Industrial Location and Globalization of Enterprise

Review Questions Term paper topics and prospectus

due one month from today! The State is Dead…Long Live the State

Definitions Emergence of the State – a new idea

States as containersStates as regulators

Defining some terms I

State: portion of geographical space within which, the resident population is organized by an authority structureExternally recognized sovereignty over their

territory Ambiguity! ‘State’ is commonly used to

refer to subnational regions e.g. Montana, Durango, New South Wales

Defining some terms II

Nation: large group of people with a common culture, sharing traits such as language, values, institutions, historical experience and shared sense of identity. A nation does not necessarily have a territory. E.g. Kurds, Roma, Palestinians, Blackfoot Confederacy

Ambiguity! ‘Nation’ is often used to refer to a sovereign state that contains many national groups

Defining some terms III

Nation-state: a nation with a state wrapped around it. A nation with its own state. A state in which there is no significant group that

is not part of the nation.E.g. Japan, Denmark

Ambiguity! ‘Nation-state’ may be used to refer to a sovereign state to distinguish it from a sub-national state

Defining some terms IV

Multinational state:There is no accepted definition!Any state that contains more than one nation

E.g.?

When there were no states…

Class identityReligious identityReciprocal obligationsLoyalty to superiors in rank“L’État, c’est moi!” Louis XIV

Industrial Location and Industrial Location and Globalization of EnterpriseGlobalization of Enterprise

ReviewReviewQuestionsQuestionsTerm paper: How to have an idea!Term paper: How to have an idea!The State is Dead…Long Live the StateThe State is Dead…Long Live the State

Emergence of the State – a new ideaEmergence of the State – a new idea

States as containersStates as containersStates as regulatorsStates as regulators

Westphalia Model

Peace of Westphalia, 1648 End of Thirty Year’s War Recognition of sovereign states

with clear geographical boundaries recognized governments and exclusive jurisdiction

Territoriality and autonomy

States emerge in the enlightenment Mercantilism: protectionism, imperialism,

evangelism

How to Conceive of the State?

As containers of distinctive business practices national - cultural contrasts

As a regulator of economic activities within its boundaries and beyond Extraterritoriality issue e.g. treaty ports

As competitors by developing the skills and technology that underpin competitive advantage Michael Porter

States as ‘Containers’

‘Around 190 states’ according to text 191 members of the UN,

Vatican City is not a member (Population 771) Most recent members are Switzerland and East

Timor Thorny problems:

Greenland (Self-governing Overseas Administrative Division of Denmark: Kalaallit Nunaat

Puerto Rico (Territory of the US) Taiwan (founding UN member, expelled in 1971) Pitcairn Island with population of 50, overseas

territory of UK

States as ‘Containers’

Containers of distinctive cultures, practices, and institutions.

Supposed behavioural traits: Individualism vs. collectivism Power Risk aversion Masculinity

Varieties of capitalism Stereotyping

Industrial Location and Industrial Location and Globalization of EnterpriseGlobalization of Enterprise

ReviewReviewQuestionsQuestionsThe State is Dead…Long Live the StateThe State is Dead…Long Live the StateStates as regulatorsStates as regulators

States as regulators

Trade PolicyExports and imports

FDI Policy Inward and outward

Industry Policy

Trade: Import Policies

Tariffs Ad valorem duties (percent of FMV)

Could be CIF, FOB, or FAS Specific duties (fixed amount per unit)

Weight, number, length, volume e.g. 10¢ per kg Compound tariff: ad valorem and specified duties - combo Tariff schedules Harmonized Commodity Coding and Classification System

Non-tariff barriers (NTBs) Quotas

Imposition of VERs Import licenses Rules of origin Anti-dumping measures Labelling & packaging Customs procedures & documentation

Trade: Import Policies II

Non-tariff barriers (NTBs)Subsidies to domestic producers of import-

competing goodsCountervailing duties on subsidized importsLocal content requirementsPreferential procurement policiesExchange rate manipulation

Trade: Export Policies

Financial incentives to export producersExport creditsExport promotion agenciesFree trade zones

Export processing zonesVERExport embargo on strategic productsExchange rate manipulation

FDI Policy: Inward

Screening of investment proposals Exclusion of foreign firms from strategic

sectors Banking Culture industries

Local employment provisions Local content Minimum level of exports Technology transfer

FDI Policy: Inward II

Locational restrictions on FDIRestricted repatriation of profitsDifferential corporate tax ratesEncouragement of inward FDI

Turnkey services Investment incentives

FDI Policy: Outward

Restrictions on export of capitalGovernment approval requirements for

FDI

Industrial Policies: Investment Incentives

Investment incentivesAccelerated depreciation allowance

Procurement policiesTechnology policiesSmall firm policies

Industrial Policies: Investment Incentives

Merger and competition policiesTaxation policiesLabour market regulation

Employment standardsMinimum wage legislation

Labour relations legislation ‘Right to work’

Environmental regulationsHealth and Safety

Targeted Industrial Policy

Particular sectors Sunset industries Sunrise industries Strategic sectors

Particular types of firms New and small firms Attract foreign firms

Particular regions Depressed regions Buoyant regions

Industrial Location and Globalization of Enterprise

ReviewQuestionsMidterm – ThursdayProspectus - Tuesday DumpingThe State is Dead…Long Live the State

Supranationalism-Regional Economic BlocsExamples from Japan, China and Mexico

Midterm

A. 10 multiple choice questions, 5 choices no penalty for incorrect responses 10@2=20

B. 5 short answer questions from a choice of 8. 5@10=50 One concise paragraph."

C. Essay 1 essay from a choice of three. 1@30=30 three paragraphs

You are responsible for: 1. Field trip 2. All lecture material up to and including March 1 but excluding Mahindra tractor. 3. Textbook Chapters 1-5 and Chapter 6 pp. 164-170 and China pp. 188-191

AND pp. 171-175, 191-193

Dumping

Sale in a foreign country at a price less than charged in the country of origin

May be encouraged by hidden subsidies or surplus production

WTO specifies antidumping duties if the dumping injures or threatens to injure producers in the importing country

Regional Economic Integration

Free trade area

Customs union

Common market

Economic union

Removal of trade barriers between members

Common external trade barriers

Free movement of factors of production

Harmonization of all economic policies

Impacts of Economic Integration

Trade diversion: trade with an outsider is replaced by trade

with an insiderTrade creation:

trade created in lieu of import substitutionForeign investment may also be diverted

or createdTariff factories may close, rationalization

Free Trade Area

Association of South-East Asian Nations1967: ASEAN Declaration, Bangkok

APEC (Tangent)

Asia-Pacific Economic Cooperation Forum

“A Perfect Excuse to Chat”

Customs Union

Zollverein - Customs Union of all the German states, led by Prussia in 1833

Andean Community – AncomBolivia, Colombia, Ecuador, Peru,

Venezuela1969, revived in 1990Common Market by 2005

Common Market

Mercado Comun del Sur (Mercosur/Mercosul) 1991: Treaty of Ascunción

Argentina, Brazil, Paraguay, Uruguay eliminated tariffs on 90% of the goods traded within the bloc, Established an average common external tariff of 14% on 85% of the

goods imported from nonmembers. Customs Union

Common Market by 2006 express passport lanes for MERCOSUR citizens regional passports liberalize migration market of 190 million people Montevideo has become the capital

Mercosur

Itaipu Dam

Economic Union

EU from EEC: Treaty of Rome, 1957 Removal of Barriers

Physical barriers Customs Factors of production

Technical barriers Product standards Business law and capital flow

Fiscal barriers e.g. VAT Public procurement But natural barriers remain!

Japan

Western approach: “market imperfections” corrected by the state Japan Inc. Historical roots:

Small resource base Meiji restoration 1868: Emperor restored to political power Imperialism

Post World War II: Manufacturing. State and capital are united in goal to build up a powerful industrial base Ownership is private State guides enterprise in a highly competitive domestic economy & Trade, international focus

Post bubble economy Restructuring Financial sector

Japan =- MITI

MITI - Ministry of Industry and Trade The guiding hand.

1. Planning to achieve long term goals (visioning) based on strengths

2. Allocates capital to strategic industries (targeting) via commercial banks

3. Protection against imports 4. Imports technology for domestic use.

Licensing, not FDI is measure for technology transfer 5. Intense internal competition keeps costs down. 6. Targets industries for capacity reduction,

rationalization and closure

Geography of the Open Policy

Special Economic Zones – 1979Shenzhen – Hong KongZhuhai – MacauShantou – S-E Asian connectionsXiamen – Taiwan links

Incentives include: Tax concessionsFreeport – duty-free imports Infrastructure

A New Megalopolis-Pearl River

Shanghai

China

Dual EconomyForeign-owned enterpriseState-owned enterprise

WTO membership in 2001Massive migration

Rural to urbanAgriculture to manufacturingWest to east Interior to coast