INT-610 WS.3 -Theories of International Trade and Investment
Please use Canada and Brazil and the Hotel/Resort Industry as a reference.
1. Begin your research on economic and trade integration by understanding each candidate’s membership in the WTO, bilateral and regional or “free” (RTA or FTA) trade agreements. Abbreviations for agreements are acceptable. To research country trade agreements, try the WTO’s Regional Trade Agreements Information System (RTA-IS). To specifically look at U.S. agreements, the U.S. International Trade Administration website offers detailed information.
| International Trade Integration (Background) | Membership and Trade Agreement Annotations | |
| Canada | Brazil | |
| WTO Membership Status (date joined; any present trade complaints filed) | ||
| Candidate’s Membership in Major RTAd/FTAs (agreement acronym—e.g., “NAFTA,” country/region partner named, basic purpose and membership advantages) | ||
| Specific U.S.-Candidate Bilateral Trade Agreements (yes/no, basic purpose and membership advantages) | ||
| Use this space for additional notes: |
2. Using the National Trade Estimate Report on Foreign Trade Barriers – ustr.gov and the stat.wto.org Tariff Profiles database, briefly identify the major non-tariff trade barriers that U.S. goods and services face when entering your two candidate countries. Highlight any barrier elements that you feel will impact the hotel and resort industry by placing them in [brackets]. In the bottom row, tally the number of non-tariff measures impacting your industry within each candidate country. Might this make for a useful MARS index value?
| Import Barrier Category
(For descriptions of barriers, see ustr.gov) |
Annotations, Details, Values, | |
| Canada | Brazil | |
| Import Policies | ||
| Tariffs Levels: Trade Weighted Average | ||
| Tariff Levels: Simple Average MFN Applied | ||
| Tariffs on the hotel and resort industry’s Product (product group, avg. MFN applied) | ||
| Import Restrictions (licenses and quotas) | ||
| VAT (value-added tax, %) | ||
| Non-tariff Trade Barriers Background | ||
| Technical Barriers | ||
| Sanitary and Phytosanitary Measures and Technical Barriers to Trade | ||
| Government Procurement Requirements | ||
| Export Subsidies | ||
| Lack of Intellectual Property Protection | ||
| Services Barriers | ||
| Government-Tolerated Anticompetitive Conduct of Local Private Firms | ||
| State-Owned Enterprises (SOEs) | ||
| Digital Trade Barriers | ||
| Other Barriers | ||
| Tally for each candidate column. Count +1 point for every non-tariff barrier impacting on the hotel and resort industry. |
3. Primary data on FDI barriers is hard to find. For primary data, use the Investing Across Borders Indicators of Foreign Direct Investment Regulation Report. Use this resource to download the Excel data tables for each of the barrier types (5). After you review the measures listed along the top row of the data tables, sort for your candidates’ results. Annotate in the corresponding row and column the most significant investment entry and management challenges for each barrier in table below. For a comprehensive alternative global ranking of each candidate’s FDI attractiveness, you will also include the Global Foreign Direct Investment Attractiveness Report. This exhaustive report covers many facets of FDI attractiveness. Briefly note in the last row any areas in the subrankings that particularly stand out to differentiate your candidates.
| Investment Regulations
and Barrier Type Rankings |
Annotations, Examples, Details, Values, | |
| Canada | Brazil | |
| Primary Data (WB – Investing Across Borders Regulations Data) | ||
| Investing Across Sectors (i.e., max foreign ownership) | ||
| Starting a Foreign Investment | ||
| Arbitrating and Mediating Disputes | ||
| Converting and Transferring Currency | ||
| Employing Skilled Expatriates | ||
| Use this space for additional notes: | ||
| FDI Environment (Global Foreign Direct Investment Attractiveness) | ||
| GFCA Index (world ranking, annual trend) | ||
| Areas of Candidate Differentiation | ||
| Use this space for additional notes: |
Table of Contents
Section Two: Managerial Exploration (Informs Final Project Section II F, G, J and Section III D)
In this section, you will explore managerial implications of your research at the industry and functional business area levels. As you explore concepts and outcomes within the two foreign candidates, consider which rankings, indexes, ranking subcategories, or data measures might be included in your own MARS index this week. Use of graphical measures with commentary is encouraged where appropriate. Briefly address the following managerial topics:
1. Evaluate the overall trade openness and readiness of each candidate, considering their regulatory environment.
2. Would you consider either candidate to have a protectionist ideology on trade? What is the chance of a shift in the policy environment?
3. Which trade manipulation instrument category is the most challenging for the hotel and resort industry to address in each candidate?
4. What are the government’s motivations behind the trade and investment barriers they have in place for hotel and resort industry? Are they valid in your mind?
5. Does either candidate belong to any economic integration agreement? How does this impact their relative attractiveness to hotel and resort industry? Does this make the candidate’s trade and investment environment more or less stable in your mind?
6. Assess the foreign direct investment environment within each candidate.
7. What are the roles that FDI, licensing, and joint ventures play in reducing the impact of import tariffs?
8. Can either candidate serve as a “gateway” location to reach other less-accessible markets or resources desired by the industry?
1. Adding in the investment and trade environments to your IR framework assessment, place your two candidate country names in each viable quadrant of the integration-responsiveness framework that U.S. industry firms may pursue. Has your perspective changed from last module? Please note the most compelling global and local economic-driven pressures justifying your recommendation in the rightmost column.
| Global Integration Pressure
(Weak) (Strong) |
Global Strategy | Transnational Strategy | Trade and investment factors pressuring global value chain integration:
· · · · Trade and investment factors driving local responsiveness: · · · · |
| Home Replication Strategy | Multidomestic Strategy | ||
| (Weak) Local Responsiveness Pressure (Strong) |
2. Is it possible to have several viable international strategies for the same candidate? How would a firm’s position as a “low-cost producer” add complexity to the IR decision-making process?
3. Considering the trade and integration environment, which candidate market would best serve as a target consumer market, as a platform for manufacturing, and as a sourcing or distribution destination? How should local content, partnership, or technology transfer requirements be incorporated into this decision?
4. Do the trade and investment conditions in each candidate country lend themselves more to a centralized or decentralized corporate governance within the multinational organization?
5. Given what you know to date about your candidates, would you favor an indirect (e.g., export/import), contractual (e.g., licensing), or direct (e.g., merger or greenfield) entry mode as your top recommendation for each candidate? What about tariffs? Should candidate tariff levels impact strategy at the international strategy level or the entry-mode level?
Reflection
The world seems to respond to economic pressure now more than ever. Governments now manipulate trade barriers and investment restrictions to protect their economies and also to influence other countries to adapt their ideologies, political policies, ethics, and even culture. The United States has put economic sanctions on countries like North Korea, Iran, Russia, and Venezuela in order to drive human rights, national security, cyberterrorism, and ideological causes. But is it fair to use these instruments for more than ensuring fair and open global trading markets? Right now, the United States is the 800-pound gorilla in the global economy. It can flex its economic muscles to influence today’s emerging market countries very easily. But what will happen when these economies grow bigger than the United States economy?
1. What were the most challenging concepts this week?
2. What areas discussed in this module interested you the most?
3. As your instructor reviews this submission, is there anything you would like their additional focus on in your feedback?
References
Written submissions need APA-formatted citations, which use the author-date in-text citation method. After referencing data, paraphrasing an idea, or directly quoting a resource, insert a citation marker formatted as “(Author last name(s), year published).” The full citation for each of the sources cited in-text must appear at the end of the paper on a reference page. The full citations should be alphabetized, double-spaced, and formatted with hanging indentations using APA style for each resource type. To learn more about APA style practices, review the Shapiro Library’s APA Style: Basics page.
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