Industrial Location and Globalization of Enterprise

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Industrial Location and Globalization of
Enterprise

• Review
• Questions
• Term paper topics and prospectus
• due one month from today!
• The State is DeadLong Live the State
• Definitions
• Emergence of the State a new idea
• States as containers
• States as regulators

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Defining some terms I

• State portion of geographical space within
  which, the resident population is organized by an
  authority structure
• Externally recognized sovereignty over their
  territory
• Ambiguity! State is commonly used to refer to
  subnational regions e.g.
• Montana, Durango, New South Wales

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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

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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

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Defining some terms IV

• Multinational state
• There is no accepted definition!
• Any state that contains more than one nation
• E.g.?

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When there were no states

• Class identity
• Religious identity
• Reciprocal obligations
• Loyalty to superiors in rank
• LÉtat, cest moi! Louis XIV

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Industrial Location and Globalization of
Enterprise

• Review
• Questions
• Term paper How to have an idea!
• The State is DeadLong Live the State
• Emergence of the State a new idea
• States as containers
• States as regulators

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Westphalia Model

• Peace of Westphalia, 1648
• End of Thirty Years 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

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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

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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

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States as Containers

• Containers of distinctive cultures, practices,
  and institutions.
• Supposed behavioural traits
• Individualism vs. collectivism
• Power
• Risk aversion
• Masculinity
• Varieties of capitalism
• Stereotyping

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Industrial Location and Globalization of
Enterprise

• Review
• Questions
• The State is DeadLong Live the State
• States as regulators

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States as regulators

• Trade Policy
• Exports and imports
• FDI Policy
• Inward and outward
• Industry Policy

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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

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Trade Import Policies II

• Non-tariff barriers (NTBs)
• Subsidies to domestic producers of
  import-competing goods
• Countervailing duties on subsidized imports
• Local content requirements
• Preferential procurement policies
• Exchange rate manipulation

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Trade Export Policies

• Financial incentives to export producers
• Export credits
• Export promotion agencies
• Free trade zones
• Export processing zones
• VER
• Export embargo on strategic products
• Exchange rate manipulation

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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

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FDI Policy Inward II

• Locational restrictions on FDI
• Restricted repatriation of profits
• Differential corporate tax rates
• Encouragement of inward FDI
• Turnkey services
• Investment incentives

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FDI Policy Outward

• Restrictions on export of capital
• Government approval requirements for FDI

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Industrial Policies Investment Incentives

• Investment incentives
• Accelerated depreciation allowance
• Procurement policies
• Technology policies
• Small firm policies

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Industrial Policies Investment Incentives

• Merger and competition policies
• Taxation policies
• Labour market regulation
• Employment standards
• Minimum wage legislation
• Labour relations legislation
• Right to work
• Environmental regulations
• Health and Safety

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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

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Industrial Location and Globalization of
Enterprise

• Review
• Questions
• Midterm Thursday
• Prospectus - Tuesday
• Dumping
• The State is DeadLong Live the State
• Supranationalism-Regional Economic Blocs
• Examples from Japan, China and Mexico

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Midterm

• A. 10 multiple choice questions, 5 choices no
  penalty for incorrect responses 10_at_220 B. 5
  short answer questions from a choice of 8.
  5_at_1050 One concise paragraph." C. Essay 1
  essay from a choice of three. 1_at_3030 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

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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

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Regional Economic Integration
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Impacts of Economic Integration

• Trade diversion
• trade with an outsider is replaced by trade with
  an insider
• Trade creation
• trade created in lieu of import substitution
• Foreign investment may also be diverted or
  created
• Tariff factories may close, rationalization

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Free Trade Area

• Association of South-East Asian Nations
• 1967 ASEAN Declaration, Bangkok

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APEC (Tangent)

• Asia-Pacific Economic Cooperation Forum
• A Perfect Excuse to Chat

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Customs Union

• Zollverein - Customs Union of all the German
  states, led by Prussia in 1833
• Andean Community Ancom
• Bolivia, Colombia, Ecuador, Peru, Venezuela
• 1969, revived in 1990
• Common Market by 2005

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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

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Itaipu Dam
Mercosur
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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!

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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

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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

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Geography of the Open Policy

• Special Economic Zones 1979
• Shenzhen Hong Kong
• Zhuhai Macau
• Shantou S-E Asian connections
• Xiamen Taiwan links
• Incentives include
• Tax concessions
• Freeport duty-free imports
• Infrastructure

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A New Megalopolis-Pearl River
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Shanghai
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China

• Dual Economy
• Foreign-owned enterprise
• State-owned enterprise
• WTO membership in 2001
• Massive migration
• Rural to urban
• Agriculture to manufacturing
• West to east
• Interior to coast