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C8.3 FDI political ideology — Transcript

by International Business · 2,258 words · 440 segments · language en · Watch on YouTube

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0:00so ideology towards investment
0:03has a range from a radical stance to a
0:05hostile
0:06to all foreign direct investments in in
0:09certain free market economies so for
0:11example
0:12um you know
0:16if you look at certain countries there
0:18there could be
0:20reasons why they want to keep out some
0:22foreign direct investment
0:24uh for example if they fear that their
0:28domestic culture will be overtaken by
0:31american movies
0:32such as you know countries like france
0:34and china they may want to actually
0:36limit the amount of
0:42exposure by limiting the amount of
0:44investment that companies can make in
0:46movie theaters or
0:48production or or um directly
0:51uh investing in advertising their movies
0:54abroad
0:55um if you know if the co if a country is
0:58trying to
0:58protect protect its domestic oil
1:00business it may
1:02not may reject um foreign
1:05investors coming in to set up their
1:07foreign companies inside of
1:09their country to protect their you know
1:12national corporation so there could be
1:14some resistance to foreign direct
1:16investment and
1:17if united states we had so few a few
1:19specific instances where
1:21there was some
1:25um maybe with saudi arabia i'm not sure
1:27some country in the middle east
1:29wanted to invest in and buy uh shipping
1:32ports the united states
1:33and that was uh fought against uh
1:37and against them doing that because of
1:39fears
1:41rising from 9 11. uh also many times
1:45chinese companies want to buy energy
1:47reserves or energy companies
1:49or certain key companies that
1:52are tied to the defense united states um
1:55companies that have access to data banks
1:59or
2:00um storage facility or farms or
2:04sensitive technologies and they may step
2:06in and prevent the foreign direct
2:07investment
2:08because of national security concerns or
2:12different things that you know of that
2:14matter
2:15okay so if we look at the radical view
2:20um
2:23from you know
2:29let's think about this for a second
2:32okay um there are always radical views
2:37in any any area of government or
2:38investment or
2:40um when we're taking actions between
2:44countries they argue that multinationals
2:47extract profits from a host company and
2:49take them home to their
2:50to their country giving nothing of value
2:52to the host country in exchange
2:54well i guess that can be true but a lot
2:57of times united states
3:00companies that invest overseas like to
3:01keep the money overseas because if they
3:03bring it home
3:04they have to pay tax on it i think um
3:07apple has like 500 billion dollars of
3:10profits overseas
3:12that were they're reluctant to bring
3:13home because they're going to have to
3:14pay u.s
3:15tax once they bring that money home so
3:17they keep that money overseas and keep
3:19investing
3:20in overseas operations so i don't think
3:22that's
3:23um a fear that that a lot of companies
3:27should have
3:27based on united states foreign direct
3:29investment although
3:31you know for example that key technology
3:33is tightly controlled by multinationals
3:35and that is that important jobs and
3:37foreign subsidiaries
3:39um go to um home country nationals
3:43rather than citizens of the host country
3:44so if they set up shop in a foreign
3:46country they want to bring over their
3:48own employees
3:49to help safeguard their company secrets
3:51and in production
3:53um techniques or technologies certain
3:57innovations they have they don't want to
3:58fall in the hands of competitors
4:00because of this according to the radical
4:02view foreign direct investment by
4:04multinational enterprises
4:06of advanced capitalist country keep the
4:09less developed countries of the world
4:10relatively backwards and dependent
4:12on the advanced capitalistic nations for
4:15investments jobs and technology
4:17since they are so protective of this
4:18information
4:21according to the extreme version of this
4:23view no country should ever permit
4:25foreign
4:26corporations to undertake a foreign
4:27address and direct investment
4:29because they can never be instrumental
4:31um to the economic development
4:34only the economic domination of that
4:36foreign country
4:40so if there is a multinational under the
4:42radical view
4:43in your country you should nationalize
4:45it and this happened
4:46um and a lot of american uh corporations
4:50especially or
4:51oil corporations in the middle east and
4:53in mexico and
4:54the the companies were nationalized and
4:57the property was stolen from
4:58the multinational companies uh things
5:01also happened in venezuela and made part
5:03of the state
5:04facility so from 1945 to 1980
5:07the radical view was very influential in
5:09the world economy until the
5:11collapse of communism our countries of
5:13eastern europe opposed any foreign
5:14direct investment
5:16so communist countries elsewhere china
5:19cambodia cuba
5:20were also opposed the principle of
5:21foreign direct investment
5:23fearing increasing presence of
5:27corporations would increase influence of
5:29foreign hostile governments
5:31so china eventually started to allow
5:33foreign direct investment in the 70s and
5:35accelerated well into today
5:37um so then with the collapse of
5:40communism
5:41of course a lot of foreign direct
5:42investment mostly from europe flew into
5:44the
5:44former communist states uh and this has
5:47helped accelerate the world trade
5:49pretty quickly as these economies of
5:52these developing countries started to
5:54perform better
5:55when they embraced capitalism and
5:57allowed in more foreign direct
5:59investment into the country okay so
6:02let's talk about the free market view
6:05the free market view traces its roots to
6:07classic
6:08economies into the international trade
6:10theories of adam smith and
6:11ricardo that we talked about from
6:13chapter six and
6:15um the intellectual case for this view
6:17has been strengthened by
6:19the internationalization
6:22explanation of foreign direct investment
6:25where the free markets
6:26view argues that international
6:29production should be distributed among
6:31countries
6:32according to the theory of competitive
6:33advantage and countries should
6:35specialize
6:36in the production of those goods and
6:37services they can produce the most
6:39effectively
6:40and trade for the rest you know so
6:42within this the the
6:43multinational enterprise is an
6:45instrument for dispersing uh productions
6:47of goods and services and more
6:49effectively
6:50choosing locations around the globe to
6:52make
6:53global commerce the most effective uh pr
6:56profitable and cost reduced
6:58cost effective for global trade
7:01benefiting the world with
7:03a huge assortment of low-priced goods
7:06and creating more work opportunities and
7:08lifting more people out of poverty
7:13now a lot of some companies you know
7:15there is there are trouble
7:16or there is some discomfort when a
7:18company such as dell for example may
7:20move
7:20its computer manufacturing operations
7:23from united states to mexico
7:25or when apple computers moves its
7:27manufacturing from the united states to
7:28say china taiwan
7:30or philippines or vietnam vietnam to
7:33take advantage of lower labor costs
7:36so for free market view moves such as
7:38this can be seen as increasing the
7:40overall
7:41efficiency of resources and utilization
7:43the world economy
7:44you know china and mexico
7:47due to the lower labor costs and mexico
7:49for its advantage from shipping back to
7:51united states
7:52china for its uh technology
7:56highly skilled manufacturing and
7:58low-cost manufacturing wages
8:00has been a competitive advantage for
8:01assembling pcs and
8:03smartphones by moving the production um
8:07from united states to china or mexico
8:10companies like down apple
8:12free up u.s resources to use the
8:14activities which united states has a
8:16competitive advantage such as design
8:19development computer software hardware
8:22manufacturing of high
8:23value components such as the
8:25microprocessors
8:27from intel and amd and also a lot of
8:29research and development
8:30and these jobs are significantly higher
8:33paid and less tedious so
8:35if it's sort of a win-win if we can
8:38export the jobs people really aren't
8:40thrilled to have
8:42and that would just be not cost
8:43effective to have here but we can keep
8:45more of the high paid
8:46more prestigious more innovative uh core
8:49strength
8:50jobs in the united states then we can
8:52create a you know a more stronger
8:54economy
8:55and in addition china and mexico gain
8:57from the technology skills and capital
9:00that is going to be transferred from
9:02dell and
9:03and apple uh through foreign direct
9:05investment into their countries
9:09stimulating their own economic growth
9:11and stimulating their ability to buy the
9:13products as well
9:15so it's a win-win theoretically a
9:17win-win for everybody
9:22um so the move to globalization and and
9:25the realignment of
9:26cost structures and production is
9:29serving to you know expand the economies
9:31and the consumers rapidly around the
9:33world and create a stronger overall
9:35middle class and reduce
9:36poverty which helps escalate the
9:38consumption of
9:39goods and services which makes companies
9:41very wealthy which makes stockholders
9:43very wealthy
9:44um you know so this is this is one of
9:48the whole point of doing business
9:50by using foreign direct investment
9:59okay so let's look at pragmatic
10:01nationalism in practice
10:04many countries have developed neither a
10:06radical policy or free market policy
10:08towards
10:09uh foreign direct investment but instead
10:10of policy they can best be described
10:12as pragmatic nationalism and this view
10:16is that foreign direct investment has
10:18both benefits
10:20and costs so foreign direct investment
10:23can benefit a whole country by bringing
10:25capital skills technology
10:27jobs but those benefits come at a cost
10:30when a foreign company um
10:34rather than the best company produces
10:36products the profits from that
10:38investment go back and many times back
10:39to the home host country
10:42so many co many countries are also
10:44concerned that this foreign
10:45manufacturing plants
10:47may import many components from its home
10:50country as well
10:51which is negative for the
10:54the local companies that could provide
10:56those components and also helps to widen
10:58the trade deficit
10:59if they're if they're importing a lot of
11:01these components so
11:04countries adapting more pragmatic stance
11:07tries to look at the good and bad and
11:09maximize the good benefits of the
11:10foreign direct investment by finding out
11:12ways to minimize the bad aspects
11:14in their view sometimes companies can
11:16make promises that you know for the next
11:1810 years we'll reinvest all profits we
11:20make
11:21and even some countries pass laws where
11:23any profits you make can't be
11:24repatriated has to be state
11:26has to stay within the host country and
11:28i think brazil has many of those
11:30intact you know japan offers an example
11:33of pragmatic nationalism in in 80s japan
11:35policy was
11:37probably one of the most restrictive
11:38among countries that um
11:40with foreign direct investment uh this
11:43was due to japan's
11:44um um
11:49perception that um direct entry into
11:52foreign
11:53um by foreign firms specifically united
11:56states firms
11:57with ample managerial resources into the
11:59japanese market would hamper the
12:01development growth of their own
12:02industries and technology
12:04so they wouldn't be able to fully form
12:05their own competitive industries if
12:08too many united states companies set up
12:09shop and was competing directly against
12:11them in the japanese market
12:12so they blocked a lot of this foreign
12:14direct investment and chose to support
12:16um domestic and develop their domestic
12:19companies
12:20uh instead even though foreign direct
12:22investment from japanese
12:24companies were very strong pervasive
12:25around the world especially united
12:27states
12:27they didn't reciprocate in kind and that
12:30was sort of looked at
12:31negatively from the us government to the
12:33japanese government creating a lot of
12:34tension
12:36um
12:38some companies like ibm and texas
12:40instruments were able to set up wholly
12:41owned subsidiaries
12:43inside of japan uh by adopting these
12:46negotiating positions where they would
12:48come to terms and satisfy
12:51the government the japanese government
12:53with what benefits they can bring to the
12:55country
12:55and um to hopefully over outweigh any of
12:59the negative
13:00so companies can surely work with
13:02foreign governments
13:03to um to get access to foreign direct
13:06investment in those countries
13:08by alleviating some of their fears
13:15okay so let's look at
13:18some shifting ideology um in recent
13:22years
13:23there have been a marketed decline in a
13:25number of countries that
13:26adhere to radical ideologies one way or
13:29another
13:30although a few countries have adopted a
13:32pure free market policy stance
13:34an increasing number of countries have
13:36gravitated towards
13:38the free market end of the spectrum and
13:40have libera
13:41and have viewed that foreign direct
13:43investment was good overall
13:45mostly good and work to encourage a lot
13:48of foreign direct investment
13:49and you know such countries as ireland
13:51greatly you know
13:53made specific aggressive policies to
13:55direct attract foreign direct investment
13:57because ireland said let's
13:59you know reduce corporate taxes make
14:02promises
14:03to companies if they come over that a
14:05certain amount of years they don't have
14:07to pay tax
14:08and let's make our um
14:11foreign direct investment as easy and as
14:13beneficial as possible and as a result
14:16many companies came into ireland and
14:18hired a great deal of irish
14:20people as their employees increasing the
14:23taxes that the government
14:25took in and giving the government more
14:27ability to spend on infrastructure and
14:29education inside
14:30of ireland so sometimes foreign direct
14:32investment can be a really good thing if
14:34utilized
14:35in the best possible way in foreign
14:38countries but you know there are some
14:41countries that
14:42are a little hostile or suspicious of
14:44foreign direct investment and
14:45a lot of that has to do with how closely
14:48the cultures are aligned so the
14:49irish culture in the united states
14:51culture isn't too far apart and there's
14:53a lot of trust and a lot of
14:54mutual respect so it's easy for them to
14:57encourage this foreign direct investment
14:58but foreign direct investment between
15:01countries such as vietnam the united
15:03states
15:04took a long while to develop and to move
15:07into a more productive
15:09stance so as these ideologies shift
15:14some countries that were formally
15:15hostile to it have seen the benefits in
15:17other countries
15:18and become more open to it and
15:20liberalize their
15:22economies and laws to allow for more
15:24foreign direct investment

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