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International Business Strategies

Paula Ximena Leal Herrera


Leila Dayana Londoño
John Milton Téllez Ávila
María Angelica Tique Márquez
Juan David Rios

April 04th, 2020

Group: 821

Andrés Palacios
International Trade Theory

Fundación Universitaria del Área Andina


Faculty of Administrative, Economic and Financial Sciences
International Business
Political and Legal Factors That Impact International Trade

1. What are the different political systems?


2. Why do governments intervene in trade?
3. How do governments intervene in trade?
4. Identify the main political ideologies and provide an example
5. What is capitalism? What is a planned economy? Compare and contrast the two
forms of economic ideology discussed in this section.
6. What are three policy areas in which governments can create rules and regulations
in order to control, manage, and intervene in trade
1. What are the different political systems?

Types of political systems  Anarchy.  Autocracy.  Dictatorship.  Oligarchy. The most


outstanding in the world;  Monarchy. Totalitarianism.  Democracy (the most used).
1. Anarchy that mentions the absence of public power. they promote a form of social
organization that dispenses with the State. They do not believe in the dominion of man
over man. For this they promote institutions that are formed by the free agreement of the
citizens, without the use of force. Its creator was Mikhail Bakunin.

2: Autocracy is a system of government to the extent that its authority rests with a single
person who does not have or does not recognize any type of regulation or limitation to
exercise their power
3: The oligarchy is a minority group of people, belonging to the same social class, generally
with great power and influence, who directs and controls a collectivity or state institution
4: The monarchy is a political system that has a monarch as leader or head of state. The
meaning of monarchy is also kingdom when the monarch is the king or queen and the
royal family of a country. In this case, monarchy is the same as royalty. Hereditary
monarchy is the most common system of choosing a monarch.+

5: Democratic mechanism in which the election of the government (executive power)


emanates from the parliament (legislative power) and is politically accountable to it; in the
sense that the legislative and executive powers are closely linked, the executive
depending on the confidence of parliament to survive. It comes from Greece [ CITATION
Jes15 \l 9226 ]

2. Why do governments intervene in trade?


We all understand that, at one point, a tradeoff emerges between government
intervention and a healthy economy. Certain taxes and regulations are essential, but if
taxes are too onerous, families begin to lack the income they need to survive and build a
future. When regulation proliferates, entrepreneurs find it impossible to open businesses
and grow them.

One of the most important functions of our government is to ensure that government
interference in the economy does not go beyond what is necessary to fulfill its public
mission. It is not surprising that excessive government intervention - in the form of taxes
and regulation - also hurts international trade. When foreign governments close their
markets to US exports, they are denying our companies the ability to grow.

But they are also denying their own peoples access to quality products at competitive
prices. Similarly, when government makes it difficult to sell foreign products in our
territory, it is denying American consumers the possibility of choosing good products at
competitive prices. It is important that officials establish trade policies that promote free
market principles, as these are beneficial to both producers and consumers.

The interest of producers is clear: every time a foreign nation uses arcane taxes or rules to
prevent its people from buying imported goods, it hurts job growth here. If an American
company does not have the opportunity to sell its products abroad, that translates into
lower sales, lower productivity, and less job hiring. Companies are less interested in
investing and expanding. Everyone loses

3. How do governments intervene in trade?


Governments intervene in companies by creating local trade rules and regulations for
better control of the economy in each country, states have the ability to regulate and
strengthen companies so that they remain through their rules and regulations that
countries consider necessary to encourage the production and marketing of the
companies.

Global companies focus on monitoring and evaluating the political and legal aspects for
the proper functioning within a country and thus achieve future operations or
investigations, according to the newspaper of the Republic of Colombia, the role of the
state in the economy should be protection of the productive process of a country to
achieve the efficient allocation of resources,[ CITATION Gus18 \l 3082 ] this changes by the
philosophy of each political system that impacts the local economy.

Depending on the political system they vary as they intervene in trade, companies may
prefer to operate in open countries that have their ideology, democracy where more
freedom in theory is allowed to commercialize without so many restrictions, most
observers can indicate the minimum fundamental characteristics. Free and fair elections
exist in democracy, protecting retail companies and respecting human rights, granting
equality before the law and fair competition before companies.

In dictatorships or socialist governments where all the money is taken by a regime of


rulers where it is distributed by executing its policies and laws, sometimes causing
corruption and diversion of resources, which means that the economy does not have
growth worldwide, the opposite is a economic slowdown which also happens in
democracies or capitalist governments where unfair competition against medium-sized
companies occurs.
4. Identify the main political ideologies and provide an example

Political ideologies function as a group of ideas or foundations in which the how a


society should work is determined and what must be done to shape it as established.
In this way, political parties are created, which are organizations formed by people
who share the same ideologies and seek to achieve power to apply the political
program.

The first division of political ideologies at the historical level are liberalism, socialism,
nationalism and anarchism. These are distinguished because for some it is essential to
give priority to the group or the State and for the others it is essential the individual
and his benefit

There are other classifications of political ideologies called left or right, for example, in
the right ideology we can find political thoughts of capitalism as liberal and
conservative and that defend the interests of the upper classes and individualism. In
the left ideology are sources of communism and socialism in which the interests of the
lower classes are defended to guarantee equal opportunities[ CITATION Sub15 \l 9226 ]

Liberalism defends equality before the law, the right to have private property resulting
from the effort and work of individuals, the power of decision by citizens and the
decrease in public spending

In social democracy the mixed economy is defended, that is, the existence of public
and private companies that favor the country's economy, the defense of the welfare
state in which the state provides education, health, pensions, etc.

In socialism, public possession of the means of production and control of resources are
defended to plan the country's economy, that is, that the economy is managed by the
state, companies are mostly public and citizens are provides what is necessary for their
livelihood[ CITATION Edu16 \l 9226 ]

5. What is capitalism? What is a planned economy? Compare and contrast the two
forms of economic ideology discussed in this section.

Capitalism
Economic and social system that takes capital as a starting point to generate wealth. It is
characterized by the private ownership of the means of production that is mostly made up
of business relationships dedicated to investment and profit-making activities. the
individuals and companies usually represented by them, carry out the production of goods
and services privately and interdependently[ CITATION Jim19 \l 9226 ]

Planned Economy
The economic system in government makes most of the important decisions about the
production and distribution of goods and services in society. Its main objective is the equal
distribution of income. They demand the substitution of private property for collective
property in the means of production, exchange and distribution. It is a type of economic
system contrary to capitalism or a market economy [ CITATION Enc20 \l 9226 ]

Capitalism Planned Economy


Capitalism has many advantages such as The planned economy is good because it
greater technology, economic stability, seeks equity, it does not want social
high quality public services, better quality classes to exist, that everyone, without
of life. People get used to work and exceptions, lives and enjoys life equally in
entrepreneurship, they have free conditions and situations, the problem is
competition. Do not seek or expect the that the government does not fulfill what
government to manage or subsidize your it promises is who administers The money
money. But not everything is positive, they and corruption of the people do not allow
can have lower taxes, very high education equity to exist, the government is the one
systems and inclusion in consumption that ends up giving a good life and the
people with fear and misery because they
are used to subsidies and do not aspire to
be better or develop.

6. What are three policy areas in which governments can create rules and
regulations in order to control, manage, and intervene in trade

Governments have several key policy areas that can be used to create rules and
regulations to control and manage trade.

• Tariffs: are taxes imposed on imports. Two kinds of tariffs exist specific tariffs,
which are levied as a fixed charge, andad valorem tariffs, which are calculated as a
percentage of the value. Many governments still charge ad valorem tariffs as a way
to regulate imports and raise revenues for their coffers.[ CITATION Ian10 \l 9226 ]
• Subsidies: A subsidy is a form of government payment to a producer. Types of
subsidies include tax breaks or low-interest loans, both of which are common.
Subsidies can also be cash grants and government-equity participation, which are
less common because they require a direct use of government resources.
[ CITATION Ian10 \l 9226 ]
• Import quotas and VER Import quotas and voluntary export restraints (VER): are
two strategies to limit the amount of imports into a country. The importing
government directs import quotas, while VER are imposed at the discretion of the
exporting nation in conjunction with the importing one.[ CITATION Ian10 \l 9226 ]

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