Strengthening International Government Relations

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Strengthening International Government Relations
Key Points Sources of Trade Regulation Opportuniti
es, Threats and Political Strategy Impact of
International Business-Government
interaction Proactive Management of Government
relations
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Sources of Trade Regulation

• GATT and WTO
• Set up to deal with tariffs and non tariff
  barriers to trade
• Tokyo Round in mid 1970s
• Tariff barriers reduced significantly
• Partial success with non-tariff barrier reduction
  mainly due to complexity and sensitivity

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Sources of Trade Regulation

• GATT and WTO
• Uruguay Round 1986-1993
• Challenging problems addressed technical
  barriers, trade in services, intellectual
  property rights, trade in technology etc.
• More member countries 117
• Problems of developing countries addressed
• WTO formed meets every 2 years

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Trade Agreements and Associations

• U.S. Canada Free Trade Agreement
• Formed January 1988 worlds largest free trade
  area
• Dispute resolution mechanisms established
• NAFTA formed with Mexican representatives

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Trade Agreements and Associations

• Association of Southeast Asian Nations
• ASEAN formed August 1967 with 5 member states,
  presently has 10 members
• Regarded as a loose economic cooperation channel
  but expected to change, FTA with China expected
• Move towards ASEAN FTA

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Trade Agreements and Associations (cont.)

• Asia-Pacific Economic Corporation
• APEC established 1989, presently has 21 members
• Primary vehicle for open trade and economic
  cooperation
• Agreement to develop free trade yet to be reached
• ANDEAN and MERCOSUR
• Composed of South American nations with an
  objective of setting a common external tariff
• European Union
• Slow process of European integration
• Founded on the principle of supra-nationality

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Opportunities and Threats
Opportunities and Threats from Government Actions
Threats Government Actions Opportunities
Increase costs Reduce ROI Competitive disadvantage Increased competition Co-opt ?Regulation? ?Taxation? ?Expenditure? ?Privatization? ?Consultation? Control competition Competitive advantage Subsidies, grants, customers Level playing field Influence policy
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Political Strategy

• Essential for a firm to form and implement
  political strategy
• Formulation
• Objectives
• Issues
• Stakeholders (allies, opponents, targets)
• Position/Case (public interest)

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Political Strategy

• Implementation
• Timing
• Techniques
• Direct (negotiate, litigate)
• Indirect (advocacy advertising, political
  contributions)
• Vehicles (e.g. coalition, Government Relations
  department, consultants)
• Style (e.g., confrontation or conciliation)

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Impact of International Business-Government
InteractionObjectives and Motivations of MNC-SOE
Alliances and Acquisitions

• Objectives of MNCs
• Increase profits, reduce potential risks and
  achieve economies of scale
• Control/preempt competition, expand market share,
  achieve first mover advantage
• Obtain lower-cost production or distribution
  facilities
• Develop or adapt technology jointly, obtain new
  labor or technology resources
• Expand domestic sales through overseas operations
• Obtain new labor or technology resources

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Impact of International Business-Government
InteractionObjectives and Motivations of MNC-SOE
Alliances and Acquisitions

• Objectives of SOEs or Privatized Enterprises
• Ensure survival and financial viability
• Gain competitiveness and become profitable
• Acquire new technology and improve managerial
  competence

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Impact of International Business-Government
InteractionObjectives and Motivations of MNC-SOE
Alliances and Acquisitions

• Objectives of Governments
• Generate public revenues from SOE sales
• Reduce subsidies to loss making SOEs, foreign
  debts and public budget deficits
• Strengthen private sector, increase national
  productivity and stimulate growth
• Expand shareholding among citizens and reduce
  government role in economy

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ENSURING THE SUCCESSFUL PRIVATIZATION OF ONTARIO
HYDRO Rolling blackouts in California have drawn
attention to Ontarios plans to privatize the
production and distribution of electricity. The
failure of privatization in California makes it
all the more important for Ontario to understand
what went wrong there, and why others (such as
British Airways and British Telecom, for example)
succeeded. This article describes the best
practices in privatization, and provides lessons
for both the Ontario government and the parties
who would manage the privately owned
corporations. For government, we recommend a
controlled deregulation over time that would
enable Ontario Hydro to adjust to market dynamics
and avoid the California situation. For potential
investors, we offer new ideas and business models
to capitalize on the opportunities the opening of
this market will provide. BY DAVID W. CONKLIN
AND TREVOR HUNTER IVEY BUSINESS JOURNAL
JULY/AUGUST 2001
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Proactive Management of Relations
MNEs Perception of Government Policy
MNEs approach to Government Policy
Viewed as outside the Influence Of MNE Managers
Viewed as Potentially Influenced by MNE Managers
1 Government Policy as lever for global competitiveness approach Example Porters home base/cluster concept 3 Non-location bound firm specific characteristics in MNE government interaction Example Use of strategic trade policy arguments to obtain government favors.
2 Good corporate citizen approach Government policy not viewed as a major determinant of international competitiveness 4 Location bound firm specific characteristics in MNE government interaction Government policy viewed as something which can be influenced through lobbying, i.e., a proactive strategy
To achieve Benefits of integration
MNEs objectives in Business Government
Interactions
To achieve Benefits of National Responsiveness
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Bargaining Power

• Discriminatory enforcement occurs due to
  differing characteristics of subsidiaries
  Bargaining Power
• Sources of Bargaining power for host country
• Growing capability to replace the MNEs products
• Control over access to raw materials, labor and
  capital
• Sources of Bargaining power for MNE
• Vertical integration