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Political and Economic Factors Affecting International Business Centrally planned economy Currency devaluation Currency revaluation Democracy Economic Imperialism Economic system Equilibrium Exchange controls Expropriation Floating rate Foreign investment General instability risk Global economy Global equity market Market economy Mixed economy Operations risk Ownership risk Political risk Privatize Repatriation of earnings Think tank Supply and demand Systems Totalitarian Trade war Transfer risk The Political Process: Government’s Role in International Trade What do governments do? All governments have some sort of role in international trade. What does Canada’s government do? Establishes import/export policies to protect Canada and its people. Develop policies and regulations to govern and encourage trade Assists Canadian exporters in their quest to succeed internationally. Matches potential Canadian exporters with international clients Maintains and improves relationships with other nations for the purpose of trade Assists Canadian companies in adjusting to changing international market conditions Fosters innovation and human resource development to enable companies to compete internationally. Political Risk Political risk can be business risk, but business risks are not always political. They can be: -Political decisions -Conditions -Events -Activities …that affect the business climate. Types of Political Systems Democracy Vote (free elections) -rules that govern them. Own property -run business Free press/freedom of speech. Market-oriented/capitalist economy. Free Trade (usually) Totalitarian Centralize power -often use military to control Single-party rule (usually) -Dictatorship (sometimes) No elected representatives Command economy Usually, there are aspects of both. Governments have mixtures of both, like economies. Political Interdependence What do you think these words mean together? We know what it means when we talk about companies. What does it mean for governments? This allows countries to pressure others to change policies Sometimes businesses prefer totalitarian economies (in theory anyway). Why do you think this is? Trade Wars Sometimes, governments can carry out “trade wars” when there are things going on that they do not like. Economic Imperialism What is imperialism? How does this apply to economics and business? 1c and 3b on page 279.