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Key Term: Cause of Risk 

1. Key Term and Why You Are Interested in It (100 words minimum)

I was aware of what some of the risks could be that could negatively impact a country and its business(es), but after reading the textbook, I realized the impact these causes of risks can have on an international level as well. I understood the impacts and possible consequences on a surface level, but not at the entirety. I could say the reason why I am interested in conducting further research on the key concept “causes of risk” is due to academic curiosity and to gain more knowledge and understanding on the impact on international businesses on a deeper level. Since I’m from Nepal, the way the government operates is somewhat different compared to how the United States operated and I am curious to see the results of how other governments operate regarding various causes of risks on international business.

2. Explanation of the Key Term (100 words minimum)

There are always risks that are entailed in conducting a business, whether that is local, domestic business or an international business that has partners in foreign countries. The various risks could be related to the economy and/or politics that could negatively harm a nation. Sometimes, these risks can be prevented but, in some cases, it cannot be controlled. An astute business professional must understand and identify what the causes of the risks in a foreign nation could be/are to prepare ahead of time, so that the organization can succeed in the business. The book International Business with Biblical Worldview by Brian Satterlee states that violence and conflict, terrorism and kidnapping, and confiscation, expropriation, and nationalism are the three causes of risk for an international business (Satterlee, p. 90).

3. Major Article Summary (200 words minimum)

The article “The impact of terrorism on international mergers and acquisitions: Evidence from firm-level decisions” by Babet Hogetoorn and Michiel Gerritse conducts research focusing on the topic of terrorism and how it affects the ability of a country to attract investment and if the foreign investors lower their direct investments or entirely withdraw them due to the fear that arise from terrorism (Hogetoorn & Gerritse, p. 524). The research also focuses on the impact terrorism has on any decisions contributing to international merger and acquisitions. The authors conducted the study on decisions of “8,872 firms of over 116 countries over 16 years” regarding impact of terrorism on merger and acquisition (Hogetoorn & Gerritse, p. 523).

Through the content analysis and research, the authors concluded that the terrorism have a negative impact on the national direct investment. The terrorist attacks that occur avert and reduce the chances of receiving international investment(s). Through the research, the authors also found that most firms withhold from investing entirely, as most international investors are taking a risk and are sensitive to “local terrorism” (Hogetoorn & Gerritse, p. 534). These results indicate that for a firm to invest, terrorism is a sensitive topic that most are not willing to take a risk investing in the organization(s) of the country that can bring obvious threat to the success of the host organization.

4. Discussion

1. The article mentioned and summarized above is research about how terrorism has a negative impact on international mergers and acquisitions. In addition, it also depicts the fear investors have, to invest internationally in other countries. Sometimes, the causes of risks such as terrorism and kidnapping cannot fully be controlled by an organization. It could just happen one day, with people having little to no information about the event and this applies to the kidnapping situation as well. An astute business professional must know if those events occur frequently or not, and if the business must be conducted, strategically sound protocols must be in place for the business to not be heavily negatively impacted. In doing so just as the main article above, one of the negative impacts is preventing attraction from international investments. Having strategic protocols that prove the organization can be prevented from the impacts of these causes of risks could give foreign corporations a surety to invest in.

2. The article “The impact of terrorism on the FDI of the EU and EEA Countries” by the authors Heric Bezic, Tomislav Galovic, and Petar Misevic is on how terrorist attacks impact the Federal Direct Investment of the European countries. Just as the main article, it concluded that terrorism depresses FDI based on the 29 countries that they conducted the research on. The second article is like the previous article in that the researched concluded “terrorism is proven to prevent FDI inflows in the recipient economies” (Polyxeni & Theodore, 2019). The article “The War on Drugs in Mexico and Transnational Corporate Control” by Martha Idalia Chew Sánchez is on the experience of Mexican people with kidnapping, extortions, and such due to drugs over the past few years and how the government is trying to use government forces to stop these acts (Sánchez, 2019). These types of crimes do not make it safe for employees and can be one of the major determinants in international business. The final article “Prominent need to increase the level of education and awareness in the field of terrorist activities” by Airat Halitovich Tukhvatullin and Vitaly Anatolievich Epshteyn is related to terrorism as well, but confused more on the religious, as well as a “combination of socio-economic, confessional, and ethnic problems” (Tukhvatullin & Anatolievich, 2021). All these articles relate to each other as they focus on the causes of risks and how it impacts on international business(es). An astute business professional must understand and be prepared for risks that could fall on the success or the organizations and combat them.

References

Bezic, H., Galovic, T., & Misevic, P. (2016). The Impact of Terrorism on the FDI of the EU and EEA Countries. Zbornik Radova Ekonomskog Fakulteta u Rijeci: Casopis Za Ekonomsku Teoriju i Praksu/Proceedings of Rijeka School of Economics: Journal of Economics and Business, 34(2), 333–362.  https://doi.org/http://www.efri.hr/zbornik-radova

Hogetoorn, B., & Gerritse, M. (2021). The impact of terrorism on international mergers and acquisitions: Evidence from firm-level decisions. Journal of Peace Research, 58(3), 523–538.  https://doi.org/10.1177/0022343319900207

Polyxeni, K., & Theodore, M. (2019, November). An empirical investigation of FDI inflows in developing economies: Terrorism as a determinant factor. Retrieved January 24, 2022, from  https://www-sciencedirect-com.ezproxy.liberty.edu/science/article/pii/S1876201812001876?via%3Dihub

Sánchez, M. I. C. (2019). The War on Drugs in Mexico and Transnational Corporate Control. Perspectives on Global Development & Technology, 18(1/2), 175–185.  https://doi.org/10.1163/15691497-12341512

Satterlee, B. Chapter 3. International Business with Biblical Worldview (p. 90).

Tukhvatullin, A. H., & Epshteyn, V. A. (2021). Prominent need to increase the level of education and awareness in the field of terrorist activities. Propósitos y Representaciones, 9, 1–9. https://doi.org/10.20511/pyr2021.v9nSPE3.1285

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1. Key Term and Why You Are Interested in It

The key term I chose was protectionism for my research. The concept of protectionism peaked my interest because there is a push for buy locally and buy products made in the USA. There tends to be a great sense of pride in supporting homegrown companies. While local businesses may benefit from this campaign, it is not always the best for the consumer that may be able to get products cheaper through global commerce. Protectionism can be seen as the opposite of free trade and can be politically driven. I have been a proponent of focusing on local businesses but I am interested in discovering how it looks from a global perspective.

2. Explanation of the Key Term

The concept of protectionism can be seen as a way to restrict trade between nations. It is in opposition to free trade where there are no barriers. These restrictions may be in the form of high tariffs on imported goods, government regulations on imports, regulations on other nations owning domestic assets, and anti-dumping laws. Protectionism can be used as a means to curtail foreign influence in a nation by controlling foreign direct investment (Satterlee, 2019). China has used these means throughout history to keep out the western culture. Protectionism from an economic perspective can be used to elevate taxes on domestic products by receiving revenue from tariffs on imported products. Some may see this as discouraging competition and hurting domestic consumers instead of helping them (Satterlee, 2019).

3. Major Article Summary

The article that was found for the key term research discusses the history of protectionism in US trade policy. The United States has always had protectionist trade policies and laws in place throughout history. Polices for protectionism can be traced back to mercantilism which the idea that government should manage international trade. Governments regulate trade by balancing trade, protecting domestic production through discouraging imports, and providing subsidies to domestic businesses (Williams, 2019). The premise was to increase a nations wealth through trade surplus. The United States were focused mainly on domestic production in the early twentieth century. As the economy grew, they began to international trade became more prevalent. The US was concerned about protecting the economy during the Great Depression closed off the economy with the passing of the Smoot-Hawley Act in 1930. This was a strong protectionist move that increased tariffs on imports substantially. The United States was one of the leaders in promoting free trade polices after WWII. Global leaders pushed international cooperation in trade because of the effects of protectionism during the global depression. The US still kept some protectionist laws. Protectionism does have its benefits; it can redistribute wealth, curtail methods of unfair trade, lower trade deficits, protect domestic jobs, and help emerging industries. However, critics attribute these practices as detrimental to the economy. Especially through the example of the Smoot-Hawley Act in which many believe worsened the Great Depression. The push in the Trump presidency in recent years have brought back protectionist ideas through “America first” campaigns. However, those protectionism policies in trade have always been part of the US trade polices (Williams, 2019).

4. Discussion

1. The article chosen focuses on the practical application of protectionism and how it has been used in the United States throughout history. The textbook focuses on how China has used protectionism to limit western influences (Satterlee, 2019). While the article explains how the US has been a proponent of free trade since WWII but has still implemented many protectionist policies. These polices have worked in some ways and have been detrimental in others. The glaring example is how the Smoot-Hawley Act hurt the US economy during the Great Depression. The tariffs placed on imports were very high and added to the global economic crises. The US has also used protectionist policies to push domestic products and to subsidize domestic companies. The US has a blended philosophy of free trade and protectionism (Williams, 2019).

2. The other articles researched focus on how protectionism takes place and the economies are affected by these policies. China has always regulated their trade polices to keep foreign influence out. However, since the Covid-19 pandemic other countries have placed more tariffs on imports from China in response (Wang, 2021). The United State’s policy of “Buy America First” has resulted in higher tariffs placed on imports and other countries retaliating by putting levies on US products (Chunding & Whalley, 2021). Another large economy that has practiced protectionism is Australia. They have been one of the largest protected economies next to New Zealand for much of the 20th century (Anderson, 2020). The last article explains how the process of protectionism is very political and how the economy is affected (van Aaken, 2029). The political impact is seen throughout the other articles.

References

Anderson, K. (2020), TRADE PROTECTIONISM IN AUSTRALIA: ITS GROWTH AND DISMANTLING. Journal of Economic Surveys, 34: 1044-1067.  https://doi-org.ezproxy.liberty.edu/10.1111/joes.12388

Chunding Li, John Whalley (2021).Trade protectionism and US manufacturing employment, Economic Modelling,Volume 96, Pages 353-361, ISSN 0264-9993.  https://doi.org/10.1016/j.econmod.2020.03.017.

Satterlee, B. (2019). International Business with Biblical Worldview. McGraw-Hill. ISBN 13: 978-1-260-77143-5. 

van Aaken. (2019). Beyond Rational Choice: International Trade Law and The Behavioral Political Economy of Protectionism. Journal of International Economic Law., 22(4), 601–628. https://doi.org/10.1093/jiel/jgz034

Wang, F., & Wu, M. (2021). The Impacts of COVID-19 on China’s Economy and Energy in the Context of Trade Protectionism. International Journal of Environmental Research and Public Health, 18(23), 12768.  http://dx.doi.org/10.3390/ijerph182312768

Williams, N. (2019). THE RESILIENCE OF PROTECTIONISM IN U.S. TRADE POLICY. Boston University Law Review, 99(2), 683-719.  http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fscholarly-journals%2Fresilience-protectionism-u-s-trade-policy%2Fdocview%2F2215508507%2Fse-2%3Faccountid=12085

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Government Restrictions on Trade

My chosen key term this week is Government Restrictions on Trade. I am very interested in the way that the US government imposes sanctions and restrictions on trade with other countries. I know that these restrictions are usually politically motivated and imposed on certain countries that do not comply with US laws and policies, especially countries that have sponsored or have been known to sponsor terrorism. I know that in the past the US has imposed sanctions on countries such as Iran, Cuba, China, Russia, and many other countries in Africa. Cuba has been the country with the longest running sanctions dating back to the 1960’s.

Explanation

Satterlee defines government restrictions on trade as “any attempt made to restrict trade with other countries especially in circumstances of large trade deficits or excessive currency outflows” (Satterlee, 2018, p.77). This could come in the form of tariffs, quotas, and embargoes. These types of restrictions are also called “sanctions,” it is another way for large governments to show their disapproval over how the country is comporting themselves. These sanctions can be detrimental to a country and can have long lasting effects. One reason for sanctions could be that a country is involved with or sponsors terrorism. Another reasons could be that a country is violating its citizens human rights.

Tariffs

            Tariffs are taxes that are imposed on goods that are being imported by other countries. These tariffs usually bring higher prices and they lower sales. The country imposing the tariffs get a percentage of the taxes based on the value of the products. “Tariffs are similar to excise taxes (taxes on cigarettes and alcohol, for example) in design and economic impact” (Satterlee, 2018, p.77). Historically, tariffs were a way for countries to gain revenue as ships landed in different nations. Other than earning money for the government, tariffs also offer protection on goods. “Other tariffs exist as a form of protectionism, to make imported goods more expensive than they might otherwise be, in order to protect domestic industries” (McGuigan, 2022, para. 3).

Quotas

            Governments can also utilize quotas as restrictions on trade. According to Satterlee, “also known as quantitative restrictions, to limit the quantity of imports allowed into a nation. Quotas typically raise the price of imports, reduce the volume of imports, and encourage demand for domestically made substitutes” (Satterlee, 2018, p.77). Quotas are similar to tariffs; however, quotas limit the amount of goods that come into a country. This can be good, as countries want to limit the amount of trade between them and other countries. The drawbacks are that they usually drive-up prices on goods and can increase smuggling activity. As with tariffs, quotas increase smuggling by the increase of prices, taxes, and volume.  

Embargoes

            Embargoes are also another form of trade restrictions. According to Satterlee, embargoes are economic and trade sanctions against targeted foreign countries, groups, organizations, and individuals (Satterlee, 2018, p. 78). These sanctions are usually due to political and economic reasons, and are used to try and influence a country to change their radical behavior. These sanctions can come in numerous forms, such as limiting or restricting imports and exports, restricting investing in the targeted country, and prohibiting private financial operations. Another reason for embargoes would be to protect national security and those industries that might be strategically important to supporting national security.

Summary

            The article that I chose is “What are Trade Barriers?” this article discussed the different types of trade restrictions that can be imposed on countries. It also discusses how these restrictions or sanctions can have political and economic impacts on the countries when the United States imposes these sanctions. These sanctions are a way of punishing a country and trying to get them to change their radical behavior. They can come in the form of tariffs, quotas, and embargoes. These restrictions limit or exterminate all trade with countries that are not in compliance with US policies and laws. Most countries usually will adhere to the United States’ policies, however, there are countries that do not adhere and have sanctions put on their country until they do comply.

Discussion

            The article that I chose explains all the different types of sanctions that can be imposed on a country and how it can affect the country if it decides to continue with their radical behavior. One of the US major threats is terrorism. The US will not tolerate any countries that sponsor or participates in terrorism or terroristic threats. These countries cannot trade, no imports or exports of their goods. It also talks about the World Trade Organization and how they help with World trade. The World Trade Organization replaced the General Agreement on Tariffs and Trade (GATT) which was created shortly after WWII.

            The article that I chose is different from the other articles that I researched in that it explains and gives examples of the different kinds of sanctions that can be imposed on countries. It also explains that it not only imposes restrictions but also ensures that the goods that we receive from other countries meets industry standards. Not only does it speak about sanctions, but it also discusses the tariffs that can be imposed on certain goods. These tariffs are another form of taxes and a way to gain income for a country. Of course, certain tariffs usually raise the prices of the goods sold in that country.

References

ABC News. (2021) China urges US to lift trade restrictions, stop interference. ABC NEWS.

https://abcnews.go.com/US/wireStory/china-urges-us-lift-trade-restrictions-stop-interference-76036205

Barone, A. (2021) Quota. Investopedia. https://www.investopedia.com/terms/q/quota.asp

McGuigan, B. (2022) What are Trade Barriers? Smart Capital Mind. https://www.smartcapitalmind.com/what-are-trade-barriers.htm

Phiri, D. (2013) Why Nations impose trade restrictions. The Nation.

https://www.mwnation.com/why-nations-impose-trade-restrictions/

Radcliffe, B. (2021) The Basics of Tariffs and Trade Barriers. Investopedia. https://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp

Satterlee, Brian. (2018) International Business with Biblical Worldview. McGraw Hill Publishing.

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