INTERNATIONAL COOPERATION FOR SUSTAINABILITY

GROUP TASK

PREPARED FOR: SIR LAMHOT HENRY PASARIBU

PREPARED BY:
1. LIU YUTING 014201700166
2. SAFIRA RAHMADANTI WIBOWO 014201700042
3. FRANS SUSANTO SIHOMBING 014201700085
4. AMIRA NURUL AZMI 014201700058
5. FARAH NUR NAJWA BINTI MUHAMMAD AZHAR 014201900001

SUBMISSION DATE: 11 NOVEMBER 2019

Why is product safety and product liability important?

Because product safety laws set certain safety standards to which a product must
adhere and product liability involves holding a firm and its officers responsible when a
product causes injury, death or damage. Product liability can be much greater if a
product does not conform to required safety standards. Both civil and criminal product
liability laws exist. Civil laws call for payment and monetary damages. Criminal liability
laws result in fines or imprisonment. [CITATION Cha \l 1033 ]

Question 1: Does the high cost of liability insurance in U.S. make American
companies less competitive?

Answer: According to the study by Castlight Health, approximately 90 percent of chief

financial officers surveyed agreed they could invest more in their businesses if their
company’s healthcare costs were lower. The effect on the American business sector is
clear where the rising healthcare costs are hurting the enterprise. That's not just the
opinion of a few executives. A 2009 RAND study found U.S. industries with the highest
level of employer-sponsored healthcare showed slower growth between 1987 and 2005
—in both employment and contribution to GDP over time—than industries where health
benefits were less common. "This study provides some of the first evidence that the
rapid rise in health care costs has negative consequences for several U.S. industries,"
said RAND senior economist and lead author of the study Neeraj Sood. According to a
report by the Robert Wood Johnson Foundation, and small businesses are less able to
provide health insurance to employees than large businesses. Healthcare, the report
said, is the most expensive benefit for U.S. employers. Not all of those costs can be
passed on to the consumer. U.S. businesses spend more than $620 billion each year
on healthcare and more than 80 percent of CFOs surveyed said healthcare costs drain
company resources that could be better used elsewhere—including the wages and
salaries of their employees, and investing in better technology. This could be why 93
percent of respondents agree that the high cost of healthcare in the U.S. gives foreign
companies a competitive advantage. [ CITATION Bur14 \l 1033 ]
Question 2: Is it ethical to follow host country standards when product safety
laws are stricter in a firm’s home country than in a foreign country?

Answer: When product safety laws are tougher in a firm’s home country than in a
foreign country, the ethical thing to do is to adhere to home-country standards. While
the ethical thing to do is undoubtedly to adhere to home-country standards, firms have
been known to take advantage of lax safety and liability laws to do business in a
manner that would not be allowed at home. Many people’s belief that different cultural
traditions must be respected. According to cultural relativism, no culture’s ethics are
better than any others, therefore there are no international rights and wrongs.
(Donaldson, 1996) It is the same as laws in a country. In some cultures, loyalty to a
community—family, organization, or society—is the foundation of all ethical behavior.
For example, the Japanese, define business ethics in terms of loyalty to their
companies, their business networks, and their nation. Americans place a higher value
on liberty than on loyalty; the U.S. tradition of rights emphasizes equality, fairness, and
individual freedom. Consider the large U.S. computer-products company that in 1993
introduced a course on sexual harassment in its Saudi Arabian facility. Under the
banner of global consistency, instructors used the same approach to train Saudi
Arabian managers that they had used with U.S. managers: the participants were asked
to discuss a case in which a manager makes sexually explicit remarks to a new female
employee over drinks in a bar. The instructors failed to consider how the exercise would
work in a culture with strict conventions governing relationships between men and
women. As a result, the training sessions were ludicrous. They baffled and offended the
Saudi participants, and the message to avoid coercion and sexual discrimination was
lost.[ CITATION Tho96 \l 1033 ] Therefore, we think it is not ethical to follow host country
standards when product safety laws are stricter in home country because it may lead to
cultural and social impact where large numbers of foreign businesses can dilute local
customs and traditional cultures. Furthermore, it will also minimize the percentage of
damage or loss to any party where the firm is already bound to the laws of their home
country.
Question 3: Is it ethical to follow host country standards when liability laws are
more lax in the host country?

Answer: The ethical thing to do is undoubtedly to adhere to home-country standards but

firms have been known to take advantage of lax safety and liability laws to do business
in a manner that would not be allowed at home. Multinational corporations can provide
developing countries with many benefits. However, these institutions may also bring
with them relaxed codes of ethical conduct that serve to exploit the neediness of
developing nations, rather than to provide the critical support necessary for countrywide
economic and social development. When a multinational invests in a host country, the
scale of the investment is likely to be significant. Indeed governments will often offer
incentives to firms in the form of grants, subsidies and tax breaks to attract investment
into their countries. The political, economic, and legal systems of a country raise
important ethical issues that have implications for the practice of international business.
For example, what ethical implications are associated with doing business in totalitarian
countries where citizens are denied basic human rights, corruption is rampant, and
bribes are necessary to gain permission to do business? Is it right to operate in such a
setting? Next, the political, economic, and legal environments of a country clearly
influence the attractiveness of that country as a market or investment site. The benefits,
costs, and risks associated with doing business in a country are a function of that
country’s political, economic, and legal systems. The overall attractiveness of a country
as a market or investment site depends on balancing the likely long-term benefits of
doing business in that country against the likely costs and risks. A nation with
democratic political institutions, a market-based economic system, and strong legal
system that protects property rights and limits corruption is clearly more attractive as a
place in which to do business than a nation that lacks democratic institutions, where
economic activity is heavily regulated by the state, and where corruption is rampant and
the rule of law is not respected. On this basis, for example, a country like Canada is a
better place in which to do business than the Russia of Vladimir Putin. That being said,
the reality is often more nuanced and complex. For example, China lacks democratic
institutions, corruption is widespread, property rights are not always respected, and
even though the country has embraced many market-based economic reforms, there
are still large numbers of state-owned enterprises, yet many Western businesses feel
that they must invest in China. They do so despite the risks because the market is large,
the nation is moving toward a market-based system, economic growth has been strong
(although it faltered in 2015–2016), legal protection of property rights has been
improving, and China is already the second largest economy in the world and could
ultimately replace the United States as the world’s largest. Thus, China is becoming
increasingly attractive as a place in which to do business, and given the future growth
trajectory, significant opportunities may be lost by not investing in the country. [ CITATION
Cha \l 1033 ] Chief Justice of the U.S. Supreme Court Potter Stewart once stated “Ethics
is knowing the difference between what you have the right to do and what is right to do”
(Michigan State University, 2013). In short, we think that it is ethical as long as the act is
not causing any damage or loss to any party.

References
Burg, N. (2014, December 29). How Rising Healthcare Costs Make American
Businesses Less Competitive. Retrieved from Forbes; Castlight:
https://www.forbes.com/sites/castlight/2014/12/29/how-rising-healthcare-costs-
make-american-businesses-less-competitive/#5f3c67a4f5f6
Charles W. L. Hill, G. T. (2018). GLOBAL BUSINESS TODAY, TENTH EDITION. New
York, United States of America: McGraw-Hill Education.
Donaldson, T. (1996, October). Thomas Donaldson. Retrieved from
https://hbr.org/1996/09/values-in-tension-ethics-away-from-home
Michigan State University. (2013, December 31). Ethics for community planning.
Retrieved from Michigan State University:
https://www.canr.msu.edu/news/ethics_for_community_planning