Globalization & Sustainability Final Revision Flashcards

The Paris Agreement and United Nations Sustainable Development Goals

  • Kyoto Protocol: A global agreement that set binding targets for greenhouse gas emissions for Developed countries, excluding Developing nations.
  • Paris Agreement: Result of the 2015 COP21 in Paris; involves both Developed and Developing countries in addressing climate change.
  • Key Provisions of the Paris Agreement:
    1. Long-term temperature goal: Limit global warming to well below 2°C2°C, aiming for 1.5°C1.5°C.
    2. Climate finance: Financial support to developing nations for mitigation and adaptation efforts.
    3. Global Stocktake: Periodic reviews to assess collective progress.
  • Millennium Development Goals (MDGs): A set of 8 goals established by the UN in 2000, serving as predecessor to the SDGs.
  • Sustainable Development Goals (SDGs): A set of 17 goals established by the UN in 2015 to achieve a sustainable future.
  • List 4-5 SDGs (Slide 10-18).

Ethics, Corporate Social Responsibility, and Sustainability

  • Ethics: Accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization.
  • Ethical dilemmas: Situations in which none of the available alternatives seems ethically acceptable.
  • Bribe: Payments made to obtain exclusive preferential treatment.
  • Facilitating payments: Payments made to expedite routine government action.
  • “Roots of Unethical Behavior” or “Determinants of Ethical Behavior” (Slide 11-12).
  • Expatriate managers: Home-country managers working abroad in multinational firms are more likely to perform unethical behavior in a business.
  • Businesspeople may behave unethically because they fail to take into account the ethical dimension of Business Decisions.
  • Unethical behavior may exist in firms with an Organizational Culture that does not emphasize business ethics.
  • Organizational culture: The values and norms that are shared among employees of an organization.
  • One of the causes of unethical behavior is pressure from the parent company to meet unrealistic performance goals that can be attained only by cutting corners or acting in an unethical manner.
  • What is ethical → depends upon one’s cultural perspective, for example “Gift giving” consider bribe in some cultures and simply gift in other cultures.
  • Friedman doctrine: The only social responsibility of business is to increase profits, so long as the company stays within the rules of law.
  • Righteous moralism: The belief that a multinational’s home-country standards of ethics are the appropriate ones for companies to follow in foreign countries. Common among Developed countries managers. The biggest criticism of the righteous moralist approach to an ethical situation is that it goes too far and not every situation can be approached relying on home-country standards.
  • Naive immoralist: Asserts that if a manager of a multinational firm sees that firms from other nations are not following ethical norms in a host nation, that manager should not either, i.e., actions are ethically justified if everyone else is doing the same thing.
  • Utilitarianism approach of ethics: Moral worth of actions or practices is determined by their consequences.
  • Kantian ethics: People should be treated as ends. People have dignity and need to be respected; they are not machines.
  • Rights theories: Focus on respecting fundamental human rights and privileges.
  • The notion that there are fundamental rights that transcend national borders and cultures was the underlying motivation for the Universal Declaration of Human Rights.
  • Justice theories: All persons would agree if they could freely and impartially consider the situation. Impartiality is guaranteed by → The veil of ignorance.
  • The veil of ignorance: Everyone is imagined to be ignorant of all of their particular characteristics, for example, race, sex, intelligence, nationality, family background, and special talents.
  • Corporate social responsibility (CSR): The idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both good economic and social consequences.
  • Sustainable strategies: Help MNE’s make profits without harming the environment, while ensuring the company operates in a socially responsible manner with regard to its stakeholders.

International Trade Theory

  • Mercantilism: Export more than Import.
    • Zero-Sum Game. Country(+)/Country(−)Country (+) / Country (-).
    • China utilizes mercantilist policy → Currency ↓ → to sell more.
  • Absolute Advantage - Adam Smith.
    • Producing product: Efficient/ Specialized.
    • Not Zero-Sum Game.
    • Ex. Ghana: Coco.
  • Comparative Advantage - David Ricardo.
    • Can produce it, but less Efficient ↓ ⸫ Buy it from another country, more Efficient ↑ i.e. A country should specialize in production of goods that it produces MOST efficiently and buy goods that it produces LESS efficiently from other countries.
    • Ex: Natural Gas from Qatar.
    • Encourage Free Trade.
    • Advantages:
      1. Stock of Resources ↑.
      2. Efficient Resources.
      3. Economic Growth.
  • Heckscher-Ohlin
    • Comparative Advantage reflects (Factor Endowment). Factors Endowments: The labor, energy, land, and capital a country relies on to source goods and services.
    • US export goods with Capital Intensive → Innovative Brains. Ex: Tesla.
    • China exports goods with Labor Intensive → Mass Production Ex: Household goods. ⸫ Countries will export locally abundant goods, and import locally scarce goods.
  • Product Life-Cycle Theory - Raymond Vernon.
    • Product when mature → place of production/sale change.
    • Demand ↑ only when product is NEW. ⸫ With time, the country loses its advantage. Ex: High Tech. start in the US, with time it shifts to Japan/ South Korea.
    • Result of Globalization.
  • New Trade Theory
    • More Availability ↑ Unit value (cost) ↓
    • More Variety ↑ Less Cost ↓ ⸫ Who takes the advantage? – 1st Mover.
    • Nations benefit from trade even if not specialized or do not differ in factor endowment.
  • National Competitive Advantage - Michael Porter.
    • Porter Diamond [4 Factors].
    • Why do nations achieve success in a particular industry?
      1. Firm Structure.
      2. Supporting Industry.
      3. Demand Condition.
      4. Factors Endowment [Basic/ Advanced].

Government Policy and International Trade

  • Free Trade – Absence of barriers to the free flow of goods and services between countries.
  • General Agreement on Tariffs and Trade (GATT) – International treaty that committed signatories to lowering barriers to the free flow of goods across national borders, succeeded by WTO.
  • Instruments of Trade Policy:
    1. Tariffs.
    2. Subsidies.
    3. Import quotas.
    4. Voluntary export restraints.
    5. Local content requirements.
    6. Administrative policies.
    7. Antidumping duties.
  • Tariffs – Atax levied on imports that effectively raises the cost of imported products relative to domestic products.
  • Import Tariffs – Taxes levied on imports.
  • Specific Tariffs – Levied as a fixed charge for each unit of an imported good.
  • Ad Valorem Tariffs – Levied as a proportion of the value of an imported good.
  • Export Tariff – A tax placed on the export of a good.
  • Export Ban – Policy that partially or entirely restricts the export of a good.
  • Subsidy – A government payment to a domestic producer.
  • Import Quota – A direct restriction on the quantity of some good that may be imported into a country.
  • Tariff Rate Quota – Hybrid of a quota and a tariff; a lower tariff is applied to imports within the quota than those over the quota.
  • Voluntary Export Restraint (VER) – Quota on trade imposed by the exporting country, typically at the request of the importing country’s government.
  • Quota Rent – Extra profit that producers make when supply is artificially limited by an import quota.
  • Local Content Requirements (LCR) – Demand that some specific fraction of a good be produced domestically.
  • Administrative Trade Policies – Bureaucratic rules designed to make it difficult for imports to enter a country (ex: Licenses).
  • Dumping – Selling goods in a foreign market below their cost of production or below their “fair” market value.
  • Antidumping Policies – Punish foreign firms that engage in dumping, thus protecting domestic producers from unfair foreign competition.
  • The Case for Government Intervention:
    1. To protect the interests of politically important groups.
    2. To promote the interests of key domestic producers.
    3. For reasons of national security.
    4. Achieving some political objective, such as protecting the environment or human rights.
    5. Protecting jobs and industries.
  • New Trade Theorists believe government intervention in international trade (Strategic Trade Policy) is justified. While Classical Trade Theorists disagree.
  • Krugman – sees that Strategic trade policies to establish domestic firms in a dominant position in a global industry are: beggar-thy-neighbor policies – That boost national income at the expense of other countries.
  • A country that attempts to use Strategic Trade Policies will probably provoke Retaliation.
  • A country that attempts to use Strategic Trade Policies will probably provoke a Trade War.

The International Trading Framework

  • The International Trading Framework evolved since World War II to govern world trade.
    • In its first 50 years, the framework was known as the General Agreement on Tariffs and Trade (GATT).
    • 1980 to 1993, Protectionist Trends (Japan’s economic success).
    • The Uruguay Round: concerned services, intellectual property, and agricultural subsidies.
    • Since 1995, the framework has been known as the World Trade Organization (WTO).
    • Ongoing since 2001, The Doha Round: concerned with cutting tariffs on industrial goods and services, phasing out subsidies to agricultural producers, reducing barriers to cross-border investment, and limiting use of antidumping laws.