Definition politics and law

Politics set of activities that are associated with making decisions in groups, or other forms of
power relations among individuals, such as the distribution of resources or status.

Law the discipline and profession concerned with the customs, practices, and rules of conduct of
a community that are recognized as binding by the community. Enforcement of the body of rules
is through a controlling authority.

The Home-Country Perspective

No money you can afford to ignore the policies and regulations of the country from which he or
she conducts international marketing transactions. Wherever a firm is located it will be affected
by government policies and the legal system.

Many of these law and regulations may not been assigned specifically to address international
marketing transactions, yet they can have a major impact on a firms opportunities abroad.
Minimum wage legislation , for example , affects international competitiveness of a firm using
production processes that are highly labor-intensive period the cause of domestic safety regulates
may significantly affect the pricing policies of firms in their international marketing efforts
period example us legislation that create their environmental super fund requires payment by
chemical firms based on their on their production volume regardless of whether the production is
sold domestically or exported. As a result, this firm is at a disadvantage internationally when
exporting their commodity type products because they must compete against foreign firms that
are not required to make such a payment in their home counties and therefore have a cost
advantage.

Other legal and regulatory measures, however, are clearly aimed at international marketing
activities. Some may be designed to help firms in their international efforts. The lack of
enforcement of other may hurt the international market. For instance, many firms are concerned
about the lack of safeguard for intellectual property rights in developing countries, and issues
discussed later in this chapter.

Another area which governments may attempt to aid international marketing efforts of
companies is gray market activities. Gray market good are products that enter market in a way
not desired by their manufacturer. Companies may be hurt by their own product if they reach the
consumer via uncontrolled distribution channels.

Apart from specific areas that result in government involvement, the political environment in
most countries tends to provide general support for the international marketing efforts of the
country’s firms. For example a government may work to reduce trade barrier or to increase trade
opportunities through bilateral and multilateral negotiation. Such action will affect individual
firms to the extent that they affect the international climate for free trade.
Often, however, governments also have specific rules and regulations restricting international
marketing. Such regulations are frequently political in natural and are based on the fact that
governments believe commerce to be only one objective among other, such as foreign policy and
national security. Four main areas government activities are of major concern to the international
market here: embargoes or trade sanction, export control, import control and the regulation of
international business behavior.
What Is the Foreign Corrupt Practices Act (FCPA)?
The Foreign Corrupt Practices Act (FCPA, the Act) is a United States law that
prohibits U.S. firms and individuals from paying bribes to foreign officials to
further business deals. The FCPA contains two main articles:

 The anti-bribery provisions

 The books, records, and internal control provisions, which speaks to
accounting practices

Understanding the Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act targets corruption and bribery
internationally. Paying foreign officials for expediting legal processes or
obtaining contracts was a common business practice around the world well
into the 1970s. In some countries, in fact, corporations routinely wrote-off
bribes as normal business expenses when filing their tax returns. Being
common, however, does not make this behavior desirable or ethical.

When the act was passed in 1977, it received substantial backing from
American businesses because they could not compete fairly in overseas
markets where bribery was accepted. The FCPA’s anti-bribery regime—along
with the adoption of treaties like the Organisation for Economic Co-operation
and Development's (OECD), which required signatory countries to outlaw all
financial crime—has helped to level the playing field abroad for U.S.
businesses.

Anti-Bribery Provisions
The act prohibits bribery of foreign officials and intends to deter corruption
and abuses of power worldwide. The FCPA contains policies for governing
the actions of publicly traded companies, their directors, officers,
shareholders, agents, and employees. This includes working through third
parties such as consultants and partners in a joint venture (JV) with the
company—meaning that the use of proxies to execute a bribe will not shield
the company or individual from culpability.

Books, Records, and Internal Control Provisions

This section of the act outlines the accounting transparency guidelines that
are meant to operate in tandem with the anti-bribery provisions. The FCPA
requires companies whose securities are listed in the U.S. to meet its
accounting provisions, which cite ways of recording assets that make it
difficult to mask corrupt payments.

Corporations covered by the act also must devise and maintain internal

controls to assure regulators that their business transactions are accounted
for properly.

Violating the Foreign Corrupt Practices Act

The Securities and Exchange Commission (SEC)  and the Department of
Justice (DOJ) are jointly responsible for enforcing the Foreign Corrupt
Practices Act. For its part, the SEC created a special unit within its
enforcement division to focus on matters that fall under the auspices of the
FCPA.
Violators of the act can face substantial sanctions and penalties, and both
criminal and civil actions may be charged. Punishments include fines as
much as twice the amount of the benefit expected to be received from the
bribery. Corporate entities found guilty of breaching the act may be forced to
accept the oversight of an independent auditor to ensure future compliance.
Individuals involved in breaking this law can face imprisonment for as many
as five years.

SEC Sample Rulings in the FCPA

The SEC publishes current violations of the act, along with its enforcement
actions, on the SEC website in press release format. The agency also
redacts a summary list, organized by calendar year, of individuals and firms
that violated the tenets of the act.

For example, in 2019, some of the SEC's rulings included actions against:

 Ericsson (NASDAQ: ERIC), the Stockholm based multinational

telecommunications company, agreed to pay more than $1 billion to the
SEC and DOJ to resolve charges that it violated the FCPA by engaging
in a large-scale bribery scheme involving the use of sham consultants
to secretly funnel money to government officials in multiple countries.
 Microsoft (NASDAQ: MSFT) agreed to pay more than $24 million to
settle SEC charges related to FCPA violations in Hungary, Thailand,
Saudi Arabia, and Turkey, and criminal charges related to Hungary.
 Tim Leissner, a former executive of Goldman Sachs (NYSE: GS),
agreed to a settlement with the SEC that includes a permanent bar
from the securities industry for violating the FCPA by engaging in a
corruption scheme, in which he obtained millions of dollars by paying
unlawful bribes to various government officials to secure lucrative
contracts for Goldman Sachs.
 The SEC charged Walmart Inc. (NYSE: WMT) with violating the books,
records, and internal accounting controls provisions of the FCPA by
failing to operate a sufficient anti-corruption compliance program for
more than a decade as the retailer experienced rapid international
growth. Walmart agreed to pay more than $144 million to settle the
SEC’s charges and approximately $138 million to resolve parallel
criminal charges by the DOJ for a combined total of more than $282
million.
 https://www.investopedia.com/terms/f/foreign-corrupt-practices-act.asp
Economic Risk
Some nations impose controls on the movement of capital into and out of the country:
Exchange Controls
 Limit the flow of foreign currency out of a country
Tax Policy
 Controls multinational corporations and their capital
Price Controls
 Control the prices of imported products or services
International Relations and Laws
Policies and events occurring among countries affect international business
International Politics
Determined by bilateral political relations and by multilateral agreements
International Laws
Although no enforceable body of law exists, certain treaties and agreements are respected by a
number of countries.
Sanctions and Embargoes

Sanctions involve specific coercive trade measures that are imposed on a targeted country, entity,
or individuals associated with them. These measures are designed to impose economic pressure
and penalties to influence the behavior or policies of the targeted party. Sanctions can include
various actions such as trade barriers, tariffs, export/import restrictions, financial sanctions,
travel bans, asset freezes, and limitations on specific industries or individuals. They are typically
targeted and aimed at specific entities or sectors of the economy.

Embargoes, on the other hand, are more comprehensive in nature and involve a complete
prohibition of trade with the targeted country or entity. Unlike sanctions, embargoes encompass
a broader range of restrictions that can extend to all types of trade, including imports, exports,
financial transactions, investments, and other related activities. Embargoes are typically imposed
as a stronger measure and serve to isolate and cut off the targeted party from international trade
entirely.

The objectives of sanctions and embargoes are primarily political or adversarial. Governments or
international bodies impose these measures to express disapproval, exert influence, deter certain
behaviors, or address security concerns. They are often used as tools of diplomacy and foreign
policy to pressure the targeted party into compliance or to achieve specific political outcomes.

Both sanctions and embargoes disrupt the free flow of trade and can have significant economic
and humanitarian consequences. They can impact the economies of the targeted countries, hinder
economic development, and affect the livelihoods of individuals and businesses involved in
international trade. In some cases, sanctions and embargoes can lead to shortages of essential
goods, hinder access to vital resources, and negatively affect the well-being of the civilian
population.

It is important to note that the effectiveness and ethical implications of sanctions and embargoes
are subjects of ongoing debate. While these measures can be used to address political or security
concerns, they can also have unintended consequences and disproportionately affect innocent
civilians. The decision to impose, modify, or lift sanctions and embargoes is usually made by
governments or international organizations and is often subject to negotiation, compliance with
conditions, and periodic reviews.

Export controls are regulatory measures implemented by governments to restrict or regulate the
exportation of certain goods, technologies, or information that are deemed strategically important
or sensitive. The primary purpose of export controls is to deny or delay the acquisition of these
items by adversaries or countries of concern.

The legal basis for export controls can vary from one nation to another. Each country typically
has its own set of laws, regulations, and agencies responsible for implementing and enforcing
export control policies. These policies are designed to protect national security, prevent the
 proliferation of weapons of mass destruction, safeguard sensitive technologies, and address other
strategic concerns.

Under the concept of No License Required (NLR), most international business transactions can
be conducted without the need for an export license. NLR conditions apply to goods,
technologies, or information that are considered to have minimal or no national security
implications and can be freely traded with most countries. However, specific items or
destinations may still be subject to restrictions or licensing requirements based on the nature of
the goods, the intended recipient, or the destination country.

For commodities that are considered sensitive or fall under controlled categories, export licenses
may be required. These licenses are issued by the relevant government agencies, such as the
Department of Commerce in the United States, and are granted on a case-by-case basis. The
purpose of export licenses is to ensure that the export of sensitive goods or technologies is
properly regulated and aligned with national security and foreign policy objectives.

Export control regulations can cover a wide range of items, including military equipment, dual-
use technologies (items with both civilian and military applications), certain chemicals, software,
and advanced scientific research. The specific categories and criteria for export controls are
defined by each country's laws and regulations, as well as international agreements and treaties.

Compliance with export controls is essential for businesses involved in international trade.
Exporters are responsible for understanding and complying with the export control requirements
applicable to their goods or technologies. Failure to comply with export control regulations can
result in legal consequences, including fines, penalties, loss of export privileges, or even criminal
charges, depending on the severity of the violation and the jurisdiction in which it occurs.

The process of issuing an export license typically involves several steps and considerations.
While the specific procedures may vary depending on the country and its regulatory framework,
the general process is as follows:

1. Determining if a license is required: Exporters first need to assess whether their goods or
technologies fall under controlled categories that require an export license. This assessment is
usually based on the nature of the product, its technical specifications, and its intended use or
end-user. Governments maintain lists, such as the Critical Commodities list, that outline specific
items subject to export control.
2. Identifying the country of destination: The exporter must identify the country to which the goods
will be exported. Some countries are subject to higher scrutiny due to national security concerns,
non-proliferation considerations, or other geopolitical factors. The destination country can
impact the decision-making process for issuing an export license.
3. Assessing the recipient company: The exporter must evaluate the recipient company or end-user
involved in the transaction. This assessment involves verifying the legitimacy of the recipient,
ensuring they are not involved in illegal activities or have a history of violations, and assessing
their capability to handle sensitive goods or technologies responsibly.
4. Conducting a risk assessment: Specialists within the relevant government agency, such as the
Department of Commerce, analyze the commodity, destination country, and recipient company
to assess any potential risks associated with the export. This assessment considers factors such as
national security, human rights concerns, regional stability, and international obligations.
5. Determining the need for a license: If the specialists determine that there are no concerns in any
of the three areas (commodity, destination country, recipient company), an export license may be
issued. This means that the export can proceed under the conditions and restrictions specified in
the license.

It is important to note that the export license issuance process primarily applies to sensitive
goods or technologies and certain recipient countries. For commodities that are not considered
sensitive and for destinations that do not raise significant concerns, the export can often be
conducted under No License Required (NLR) conditions, without the need for an export license.

The specific details and requirements of the export license application process vary by country.
Exporters are typically required to submit detailed information about the commodity, destination,
end-user, intended use, and other relevant documentation to support their license application.
Government authorities carefully review the application and make a determination based on the
applicable laws, regulations, and national security considerations.

The regulation of international business behavior refers to the legal and ethical frameworks
established by countries to govern the conduct of businesses operating across national borders.
These regulations aim to ensure fair competition, protect consumers and workers, promote
ethical practices, and uphold societal values. Here are two methods of regulation commonly
employed:

1. Boycotts: Boycotts are a form of regulation where individuals or groups voluntarily refuse to
engage in business with a company or country due to moral or ethical concerns. Boycotts can be
initiated by consumers, organizations, or governments to express disapproval of certain practices,
such as human rights violations, environmental damage, or unfair labor practices. Boycotts can
impact a company's reputation, sales, and profitability, exerting pressure for change.
2. Anti-trust Laws: Anti-trust laws, also known as competition laws, are regulations that aim to
prevent anti-competitive behavior and maintain fair market competition. These laws address
practices such as monopolies, price-fixing, collusion, and abuse of market power. Anti-trust laws
promote market efficiency, protect consumer interests, and encourage innovation by ensuring a
level playing field for businesses.

In addition to these methods, there are various other regulatory approaches employed by
countries to govern international business behavior. These can include:

 Trade Regulations: Governments impose trade regulations, such as tariffs, quotas, and trade
agreements, to protect domestic industries, promote fair trade, and ensure compliance with
international trade rules.
 Labor Standards: Regulations address labor rights, including minimum wage, working hours,
occupational health and safety, and non-discrimination. These standards aim to protect workers'
rights and ensure fair employment practices.
 Environmental Regulations: Laws and regulations set standards for environmental protection,
pollution control, and sustainable practices. These regulations aim to mitigate environmental
harm and encourage businesses to adopt sustainable approaches.
 Consumer Protection: Regulations protect consumers from fraudulent, deceptive, or unfair
business practices. These regulations cover areas such as product safety, accurate labeling, fair
advertising, and dispute resolution mechanisms.
 Corporate Governance: Countries have regulations and guidelines in place to ensure good
corporate governance, including transparent reporting, accountability, and the protection of
shareholders' rights.
 Intellectual Property Rights: International agreements and national laws protect intellectual
property rights, such as patents, copyrights, and trademarks, to foster innovation, protect
creators, and incentivize investment in research and development.

It is important to note that what is considered appropriate in terms of international business

behavior may vary across countries due to cultural, legal, and ethical differences. Each country
establishes its own regulations based on its unique values, priorities, and societal expectations.
Additionally, international organizations and agreements play a role in harmonizing standards
and promoting best practices in global business conduct.

Understanding the Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (FCPA) is a U.S. law enacted in 1977 that targets corruption
and bribery involving foreign officials. The FCPA was enacted in response to concerns about the
involvement of U.S. companies in corrupt practices abroad. Prior to the FCPA, it was not
uncommon for companies to engage in bribery as a means to secure business deals or expedite
legal processes in foreign countries.

The main objectives of the FCPA are to promote fair and transparent business practices, combat
corruption, and maintain a level playing field for companies operating internationally. The law
has two main components:

1. Anti-Bribery Provisions: The FCPA prohibits the payment, offer, or promise of anything of
value to foreign government officials, political parties, or candidates for the purpose of obtaining
or retaining business or securing an improper advantage. This includes bribes or kickbacks
offered directly or indirectly through intermediaries.

The FCPA applies to U.S. companies, as well as foreign companies that trade securities on U.S.
stock exchanges or engage in other activities within U.S. jurisdiction. It also applies to U.S.
individuals, including employees, officers, directors, and agents acting on behalf of covered
entities.
2. Accounting and Record-Keeping Provisions: The FCPA requires companies to maintain accurate
and detailed books, records, and internal accounting controls. This provision is aimed at
preventing off-the-books or undisclosed transactions that could facilitate bribery or other corrupt
practices.

Companies subject to the FCPA must have adequate internal controls to ensure accurate financial
reporting and transparency. This allows for proper oversight and detection of potential corrupt
practices. Failure to maintain proper records or internal controls can lead to violations of the
FCPA.

The enforcement of the FCPA is carried out by the U.S. Department of Justice (DOJ) and the
Securities and Exchange Commission (SEC). Both agencies have the authority to investigate
potential violations, impose penalties, and initiate legal actions against companies or individuals
found to have violated the FCPA.

Penalties for FCPA violations can be severe and may include criminal fines, civil monetary
penalties, disgorgement of ill-gotten gains, and even imprisonment for individuals involved in
bribery schemes. In addition to U.S. enforcement, other countries have also implemented their
own anti-corruption laws and cooperate with international efforts to combat bribery and
corruption.

The FCPA has had a significant impact on international business practices, promoting greater
transparency and ethical conduct in global transactions. It has helped to level the playing field for
companies by discouraging corrupt practices and promoting fair competition based on merit and
quality.

Economic risk

refers to the potential negative impact on businesses and investments due to economic factors,
policy decisions, or events that can disrupt the normal functioning of markets and affect financial
returns. Several factors contribute to economic risk, including exchange controls, tax policy, and
price controls. Here's a brief explanation of each:

1. Exchange Controls: Exchange controls are measures implemented by governments to regulate

the flow of capital into and out of a country. These controls can include restrictions on currency
conversions, limits on the amount of foreign currency individuals or businesses can hold, and
requirements for approval or documentation for certain foreign transactions.

Exchange controls can impact businesses and investments by limiting their ability to freely
convert currencies, repatriate profits, or access foreign markets. They introduce uncertainty and
can create obstacles for international trade and investment, affecting the profitability and
liquidity of businesses operating across borders.

2. Tax Policy: Tax policies set by governments can also introduce economic risks. Changes in tax
rates, tax regulations, or the interpretation and enforcement of tax laws can impact businesses
 and investments. Higher tax rates or new tax burdens can reduce profitability, increase costs, and
alter investment decisions.

Tax policy can also affect business competitiveness and investment attractiveness in a particular
country. Favorable tax policies can incentivize investment and economic growth, while
unfavorable tax policies can discourage investment and potentially lead to capital flight.

3. Price Controls: Price controls refer to government regulations that dictate or influence the prices
of certain goods or services. These controls can include price ceilings, where the government sets
a maximum price, or price floors, where the government sets a minimum price.

Price controls are typically implemented to protect consumers from excessive price increases or
to ensure access to essential goods. However, they can create economic distortions, supply
shortages, and disincentives for producers, leading to reduced investment, lower production
levels, and lower quality products.

Price controls can also impact the profitability and viability of businesses operating in regulated
sectors, as they limit the ability to adjust prices in response to market dynamics, input costs, and
inflation.

It is important for businesses and investors to consider and assess the economic risks associated
with exchange controls, tax policies, and price controls when making investment decisions or
engaging in international trade. These factors can significantly impact profitability, liquidity, and
the overall business environment, and may require careful planning, risk management strategies,
and adaptation to changing economic conditions and policies.

Relation

International relations and laws play a crucial role in shaping the landscape of international
business. Policies and events that occur among countries have a direct impact on the conduct of
global trade, investments, and business operations. Here, we will explore the significance of
international politics and laws in the context of international business.

1. International Politics: International politics refers to the relationships, interactions, and power
dynamics among nations on a global scale. Political decisions, ideologies, and conflicts can
significantly influence international business operations. Here are some key aspects:
a. Trade Policies: Governments establish trade policies that regulate imports, exports, tariffs, and
trade agreements. These policies are shaped by political considerations such as national interests,
economic priorities, and diplomatic relations. Trade disputes and negotiations between countries
can impact market access, trade barriers, and the competitive environment for businesses.
b. Political Stability: The stability or instability of political systems in different countries affects
business confidence and investment decisions. Political stability fosters a favorable business
environment, encourages long-term investments, and supports sustainable economic growth. On
the other hand, political instability, civil unrest, or regime changes can disrupt business
operations and increase risks for international businesses.
 c. Geopolitical Considerations: Geopolitical factors, such as territorial disputes, regional
conflicts, or alliances, can have significant implications for international business. These factors
can influence market access, supply chains, resource availability, and investment opportunities.
Businesses must consider geopolitical risks and adapt their strategies accordingly.
2. International Laws: International laws and regulations provide a framework for governing
relations between countries and addressing global challenges. They help establish rules, norms,
and standards that govern international business transactions. Key aspects include:
a. International Trade Laws: International trade laws, including agreements like the World Trade
Organization (WTO) framework, set out rules and principles for fair and non-discriminatory
trade practices. These laws aim to reduce barriers to trade, protect intellectual property rights,
and ensure a level playing field for businesses in global markets.
b. Investment Laws: International investment laws govern the rights, protections, and obligations
of foreign investors in host countries. Bilateral investment treaties (BITs) and international
investment agreements (IIAs) provide legal frameworks to promote and protect foreign
investments, including dispute resolution mechanisms.
c. Human Rights and Labor Standards: International laws and conventions address human rights,
labor standards, and corporate social responsibility. They define acceptable practices regarding
workers' rights, child labor, forced labor, and environmental sustainability. Adhering to these
standards is essential for businesses to maintain their reputation, comply with legal obligations,
and meet stakeholder expectations.

It is crucial for businesses engaged in international activities to understand and comply with
international laws and navigate the complexities of international politics. This requires staying
informed about evolving policies, engaging in responsible business practices, and adapting
strategies to mitigate risks and seize opportunities presented by international relations and laws.

By aligning with international norms, respecting local regulations, and building strong
relationships with governments and stakeholders, businesses can thrive in the ever-changing
landscape of global trade and contribute to sustainable economic development.