forgotten’ Google says decisions to remove/deny are easy, but are they really? So many gray areas that get in the way An U.S. citizen may not have the same right as a European as this case is held in Europe. However, if you were born anywhere in Europe and considered European, you may have the right to run for office say in Germany or Russia. European Court of Justice (makes laws for all European citizens) Two Major Business Implications of Globalization 1. Globalization of Markets A. Boost Sales Volume Associated with new markets that are not well known in a foreign country. “First Mover Advantage”: If your company is first to enter a nation, it will be more difficult for other nations to compete. B. (Internal) Economies of Scale: Cost of a product will fall, thus, increasing profit if company buys more. e.g. lemonade stand versus different lemonade stores across the U.S. B. Levels Income Stream: A shift in natural economies (economy where money is either scarce or gone) e.g. Changes in exchange rates; some nations do better than others. 2. Globalization of Production A. Lower cost labors B. Technical Expertise C. Production February 2 Chapter 6: Business Government Trade Relation Switzerland and International Trade Switzerland is centered in the middle of Europe, but not a European union member Swiss Clam down on cross-border pizza delivery (1/12/15) Because Switzerland is in the middle of the Europe and not apart of the European union, as their currency increases, they are able to order from Germany, say Pizza, at a lower price because the currency in Germany did not change. Three major rationales for government intervention in international trade Political motives: a. Preserving national security b. Protecting jobs c. Responding to “unfair trade” (e.g. dumping: selling product lower than cost of actual product to drive up competition in a foreign market.) Economic motives: Protecting “infant industries”: protect new emerging industries during development from global competition. (e.g. The automobile industry in India) Cultural motives: Government steps in to preserve cultural identity that may be considered harmful. Potential Results that may occur from government intervention: Increase in national income (+) Wrong industries protected (-) Firms grow complacent (-) Consumer prices increase (-) Public funds poorly spent (-) Methods a government can use to limit international trade: 1. Tariff barriers: Tax on imported/exported goods: can be calculated through percentage of sales, quantity “Harmonized tax schedule:” Determines tariff level 2. Non-Tariff Barriers: Quota: restriction on quantity of goods that can enter/leave country Quantitative restriction= Quotas Voluntary Export Restraint (VER): Not imposing tax on incoming good from a foreign country; instead it’s imposed by the country selling the goods. (e.g. Japan puts a limit on how many automobiles can enter the U.S. instead of U.S. imposing the limit.) Tariff-Quota: Allow a certain number of products to enter country without tariff. After that number has been reached, a tariff will be charged on remaining product. Embargo= “zero quota”: complete ban on products entering/leaving country Article: “China’s fresh rare earths export quotas restore cuts” “Rare earths” are important for the technology industry, but there is a limited amount available China has put tariff on rare earth; says it’s to protect the environment Concern: Is it enough for other countries to use it? February 9 Case for Regional Integration: Country on its own is okay, but when countries come together; it is a big powerhouse to avoid trade barriers Trade Creation Greater Consensus Political Cooperation Employment Opportunities Cooperate Savings Case Against Regional Integration: Trade Division: Hurting countries nearby that aren’t allowed to trade Shifts in Employment Loss of National Sovereignty-giving up some political power North American Free trade Agreement (NAFTA): U.S., Canada, and Mexico Took effect in January 1994 Trade/tariff free within the three countries Increased trade in 3 countries Job growth/loss in different sectors Audio clip: “The Fruits of Free Trade” Fruits available year round (more produce) “Used to lower tariff” Audio clip: NAFTA and Immigration Mexico produced more corn After NAFTA, Mexican corn was harder to sell because U.S. corn was better Lots of immigrants moving to U.S.; as a result corn industry decreased Audio clip: NAFTA opened Continent for some Canadian Companies As long as the products are produced within U.S., Canada, and Mexico, it will be tariff free Canada feared that it would become U.S. Junior Some small Canadian countries went under ASEAN (Association of Southeast Asia Nations) New to manufacturing economy; transitioning into a common market 1980’s and 1990: starting trading more outside (e.g. China) their countries instead of trading with their neighboring countries. Realized this mistake and wanted to change 10 countries with different languages; English was being promoted as U.S. is a big powerhouse. Struggles: Corruption Political change Diversity in region Strengths: Labor costs Increased trade among member countries Increase tourism within Southeastern countries e.g. Bali Integration in Europe Not all European Nations are in the euro zone Euro removes financial obstacles Economic Integration in Europe EFTA (European Free Trade Association) Wanted European union member benefits, but did not want to be apart of it E.g. Iceland (fishing industry afraid people would lose jobs) and Switzerland has strong banks Transpacific Partnership (TPP) 12 members at this moment Just signed not too long ago with New Zealand Not implemented now; have until 2018 to ratify Trade barriers (reduce tariff by 90%) Countries: Vietnam, U.S., Mexico, Japan (joined because biggest export market is the U.S.) Audio clip: “Catfish TPP” Vietnam can do it cheaper than U.S. but comes with environmental cost Audio clip: Japan Rice Farmers and TPP Food sovereignty-want to be food sufficient Over 100% on tariff Japan doesn’t have enough land and if they do, it’s not good for growing. Will have to compete with countries good for farming February 11, 2016 Levels of Economic Integration Free Trade Association (FTA) Free trade among members No systematic restrictions on trade of nonmembers Customs Union (CU) Free trade among members Common barriers to trade among nonmembers Common Market Free trade among members Common barriers to trade among nonmembers Free production factor movement (labor and capital e.g. European Union) And you can travel from France to Berlin without officials looking at your passport Economic Union Free trade among members Common barriers to trade among nonmembers Free production factor movement Coordination of economic policy e.g. competition Political Union Free trade among member Common barriers to trade among nonmembers Free production factor movement Coordination of economic policy Supranational organization structure Political risk: Risk that there is going to be some bad political changes that will affect society Can avoid this by observing current events in those countries and organizations both for profit and not for profit can rank countries Types of Political Risk Sovereign Default Risk: Unable to pay debt from creditors This is different from bankruptcy because it’s not a company. When a company goes bankrupt, the government sells the company’s assets CDS (Credit Default Swap) When CDS increases= more people are concern and want more insurance e.g. If I get into a car accident, the company will pay more however amount the car is due, but if every month you are not in an accident, company collects your money Property Seizure Policy changes Economy dependent on commodities Political Risks Policy changes restrict Foreign ownership Investment levels Business activities Property Seizure Confiscation: Government taking company without compensation Expropriation: Government taking property away and offering some kind of investment ($) February 18, 2016 e.g. Nintendo 80% of sales are outside U.S. Japanese company needs to convert into Japanese currency Collecting U.S. dollars and has to worry about profit Repatriation: For those sales not using yen; process of returning a person to their place of origin Must report earnings in Yen In this process, there is always: 1. A middleman (financial intermediary) 2. Potential for exchange rates to change If Yen decreases and you bring USD to Japan, you lose more money. In addition, Americans will have to pay more and imports will fall, but exports will increase Impact on the balance of trade Depreciation of home country currency: human currency weaker Effects: (U.S.) 1. People at home have a more difficult time paying for imports because they cost more 2. People in another country will have an easier time affording exports produced in the home country because they cost less US imports decrease, Japanese exports increase Cheaper for Japanese to buy U.S. goods Appreciation of home currency: home currency gets stronger Effects: Easier for customers in U.S. to buy imports because they cost less People abroad have a harder time paying for exports (Impact: Imports increase, exports decrease) February 23, 2016 How are exchange rates determined? Supply and Demand Supply remains constant, demand increases, price will then increase If supply decreases but demand remains constant, demand will increase Aftermath of an Earthquake: strong demand for yen for rebuilding efforts 2012-2016: Japanese Prime Minister came into office. Low exports because Japanese Yen was strong and wanted to depreciate the value of Yen. Prime Minister increased supply of Yen, thus, depreciating value of Yen. Made it easier for others to buy Increasing how much Yen is in the market and buying U.S. dollar will increase return of Yen and decrease U.S. dollar March 3, 2016 What is considered a “bribe?” Paying mail carriers in Mexico to prevent them from “losing” Paying $100 to get a customer picked up from a rainy dock by customs officials Gift-giving to bond socialites Questionable Payment: when one gives another person a gift, is it for a bribe or simply being nice? Foreign Corrupt Practices Act (FCPA) -Helps distinguish between harmless practices and bribery -Prohibits illegal payment, gifts, political Foreign Official Applies to US and foreign companies doing business in U.S. and any company issuing equity (stocks) on an exchange in the U.S.; it doesn’t matter if a company has never stepped foot in U.S. ground. As long as it is earning money in the U.S., it must follow the law. Exchanges: NYSE, NASDAQ Any firms issuing equity in the U.S. must certify that the business has complied with Foreign Practices Act. e.g. Gift basket is known to be harmless but that can change if you’re giving it to someone to ensure they do what you want. However if you can prove that it is lawful and can’t influence their decisions, then you are free to give them a gift basket.
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