HOPE UNIVERSITY COLLEGE

Master of Business Administration

(MBA) Program

International Business Management (MBA 611)

Group Assignment

14 Dec. 2019

Instructor: Geremew Teklu (Ph.D.)

 GROUP MEMBERS

S.No. NAME I.D.

1 BIRUK SISAY MBA/074/18
2 BIRUK FEKADU MBA/047/18
3 ABENEZER MARKOS MBA/003/18
4 EYOB SEMERE MBA/014/18
5 TEMESGEN ARDOLO MBA/054/18
1. India is planning to come to Africa witnessed by a forum organized in Mumbai. In August,
2015 Mr. Obama visited some countries in Africa and made a speech in AU summit as Africa is
an ally to do business with. China is already omnipresent. This can show global leaders’ eyes
are targeting at Africa. As a CEO of a given company in Ethiopia (say a ready-made garment
manufacturing company), how should you prepare to manage these developments? What do
you think may be the pros and cons of these developments to your organization and what
strategies should you develop to minimize the cons and maximize the pros?

I will manage such developments by:

 Creating important strategy for learning about new technologies and markets.
 Evaluating and applying relevant concepts in appraising and formulating
economic policies.
 Integration and coordination of FDI and links to domestic firms and value chain.
 Assessing which types of FDI are conducive to the development of the Ethiopia
economy.

There have been many debates regarding the positive and negative effects of foreign direct
investment with the host government caught in a love-hate relationship. On the one hand, the host
country has to appreciate the various contributions, especially economic, that foreign direct
investment can make. Interaction between foreign and domestic investment is of paramount
importance and both can cause each other in an economy. The increase in private investment
signals high return on investment in the domestic economy whereas public investment shows the
improvement in infrastructure and thereby reduction in cost of doing business. These roles of
domestic investment motivate the foreign investors to reap the benefits of high return. However
foreign capital inflow may also be beneficial for the investors of host country.

Pros to our organization

 Technology transfer
 Managerial skills

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  Substitute for imports-To the extent that the goods/ services produced by the FDI
substitute for imported goods or services.
 Initial capital inflow-When a company invests in a foreign country, it brings capital
into that country.

Cons to our organization

 Stifling of domestic competition and entrepreneurship.

 Erosion of host culture.
 Disruption of domestic business practices.
 Risk of interference by foreign governments
 Low levels of research and development.
 Risk of increase capital outflows.

Multinational companies are, by definition, change agents. That is, the products and services they
generate and market bring about change in the lifestyles of consumers in the host country. For
example, the introduction of fast-food restaurants to Taiwan dramatically altered eating patterns,
especially of teenagers, who make these outlets extremely popular and profitable. Concern has
been expressed about the impact on family life and the higher relative cost of eating in such
establishments.

In order to minimize the cons and maximize the Pros, a suitable investment policy frame
work is needed!

The difficulty starts when decision-makers try to identify what “investment policy” is, or should
be. A huge range of stakeholders, problems, institutions, legal instruments, and administrative
tools are captured in that concept. Countries get lost. Even if policy-makers can identify a
destination, it can be difficult to know where to start, to know which concrete actions will have
the most impact. Investment policy encompasses a huge range of issues, and for a state that hopes
to reap the benefits of foreign investment, it can be difficult to know where to start. A common
mistake is that countries create investment policies to react to the challenges posed by the type of

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investment they are already receiving. Instead, a state also needs to identify the opportunities to
receive greater benefits from existing investments, and consider what other types of investment
the country needs in order to develop. Many developing country governments face difficulties in
investment policy formulation, coordination and implementation, thus undermining their
competitiveness and compromising the ability to attract and maximize the benefits of investment.

2. Compare and contrast sociocultural and political values between the West (Eg. N. America)
and the East (Eg. China and the neighboring countries). Suppose you are a marketing manager
of Agro-processing Company in Ethiopia and planning to invest in either regions. In which
region should you plan to expand? Justify.

Western tend to be more individualist? Eastern tend to be more collectivist?

Basically, the oriental society has a deep family concept and is unavoidable. It does not easily
leave the home when it is underage. The Western society focuses on the individual's self-
development, and parents and children are often independent individuals. Therefore, it is easy for
Westerners to develop an independent personality. Besides, Western parents do not have too many
economic pillars for their grown-up children, even though parents have the ability to do it. In this
case, it also causes the West. Young people will solve their life problems independently for
themselves. In fact, in the working groups, the East tends to cooperate with the party; the
Westerners tend to work independently, and the Westerners have the spirit of enthusiasm and
adventure, so they dare to challenge The environment, relying on one's own strength to live, so
most of them leave their homes and quickly find a job to work, actively promote themselves, so
that they have the opportunity to do the job.

In fact, westerners' planning for heritage is also different from the Orientals. The widows of
Westerners are mostly widowed wives or cronies (not necessarily related to blood, even
mistresses), and then they are children, rarely considering parents and brothers first. Sisters, but
the Orientals will consider their children, their parents, etc., and then consider other people. The
difference between the East and West cultures will of course lead to different attitudes towards
life!

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 Say always what you feel, not what you think. Western do better than Eastern?

The education in the East is centered on cultural textbooks. Students are passively accepted. The
learning model is based on repetitive memories, disconnected from the real world, and has little to
do with students' lives, not to pay attention to skills. However, the Western education model is
student-centered, and teachers only play a guiding, coordinating and facilitating role. Emphasis on
the experience and content of learning is related to real life and has specific meaning. Encourage
students to think independently, actively communicate and share, and develop students' practical
and life skills. The soft power of students cultivated by distinct educational models is also different.
Compared with Western students, how do the differences in soft power between Oriental students
and Western students cause problems for international students studying and living in the West?
Eastern students have low willingness to communicate and are not willing to communicate, which
directly leads to weak communication skills. There is also a lack of self-care ability and a lack of
life skills. The West values sports, outdoor experiences, and group cooperation.

On the psychological level, there are also some very prominent features, that is, many Oriental
students have a lot of negative emotions for learning, because the small learning model does not
bring them happiness, and under the spur of many people, learn for learning. The learning
mentality of such students is very passive, and the Canadian education model has cultivated the
habit of Canadian students to actively learn and explore. This is undoubtedly the need for Oriental
students to take the initiative to adjust.

Western is more powerful than Eastern?

As far as we can see, as long as it is a modern thing, it is often classified as the West, and the food,
clothing, housing, and travel are all heavily rendered by Western culture. The financial system is
set by Westerners, and the ideal system of politics - Democracy is what Westerners think of, and
even Westerners have to intervene in culture. Western movies, Western music thanks to
globalization, Western values and ways of thinking seem to be universal values that everyone
knows and accepts. .

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However, in retrospective history, the West can occupy such a favorable position as it is an
accidental accident. Compared with other influential cultures, the time of Western dominance is
not very long.

Whether it is technology, economy, politics, science, it is better than the eastern countries.

1. Technology & Science

This is difficult to reverse in the short term. I think the reason is that there is a gap in the allocation
of talents and resources.

2. Economy

The current economy is indeed superior to the East in the West, but I think there is a problem to
be raised. The financial system and liberalization are constantly advocated by the West. The IMF
and WB are also controlled by the United States and other big countries. When you want to enter
modernization, you are relying on the rules set by these big countries. Let me give you an example:
Russia after the Cold War embraced these "Western Rules" and quickly followed suit. As a result?
In the 1990s, the production volume fell by a third, and the average life expectancy of the people
fell by four years. It is not that the weak countries are not saved. It is only a country that is
economically disadvantaged. The problem to be faced is not only development. There is also
tremendous pressure from the powerful countries. But it is a hope to find opportunities with the
development of its own characteristics. I think the emerging Brazil is a good observation. Has
Brazil heard the United States shouting free trade and planting it? The development of the economy
does have strengths and weaknesses, but it does not follow the right and wrong because of strength
and weakness.

3. Politics

Is democracy suitable for universal life? I think that a lot of people regard the democracy of the
West as the supreme value. However, if the democratic undemocratic is regarded as the standard

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of political scoring, it will be too rough. It is not completely different from the political system. I
think it is different from political culture. Europe and the United States created a civil society
(predecessor of democracy) that talked to the government because of the rise of business. Taking
China as a counterexample: Under the tradition of suppressing business, it did not create
democracy similar to Europe and the United States. If you change the angle, if you are in a non-
Western country, such as Xiao Bush’s favorite axis of evil, suddenly correcting the direction to
adopt a pluralistic politics next week, will it be beneficial to their current situation? On the
contrary, I feel that it may hurt their current development. The Russian mentioned above is a good
example.

This is what Lee Kuan Yew said: "Democracy does not bring good government to new developing
countries. What Asians admire is not necessarily what Americans or Europeans admire.

4. Culture

Western culture can sweep the world as a result of strong media power, but I don't think Western
culture is worse than non-Western culture (not only the East, but also Middle Eastern culture, etc.).
A strong culture is capable of absorbing foreign culture. It is a mature culture to strengthen the old
culture by integrating new culture. For example, Chinese people who have a history of 5,000 years
of history often have a strong sense of identity in their own history, and they also have strong
flexibility to adapt to different external pressures. Just as Confucianism absorbs new cultural
transformation, Buddhism and Taoism continue to emerge in China. A new look, but the young
United States seems to lack some sense of identity, often with a strong personal style from
generation to generation, pursuing something that they don’t know what they are pursuing, the
localization that has been rolled up around the world in recent years. Isn't this counterattack against
this "western tide"? Although China is rising now, on the whole, the eastern countries are still
weak. Can we not influence the changes of the world in the style of the East?

To be honest, the rise of China is already a very powerful force. It can influence the changes in the
world. It is not necessarily small, but it does not necessarily mean that the style of the Orientals
will sweep the world. The current Western culture is derived from the West. The historical

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background and geographical environment, the Eastern culture is also derived from the unique
historical background and geographical environment of the East. If it is reversed, it is hard to
imagine (this kind of difficult matter is left to scholars to do well). If there is any situation in the
future, it will also be determined by the future time and space background. Therefore, the East is
still the East, the West is still the West.

I will expand my investment in China and neighboring countries. Because;

1. Investing in Asia = Investing in the World. Asia is Earth’s most populous region by far
with over 4.4 billion inhabitants. A greater number of people live in Asia than outside, in
fact. The world’s population is less than 8 billion. In other words, Asia consists of a
majority of the planet as humans know it. Through investing in Asia, you’re investing in
the bulk of humanity. Its Demand: 5.2 Billion People by 2050; 70% will live in cities;
70% increase in food production required; Changes in diet: More meat, dairy, fruits and
vegetables.
2. 'Ease of Doing Business', 3 of top 5 are in Asia. Countries from across Asia are ranked
highly by the World Bank for how conducive the regulatory environment is to starting up
and operating a business. Singapore, Hong Kong and South Korea are all in the top five.
3. Asia is growing three times faster than developed world. Economic growth in Asia is
booming. Countries across the region have seen much higher GDP expansion over the last
two decades than in the G7 advanced economies. Rising wealth is fuelling consumer
spending, thanks to high employment levels and wage growth.
4. Middle class to grow 2.1 billion by 2030. Asia’s middle class – the largest market for
consumer goods and services – is expanding rapidly. Its estimate it will grow to 3.4 billion
by 2030. This is well in excess of any other region.
5. Asia's biggest market is itself. Asia is now its own largest trading partner. The region is
seeing the benefits of proximity, high economic growth, a broadening of manufacturing
bases and lower trade barriers.
6. Unlike any other world markets, this market has lot of commodities which allow the
investor to diversify his/her portfolio. Therefore, diversification caters to the investor’s
requirements and thus he can create better avenues for earning profits.

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3. What roles and responsibilities are being played by international organizations like {WTO,
IMF, WB, and UN} in international business process? Explain their evolution and character in
this regard. Do you recommend Ethiopia to join/not to join WTO? Justify.

The International Monetary Fund (IMF)

The International Monetary Fund (IMF) is a global organization with 189 member countries
currently based in Washington, D.C. The fund's purpose is to promote financial stability and
economic growth among other objectives.

The IMF promotes itself as “an organization of 188 countries, working to foster global monetary
cooperation, secure financial stability, facilitate international trade, promote high employment and
sustainable economic growth, and reduce poverty around the world.” It was created in 1944, while
World War II was still raging, as part of the Bretton Woods Agreement. The agreement sought to
create a monetary and exchange rate management system that might prevent a repeat of the
currency devaluations that contributed to the economic challenges of that period. The
organization’s “primary purpose is to ensure the stability of the international monetary system-the
system of exchange rates and international payments that enables countries (and their citizens) to
transact with each other.” The IMF’s broad, self-defined mandate encompasses “all
macroeconomic and financial sector issues that bear on global stability,” including trade
promotion, economic growth and poverty reduction.

The IMF Mission

The IMF advances its mission in a variety of ways. Monitoring and reporting on economic
developments is a large part of the effort, including making recommendations to member countries
on future courses of action. For example, in 2015, the IMF reviewed the health of the U.S. economy
and recommended that the U.S. Federal Reserve hold off on its plans to increase interest rates
because it might harm the economy. Although the IMF's recommendations are not legally binding,
they are made public. Economic policymakers are certainly aware of them and are undoubtedly
influenced by them. Lending money to poor countries is also a major initiative at the IMF. The

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organization provides financing to help troubled nations avoid or recover from economic
challenges. The IMF has made significant loans to Portugal, Greece, Ireland, Ukraine, Mexico,
Poland, Columbia, and Morocco, among others. All of the IMF’s initiatives are self-funded by its
members.

When the IMF was founded, its primary functions were to provide short-term capital to aid the
balance of payments and to oversee fixed-exchange-rate arrangements between countries, thus
helping national governments manage their exchange rates and prioritize economic growth. This
assistance was meant to prevent the spread of international economic crises. The IMF was also
formed to help put the pieces of the international economy back together after the Great Depression
and World War II. In addition, it also sought to provide capital investments for economic growth
and infrastructure projects.

The IMF’s role was fundamentally altered by floating exchange rates post-1971. At that point the
organization began examining the economic policies of its loan recipients to determine whether a
shortage of capital was due to economic fluctuations or economic policy. The IMF also researched
what types of government policy would ensure economic recovery. The current challenge is to
help countries implement economic policies that reduce the frequency of crises among the
emerging-market countries, especially the middle-income countries that are vulnerable to massive
capital outflows. In order to meet this challenge, the IMF’s activities have expanded beyond the
oversight of exchange rates to surveillance of the overall macroeconomic performance of its
member countries. Today it plays an active role in shaping and managing economic policy around
the world.

The World Bank (WB)

The World Bank is also an international organization and has a goal to reduce poverty through
financial assistance. The World Bank Group, like the IMF, was created at Bretton Woods in 1944.
Its goal is to provide “financial and technical assistance to developing countries around the world”
in an effort to “reduce poverty and support development.” It consists of five underlying
institutions, the first two of which are collectively referred to as The World Bank.

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 1. International Bank for Reconstruction and Development (IBRD). This is the IMF's lending
arm. It provides financial assistance to credit-worthy, middle- and low-income nations.
2. International Development Association (IDA). IDA provides loans and grants to poor
countries.
3. International Finance Corporation (IFC). In contrast to the World Bank, which focuses its
efforts on governments, the IFC provides money and advice to private sector entities.
4. Multilateral Investment Guarantee Agency. MIGA seeks to encourage foreign direct
investment in developing nations.
5. International Centre for Settlement of Investment Disputes. ICSID provides physical
facilities and procedural expertise to help resolve the inevitable disputes that arise when
money is at the heart of a disagreement between two parties.

The World Bank Mission

The World Bank pursues its objectives by delivering financial assistance to developing nations. It
gives low- or no-interest loans and grants to finance “a wide array of investments in such areas as
education, health, public administration, infrastructure, financial and private sector development,
agriculture, and environmental and natural resource management.” For example, the World Bank
loaned India $500 million in 2015 to support micro-, small- and mid-sized businesses. The 10-year
loan was made on favorable terms that include a provision that repayment does not need to begin
for five years. The World Bank’s efforts include providing advice and guidance in addition to
working closely with the International Monetary Fund. The group is self-funded and has its home
office in Washington, D.C.

The World Bank’s primary function is providing low-interest loans and grants to developing
countries. It tends to fund projects focused on education, infrastructure, natural-resource
management, and public health. In many instances, the World Bank provides technical assistance
as well as research and policy advice to developing nations. One of the projects currently underway
is the Education Sector Support Project for the Republic of the Congo. The primary objective of
this project is to improve education outcomes for primary- and secondary-school children by
providing quality education in an appropriate teaching and learning environment. Other World

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Bank projects are aimed at improving basic infrastructure, such as building and maintaining safe
water supplies and sanitary sewer systems in Africa and parts of Asia. For developing nations,
many of these improvements would be impossible without the World Bank’s help. Although the
World Bank has come under fire in the past for budget overruns and poor project oversight, its role
in promoting economic development has been undeniable.

The World Trade Organization (WTO)

The World Trade Organization (WTO) claims to be “the only global international organization
dealing with the rules of trade between nations.” The WTO’s efforts center on developing trade
agreements between nations to encourage cross-border commerce. This includes setting up the
agreements, interpreting the agreements and facilitating dispute settlement. Officially founded in
1995, the WTO traces its roots back to Bretton Woods where the General Agreement on Trade and
Tariffs (GATT) was crafted in an effort to encourage and support trade between nations. Following
up on GATT, the 1986-1994 Uruguay Roundtable trade negotiations resulted in the formal creation
of the WTO. The WTO headquarters is located in Geneva, Switzerland. Like the IMF and the
World Bank, the WTO is funded by its members.

The WTO Mission

The WTO seeks to facilitate cross-border trade. Negotiations are conducted in an all-or-nothing
format, with every issue on the table discussed until resolved. Accordingly, there are no partial
deals, so missed deadlines and protracted efforts that continue for many years are not uncommon.
In addition to large-scale trade initiatives, the WTO also facilitates trade dispute negotiations, such
as a disagreement between Mexico and the United States over tuna fishing.

Whether or not the WTO is doing its duty and accomplishing its mission is a matter of ongoing
debate. Nonetheless, the WTO currently has 104 members and twenty observer governments.
WTO member states account for almost 97 percent of global trade and 98 percent of global GDP.
Once the twenty observer governments become members, it is possible that the WTO will oversee
the entire world economy. What began in 1947 in Geneva, with twenty-three nations focused

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solely on tariff reduction, has grown into a truly global organization that deals with agriculture,
labor standards, environmental issues, competition, and intellectual property rights.

The Bottom Line

While all the three organizations (IMF, WB, and WTO) promote themselves as fostering positive
developments, not everyone agrees with their self-assessments. The organizations do provide
financial assistance to countries in need, but like just about every other known method of obtaining
financial resources, the money comes with strings attached and the motives behind the initiatives
are often in question. For example, what these groups refer to as “promoting economic growth,”
their detractors view as a blueprint for destroying the local economy and despoiling the
environment with globalization efforts that benefit only the rich. Protests, including those in
Davos, Switzerland, Washington, D.C., Cancun, Mexico, and other major cities are a regular
feature at IMF, World Bank, and WTO events. Aside from the public protests, even some business
leaders argue against the organizations.

As a very poor country, I will not recommend Ethiopia to join the WTO! Restricting the
global market saves the peasants from being victimized by evil capitalists and saves poor
people from the horrors of competition and a free market.

The WTO is not just a marriage of equals. It is a situation where countries such as Ethiopia simply
have no chance to access the markets of bigger countries, while they open their vulnerable selves
up for grabs. Joining the World Trade Organization (WTO) is not easy, especially for a country
like Ethiopia that has a history of communism to unwind, reams of technical laws have to be
rewritten to be WTO compliant. But before legislators even sit down to rewrite laws, there is much
apprehension. The WTO promises change to a nation's import export balance sheet, and this
promise scares politicians and business owners alike. In Ethiopia there is a general lack of
knowledge about the nuts and bolts of WTO membership among business owners and politicians
alike. The WTO is most famous for its organizational goal to facilitate international trade by
reducing barriers to trade: tariffs, subsidies, import quotas, etc. To many Ethiopian business
owners and politicians, any change is scary. But an often-cited reason for the fear and it may be

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just a convenient reason is that WTO membership will force Ethiopians to compete with foreign
businesses.

The United Nation (UN)

The eradication of the world poverty and the reduction of the great gaps between the world’s rich
and the world’s poor have become the crucial problems of this century, representing the source of
the most dangerous political, economic and social conflicts possible, which can endanger the
international stability. The solution to these problems does not have to do only with the allotment
of more material and financial resources.

The world economy has grown at unprecedented paces during the last 50 years, the global world
product increasing seven times over, yet global poverty has not decreased and the gaps continue
to grow even deeper.

The main cause are the rules governing the market functioning, which have always generated and
permanently generate social polarization-the accumulation of the richness in the hands of a
minority and the perpetuation of the poverty for the largest part of the masses. This rule has
functioned nationally even since the incipient stage of the primitive capital accumulation and has
now extended on a planetary level, in the context of the globalization of the world economy.

Remedies are necessary therefore to limit these effects of the market. Nationally, it is the states’
role to promote such remedies. An example of efficient measures has been given by the West
European states, which have promoted, after the Second World War, the concept of social market
economy and have realized the social European model.

The problem is the following: who should promote such remedies on the level of the world
economy?! The UN and its specialized institutions have not availed themselves of such tools.
These issues have also been debated during several world summits because they have become
present preoccupations of the world community.

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In the spring of 2002 at the Monterey summit dedicated to the financing of the programs meant to
fight against poverty, the French president Jacques Chirac launched the proposition of the creation
of a UN Economic and Social Security Council to deal with such problems. Supporting the essence
of this proposal, but taking into account the difficulties related to its promotion, which would
suppose the modification of the UN Charter, we have proposed the use of the existing institutions,
namely the transformation of the ECOSOC (Economic and social council), which is a consultative
UN organ, into a coordinating organism, which together with the IMF, the World Bank, the World
Trade Organization and the International Labor Organization, should constitute a Forum entrusted
with the mission to elaborate a strategy promoting certain remedies for the functioning of the world
market, introducing commercial and fiscal rules in favor of the developing countries and pursuing
the goal of reducing in time the worldwide economic and social development gaps.

In the activity of the United Nations Organization, the economic issues have acquired a special
importance, attaining proportions never foreseen by the Charter. The economic function of the UN
concomitantly comprises debates, studies, the conceptualization and the determination of the main
directions in the domain of the world economy. At the same time, the institutional framework
meant for international economic collaboration has amplified and the decision-making methods
have improved.

At the UN, as well, there is a tendency to promote the concept of globalism, which designates the
need to approach the world economy problems using an overall vision, in a world of continued
increase of the economic independence in which the realization of a collective economic security
is becoming a must. The national sovereignty and the non-interference in the internal affairs of
States are consecrated in the international law and in the international organization. The
international law and the international organization constitute an important part of the political
reality because they influence the way in which States behave. States are interested in the
international law for two reasons: anticipation and legitimacy (Nye, 2005).

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4. Why multinational organizations promote the spirit of free trade? To whom do you think free
trade benefits? Discuss the challenges of free trade.

Multinational organizations promote the spirit of free trade because free trade agreements are
crafted to serve the interests of multinational corporations. The pro-free trade economist Jagdish
Bhagwati once wrote, “If any conviction strongly unites the critics of multinationals today, it is
that they exploit workers in poor countries.” Technically all can benefit from free trade, if the trade
is equal. However, free trade agreements also bring challenges for countries and businesses. While
domestic businesses benefit from a diversified export market, they also suffer from greater
competition, due to the removal of trade tariffs and inflows of cheap foreign goods.

According to Schumer and Roberts, in the modern world of multinational corporations, reduced
shipping costs, and high-speed telecommunications, factors of production are quite mobile indeed.
We can no longer be sure that "free trade" will work in the new environment. Rather than David
Ricardo's classical law of comparative advantage (which showed that laborers in various countries
will specialize in those industries in which they are relatively superior), which Roberts agrees will
produce shared gains among all trading nations, in the new global economy we confront the law
of absolute advantage: Capital and labor will move to those countries with the lowest costs of
production, meaning some nations gain and others lose.

The biggest criticism of free trade agreements is that they are responsible for job
outsourcing. There are seven total disadvantages:

1. Increased Job Outsourcing: Why does that happen? Reducing tariffs on imports allows
companies to expand to other countries. Without tariffs, imports from countries with a low cost of
living cost less. It makes it difficult for U.S. companies in those same industries to compete, so
they may reduce their workforce. Many U.S. manufacturing industries did, in fact, lay off workers
as a result of NAFTA. One of the biggest criticisms of NAFTA is that it sent jobs to Mexico.

2. Theft of Intellectual Property: Many developing countries don't have laws to protect patents,
inventions, and new processes. The laws they do have aren't always strictly enforced. As a result,

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corporations often have their ideas stolen. They must then compete with lower-priced domestic
knock-offs.

3. Crowd out Domestic Industries: Many emerging markets are traditional economies that rely on
farming for most employment. These small family farms can't compete with subsidized agri-
businesses in the developed countries. As a result, they lose their farms and must look for work in
the cities. This aggravates unemployment, crime, and poverty.

4. Poor Working Conditions: Multi-national companies may outsource jobs to emerging market
countries without adequate labor protections. As a result, women and children are often subjected
to grueling factory jobs in sub-standard conditions.

5. Degradation of Natural Resources: Emerging market countries often don’t have many
environmental protections. Free trade leads to depletion of timber, minerals, and other natural
resources. Deforestation and strip-mining reduce their jungles and fields to wastelands.

6. Destruction of Native Cultures: As development moves into isolated areas, indigenous cultures
can be destroyed. Local peoples are uprooted. Many suffer disease and death when their resources
are polluted.

7. Reduced Tax Revenue: Many smaller countries struggle to replace revenue lost from import
tariffs and fees.

5. What is European Union? How does it function? State the progressive development stages
and lessons taken from each stage of EU.

European Union (EU)

The European Union is a unified trade and monetary body of 28 member countries. It eliminates
all border controls between members. That allows the free flow of goods and people, except for
random spot checks for crime and drugs. The EU transmits state-of-the-art technologies to its
members. The areas that benefit are environmental protection, research and development, and
energy.

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Public contracts are open to bidders from any member country. Any product manufactured in one
country can be sold to any other member without tariffs or duties. Taxes are all standardized.
Practitioners of most services, such as law, medicine, tourism, banking, and insurance, can operate
in all member countries. As a result, the cost of airfares, the internet, and phone calls have fallen
dramatically.

Purpose

Its purpose is to be more competitive in the global marketplace. At the same time, it must balance
the needs of its independent fiscal and political members.

What countries are EU members?

The EU's 28 member countries are: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,
and the United Kingdom. That will drop to 27 after Brexit causes the United Kingdom to leave the
EU in 2019.

How it is governed

Three bodies run the EU. The EU Council represents national governments. The Parliament is
elected by the people. The European Commission is the EU staff. They make sure all members act
consistently in regional, agricultural, and social policies. Contributions of 120 billion euros a year
from member states fund the EU.

Here's how the three bodies uphold the laws governing the EU. These are spelled out in a series of
treaties and supporting regulations:

1. The EU Council sets the policies and proposes new legislation. The political leadership, or
Presidency of the EU, is held by a different leader every six months.

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 2. The European Parliament debates and approves the laws proposed by the Council. Its
members are elected every five years.
3. The European Commission staffs and executes the laws. Jean-Claude Juncker is the
president until October 2019.

Currency

The euro is the common currency for the EU area. It is the second most commonly held currency
in the world, after the U.S. dollar. It replaced the Italian lira, the French franc, and the German
deutschmark, among others. The value of the euro is free-floating instead of a fixed exchange rate.
As a result, foreign exchange traders determine its value each day. The most widely-watched value
is how much the euro's value is compared to the U.S. dollar. The dollar is the unofficial world
currency.

Programming and implementation

Regional policy touches all parts of the EU, and at all levels - from the EU-wide and national scale,
to Europe's regions and local communities. It is part of the EU cohesion policy, the European
Union's strategy to promote and support the overall harmonious development of its Member States
and Regions. The policy is implemented by national and regional bodies in partnership with the
European Commission. The cohesion policy framework is established for a period of 7 years. The
current period covers the years 2014-2020.

The progressive development stages and lessons taken from each stage of EU.

1. 1945–1959

 A peaceful Europe-the beginnings of cooperation

The European Union is set up with the aim of ending the frequent and bloody wars between
neighbors, which culminated in the Second World War. As of 1950, the European Coal and Steel

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Community begins to unite European countries economically and politically in order to secure
lasting peace. The six founding countries are Belgium, France, Germany, Italy, Luxembourg and
the Netherlands. The 1950s are dominated by a cold war between east and west. Protests in
Hungary against the Communist regime are put down by Soviet tanks in 1956. In 1957, the Treaty
of Rome creates the European Economic Community (EEC), or ‘Common Market’.

2. 1960–1969

 A period of economic growth

The 1960s is a good period for the economy, helped by the fact that EU countries stop charging
custom duties when they trade with each other. They also agree joint control over food production,
so that everybody now has enough to eat - and soon there is even surplus agricultural produce.
May 1968 becomes famous for student riots in Paris, and many changes in society and behavior
become associated with the so-called ‘68 generation’.

3. 1970–1979

 A growing Community-the first enlargement

Denmark, Ireland and the United Kingdom join the European Union on 1 January 1973, raising
the number of Member States to nine. The short, yet brutal, Arab-Israeli war of October 1973
results in an energy crisis and economic problems in Europe. The last right-wing dictatorships in
Europe come to an end with the overthrow of the Salazar regime in Portugal in 1974 and the death
of General Franco of Spain in 1975. The EU regional policy starts to transfer huge sums of money
to create jobs and infrastructure in poorer areas. The European Parliament increases its influence
in EU affairs and in 1979 all citizens can, for the first time, elect their members directly. The fight
against pollution intensifies in the 1970s. The EU adopts laws to protect the environment,
introducing the notion of ‘the polluter pays’ for the first time.

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 4. 1980–1989

 The changing face of Europe - the fall of the Berlin Wall

The Polish trade union, Solidarność, and its leader Lech Walesa, become household names across
Europe and the world following the Gdansk shipyard strikes in the summer of 1980. In 1981,
Greece becomes the 10th member of the EU, and Spain and Portugal follow five years later. In
1986 the Single European Act is signed. This is a treaty which provides the basis for a vast six-
year program aimed at sorting out the problems with the free flow of trade across EU borders and
thus creates the ‘Single Market’. There is major political upheaval when, on 9 November 1989,
the Berlin Wall is pulled down and the border between East and West Germany is opened for the
first time in 28 years. This leads to the reunification of Germany, when both East and West
Germany are united in October 1990.

5. 1990–1999

 A Europe without frontiers

With the collapse of communism across central and Eastern Europe, Europeans become closer
neighbors. In 1993 the Single Market is completed with the 'four freedoms' of: movement of goods,
services, people and money. The 1990s is also the decade of two treaties: the ‘Maastricht’ Treaty
on European Union in 1993 and the Treaty of Amsterdam in 1999. People are concerned about
how to protect the environment and also how Europeans can act together when it comes to security
and defense matters. In 1995 the EU gains three more new members: Austria, Finland and Sweden.
A small village in Luxembourg gives its name to the ‘Schengen’ agreements that gradually allow
people to travel without having their passports checked at the borders. Millions of young people
study in other countries with EU support. Communication is made easier as more and more people
start using mobile phones and the internet.

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 6. 2000–2009

 Further expansion

The euro is now the new currency for many Europeans. During the decade more and more
countries adopt the euro. 11 September 2001 becomes synonymous with the 'War on Terror' after
hijacked airliners are flown into buildings in New York and Washington. EU countries begin to
work much more closely together to fight crime. The political divisions between east and west
Europe are finally declared healed when no fewer than 10 new countries join the EU in 2004,
followed by Bulgaria and Romania in 2007. A financial crisis hits the global economy in
September 2008. The Treaty of Lisbon is ratified by all EU countries before entering into force in
2009. It provides the EU with modern institutions and more efficient working methods.

7. 2010–today

 A challenging decade

The global economic crisis strikes hard in Europe. The EU helps several countries to confront their
difficulties and establishes the 'Banking Union' to ensure safer and more reliable banks. In 2012,
the European Union is awarded the Nobel Peace Prize. Croatia becomes the 28th member of the
EU in 2013. Climate change is still high on the agenda and leaders agree to reduce harmful
emissions. European elections are held in 2014 and more Eurosceptics are elected into the
European Parliament. A new security policy is established in the wake of the annexation of Crimea
by Russia. Religious extremism increases in the Middle East and various countries and regions
around the world, leading to unrest and wars which result in many people fleeing their homes and
seeking refuge in Europe. The EU is not only faced with the dilemma of how to take care of them,
but also finds itself the target of several terrorist attacks.

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“About the IMF”. IMF. Retrieved 02 December 2019.

“About the World Bank”. worldbank.org.
“About Us”. World Bank. 14 October 2018. Retrieved 02 December 2019.
“Http://en.wikipedia.org/wiki/Lists_of_countries_by_GDPs
“Members and Observers” at WTO official website
“Sustainable Development Goals” Un.org. Retrieved 02 December 2019.
“The EU in brief” European Union. 16 June 2016.
“The IMF at a Glance”. Www.imf.org. Retrieved 02 December 2019.
“WTO-What is the WTO?-What we stand for”. www.wto.org.
AYENEW HAILESELASSIE. SPECIAL TO FORTUNE
New York Times, "Second Thoughts on Free Trade"
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