The Legal, Political/Trade Environment

Topics: International trade, Free trade, World Trade Organization Pages: 10 (7385 words) Published: September 16, 2014

The Legal, Political/Trade Environment

Chapter Objectives
Structure Of The Chapter
Laws, rules, and standards
The political environment
The legal environment
Terms of access
Winds of change
Chapter Summary
Key Terms
Review Questions
Review Questions Answers

The legal/political aspect is very important in global marketing. "International law" can be defined as rules and principles that states and nations consider binding upon themselves. This raises two interesting characteristics of international law. The first is that "law" belongs to individual nations and international law only exists to the degree that individual nations are willing to relinquish their rights. The second is the lack of an adequate international judicial and administrative framework or a body of law which would form the basis of a truly comprehensive international legal system. The international business is also subject to political decrees made by governments both in "home" and "host" countries. Home governments can apply pressure not to deal with disapproved parties. These measures may take the refusal to grant an export licence, or withdrawal of export guarantee cover. The host government may take measures like taxation, ownership controls, operating restrictions or expropriation. Chapter Objectives

The objectives of this chapter are:
 To give an understanding of the major factors which must be considered in the legal/political environment when planning to market globally  To describe the "Terms of Access" and show the importance of these as vital elements of facilitating trade  To give, in detail, a description of the main elements of the latest GATT Round  To show the importance of legal/political aspects in global marketing. Structure Of The Chapter

The chapter begins by looking at the major factors which the marketer must consider in assessing vulnerability to the legal/political environment. It then goes on to describe in detail the major elements of the legal environment and Terms of Access, including both tariff and non tariff barriers. A major section of the chapter is devoted to the main provisions of the new GATT Round (1995) and an assessment of its impact on the global marketer. Laws, rules, and standards

All agricultural exports operate within an institutional environment, which is made up of a set of political, social and legal ground rules. These ground rules form the laws of all production, exchange and distribution and give rise to certain expectations and assurances about the actions of others, and give order and stability to the means of doing business. The most important rules in any system are those defining, allocating and enforcing property rights, and rules and conventions defining allowable and non-allowable forms of cooperation and competition (standards, rules of contract, fair trading etc). Well defined and enforced systems regarding property rights are essential. Articulated ownership and rights to use, trade and alter assets is vital to market development, since this assigns to individuals the right to benefits and losses in production and marketing activities. Rules and conventions specifying entry conditions and boundaries on cooperative and competitive policies also facilitate exchange and coordination. The establishment and enforcement of standards can reduce transaction costs by increasing the available information to buyers and consumers. Standards may include basic weights, measures, quality grades and contract forms. Quality standards may be mandatory or voluntary and minimum or multiple grades. These standards help where trade is at a distance. The EU has a strict set of standards regarding horticultural products for example, including hygiene, quality and certificates of origin. Licensing also facilitates marketing agencies and producers by reducing transaction costs. This occurs when the criteria for licensing revolves around asset holdings, financial solvency...
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