International Business

Unit 3 – Globalisation
 GATT – 1st Jan 1948
1. COMMONWEALTH OF AUSTRALIA
2. KINGDOM OF BELGIUM
3. UNITED STATES OF BRAZIL,
4. BURMA
5. CANADA
6. CEYLON
7. REPUBLIC OF CHILE
8. REPUBLIC OF CHINA
9. REPUBLIC OF CUBA
10. CZECHOSLOVAK REPUBLIC
11. FRENCH REPUBLIC
12. INDIA
13. LEBANON
14. LUXEMBURG
GATT – 1st Jan 1948

OBJECTIVES:
Raise standards of living,
Ensure full employment and a large and steadily growing volume
of real income and effective demand
Optimal use of the resources of the world
Expand the production and exchange of goods
MAJOR POINTERS:
General MFN treatment
Schedules of concessions
National Treatment on Internal Taxation and Regulation
Special Provisions relating to Cinematograph Films
Freedom of Transit
Anti-dumping and Countervailing Duties ………
Uruguay Round – 1986-1994
Seeds were sown in Nov 1982 itself, at the GATT meeting in
Geneva
Covered almost all trade,
from toothbrushes to pleasure boats,
from banking to telecommunications,
from the genes of wild rice to AIDS treatments etc.
FOCUS: trading system into several new areas, notably trade
in services and intellectual property, and to reform trade in the
sensitive sectors of agriculture and textiles
123 countries agreed to participate
Would have ended in 1990 itself, but got extended because of
US and EU(later settled with a deal – Blair House Accord)
Date of conclusion : 15 Apr 1994 (Marrakesh)
WTO – 1st Jan 1995
Location: Geneva, Switzerland
Created based on : Uruguay Round negotiations (1986-94)
Membership: 164 countries on April 2019
Functions:
Administering WTO trade agreements
Forum for trade negotiations
Handling trade disputes
Monitoring national trade policies
Technical assistance and training for developing countries
Cooperation with other international organizations
Post WTO introduction
Doha Development Agenda, Nov 2001
Bali Package, Dec 2013
1997,2000,2013,2015,2017
Globalization ~ India
Major policy changes after 1990s – L,P,G
Motto - Integration of the Indian economy into the global economy
Devaluation – by 18-19%
Disinvestment – privatization
Dismantling of the industrial licensing regime
Allowing FDI
NRI scheme – concessions above 60% stake
Throwing open industries reserved for the public sector to private
participation
Abolition of the (MRTP) Act
The removal of quantitative restrictions on imports
The reduction of the peak customs tariff – 300% to 30%
Wide-ranging financial sector reforms
Globalization ~ India
Merchandise trade from developing economies - 2013
 GATS
TRIPS & TRIMS
General Agreement
on
Trade in Services
GATS
1st Jan 1995
Coverage of GATS
Covers all internationally traded services

Exceptions
Services provided by the Government
Services in Air transport sector

Applies to 4 modes of services supply

Cross-border supply e.g., International telephone calls
Consumption abroad e.g., Tourism
Commercial presence e.g., Banking
Presence of natural persons e.g., Actors or const’n workers
 The sectors covered by the GATS
1. Communication
2. Construction and Engineering
3. Distribution
4. Education
5. Environment;
6. Financial
7. Health
8. Tourism and Travel
9. Recreation, Cultural, and Sporting
10. Transport and Other
Trade Related Investment Measures
(TRIMs)
TRIMs
Certain conditions or restrictions imposed by the Govt. w. r. t
foreign investment in the country

Foreign capital would not be discriminated

Features
Abolition of restriction imposed on foreign capital

Offering equal rights to the foreign investor on par with the

domestic investor

No restrictions on any area of investment

No limitation or ceiling on the quantum of foreign investment

TRIMs

Granting of permission to import raw materials and other

components without any restrictions

No force on the foreign investors to use the total products and

or materials

Export of the part of the final product will not be mandatory

Restriction on repatriation of dividend interest and royalty will

be removed

Phased mfg programming will be introduced to increase the

domestic content of the manufacturer
Trade Related Intellectual Property
Rights
(TRIPs)
Intellectual property

IPRs are the rights granted to persons (inventors) for

creation of something out of their mind

TRIPs provide the norms and standards for protecting the

intellectual property.

Patent Law, 1856

Indian Patent Act, 1970
Amended in 2005
TRIPs
Information with commercial value

Ideas and creative expression

It includes
Protection or patent
Copyrights
Industrial design
Geographical indication
Trademarks
Trade secrets
Layout design
 The
Effect of
Environments
in
International
Business
Environmental factors in IB
CULTURAL COLLISION
Occurs in international business when:
A company implements practices that are less effective
Employees encounter distress because of difficulty in
accepting or adjusting to foreign behaviors

COUNTRY ANALYSIS
Managers find this difficult to implement because:
Subcultures exist within nations
Similarities link groups from different countries
Cultural Factors Affecting International Business
Operations
Environmental factors in IB
CULTURAL CHANGES
Change by Choice
Reaction to social and economic situations
Change by Imposition
Imposed introduction into a culture of certain elements from
an alien culture

LANGUAGE EFFECTS
A common language within a country is an unifying force
Major Language Groups: Population and Output
Hierarchy of Needs
Body language is not a universal language
Degree of Cultural Differences
Cultural Distance
When a company moves within a cluster of culturally
similar countries, it should expect to encounter fewer
cultural differences and to face fewer cultural
adjustments.

Cultural Friction
A business interaction may be viewed negatively
because of possible changes in power relationships
and the dominion that sets countries apart.
Company and Management Orientations
Polycentrism
belief that business units in different countries should act like
local companies

Ethnocentrism
conviction that one’s own culture is superior to that of other
countries

Geocentrism
requires companies to balance knowledge of their own
organizational cultures with both home and host country
needs, capabilities and constraints