The post-second World War period has seen a growing interest in integrating national economies at regional levels. The efforts to form regional groupings, trade blocks and treaties have often floundered due to political differences and unforeseen economic hurdles. The motivation arises out of the realization of the limitations imposed by national frontiers and the expected benefits of a wider market, consisting of several national economies. Regional trade agreements represent an attempt by a group of countries to increase the flow of trade and investment by reducing direct and indirect trade barriers between them, as well as implement similar trade policies vis-Ã -vis outsiders. Multinational trade blocks are a major global trend. Most of these blocks are formed by geographically close countries, and revolve around a small group of larger economies. This is further testament to the importance of closeness and proximity in establishing network structures. Proximity in this case refers Continue reading
International Business Policies
Free Trade Zones – Definition and Meaning
In simple words, free trade means free international trade. The classical economists like Adam Smith, Ricardo and others strongly favored free trade and this doctrine held the field for nearly one hundred years. How ever later, the countries all over the world began to adhere to the policy of imposing restrictions in one form or other. History and Development of Free Trade Zones During the last 20 years, the labor charges in developed countries have increased substantially. According to a recent estimate, the labor cost is nearly 1 USD per hour for semi-skilled workers in most European Countries, U.S and Japan. This high labor cost was due to the acute shortage of both skilled and unskilled labor in most of these countries. Countries like Germany, France, Switzerland, Sweden, Austria, Belgium and England even imported laborers from other countries. Therefore, the cost of production involving a considerable labor content has become Continue reading
Intellectual Property Rights (IPR) – Concept, Benefits and Weakness
For a sustainable growth and economic development of a country, innovation and creativity is a very important dimension. Industries and the global markets of the 21st century rest on the intellectual property protection as it is one of the central public policy. By the mid-1990s, a minimum global standard for IPR had been preserved in the WTO Charter through the incorporation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The transfer in international economic policy and the lowering of tariff and non-tariff trade barriers to the embrace of strong IPR is genuinely an issue of controversy. Intellectual property rights (IPR) are legal claims settled by governments within their relevant sovereignties that grant trademark, patents and owners of copyright the exclusive right to exploit their intellectual property for a certain period. The fundamental right for IPR protection is to provide an incentive for innovation by granting IP owners Continue reading
Sovereign Wealth Funds (SWFs) – Meaning, Types, Benefits and Risks
Sovereign Wealth Funds (SWFs), investment vehicles of Governments are increasingly seen in action through acquisition of either natural resources like oil and gas fields or equity holdings in MNCs. While the reasons for establishing a SWF may vary from commercial to strategic ones, SWFs’ influence on the countries and corporate is substantial. Since they mostly stay invested for a long-term they do not pose threat of pulling out in the short term and creating huge volatility in the financial markets. Since their investment corpus run to billions, by staying invested for a long time, they have a stabilizing effect on the capital market even during crashes and short term fluctuations. However, regulations and guidelines of the SWF also needs to be put in place in order to avoid it from exercising any soft control or strategic moves that may affect the sovereignty of the country allowing investments. Sovereign Wealth Funds Continue reading
Technology Transfer in International Business
Technology is a new variable in the equation of economic relations. Traditional theories of international business assumes that all nations have equal access to technology and, therefore, that there is no need to transfer technology from one county to another. Recent research findings have invalidated this assumption. In addition, they point to technology differences as primary cause of international inequalities in economic achievements. To reduce the inequalities, technology capabilities of the backward nations must be strengthened. The quickest way to do so is to transfer technology from the developed to the developing nations. Technology is any device or process used for productive purposes. In its broadest sense, it is the sum of the ways in which a given group provides itself with good and services, the group being a nation, an industry, or a single firm. There is a fundamental characteristic of technology that demands clear recognition. Q unites unlike Continue reading
Effect of Portfolio Capital Flows in an Economy
The notion that one can make inferences about the characteristics of financial flows by just observing their label is not new in economic. There is much convention wisdom that show capital flows reflect speculative, unstable behavior while flows reflect evaluations of long run profitability and are based on fundamental economic condition. The flows of funds approach used by many central banks and others for a analysis of the domestic economy developments is based on labels which are deemed meaningful. This view has also been an important part of the traditional analysis of international finance for many years. In fact, the structure of balance of payments accounts reflects an implicit theory that different types of capital flows have different economic implications. For example, the distinction between short-term “hot money” and long-term capital flows undoubtedly reflects the view that short-term capital movements are speculative and reversible while long-term capital flows are based Continue reading