COMMERCE PAPER No.11: International Business

COMMERCE PAPER No.11: International Business

MODULE No.16 : Role of Legal Environment in International Business

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COMMERCE PAPER No.11: International Business

MODULE No.16 : Role of Legal Environment in International Business

Web-links

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http://www.commercialdiplomacy.org/case_study/cases_internation al_trade.htm

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http://en.wikipedia.org/wiki/Globalization

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http://www.ssc.wisc.edu/~mchinn/pa854_lecture2_s08.pdf

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http://www.statcan.gc.ca/nea-cen/gloss/bp-eng.htm

Suggested Readings

 International Business: A Managerial Perspective by Griffin, Ricky W. and Pustay, Michael W.

 International Business, Vyuptakesh Sharan

 International Business-concept, environment, structure and strategy, Sumati Varma

COMMERCE PAPER No.11: International Business

MODULE No.16 : Role of Legal Environment in International Business

 International Business: Environment and Operations by Danoes, John D. Radebaugh, Lee H., and Daniel P. Sullivan

COMMERCE PAPER No.11: International Business

MODULE No.16 : Role of Legal Environment in International Business

Case study

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International Business Environment

Jean-Guillaume DITTER, PhD Groupe ESC Dijon Bourgogne Burgundy School of Business

Case 1 -Global Recovery: a long way to go Jul 23rd 2009, The Economist print edition

The global recession is coming to an end, but the ingredients of a lasting recovery are still missing with luck, the global slump has reached its trough. Asia’s economies are looking rosier, buoyed by a spectacular rebound in China, where output grew at an annualised rate of some 16% between April and June. Even in America and the euro area, GDP is likely to stop shrinking during the summer. Trade, having fallen precipitately, is levelling off. And, as firms rebuild their stocks, global growth over the next few months could be surprisingly robust.

That is a welcome prospect. But it is not the all-clear. For this “recovery” has fragile foundations. The boost from restocking will be temporary. And a big source of demand government stimulus- is unsustainable. Across the globe governments have, rightly, stepped in to counter the economic slump. In America an increase of 12 percentage points in the budget deficit has cushioned the slump in private spending. Around 75% of China’s growth this year will be state-directed, either through public spending or officially induced lending.

Governments can prop up economies temporarily, but rising budget deficits are not a route to sustainable growth. Eventually burgeoning debt will limit the room for fiscal manœuvre, and politicians may balk at renewed stimulus long before then. Worries about the budget deficit are already weighing on political debate in Washington. A solid global recovery demands healthy and balanced growth in private demand. Unfortunately, that still seems far off. Before the financial crash, global demand was horribly skewed. It was far too reliant on spending from increasingly indebted American consumers: witness the country’s gaping current- account deficit, which reached almost 6% of GDP in 2006.The crisis—particularly the credit crunch and the destruction of more than $13 trillion of household wealth has wrecked the American shopping machine and changed the nature of the world’s imbalances. As consumer spending has slumped, the external imbalances have shrivelled. America’s current-account deficit this year is likely to be less than 3% of GDP. On the other side of the ledger, China’s surplus is on course to fall by half from its 2007 peak, of 11% of GDP, by 2010. *...+

rebalancing via recession is hardly to be recommended. Worse, even as imbalances between countries have unwound, those within them have worsened, as governments have stepped in.

Chinese and German consumers are not spending more; the Chinese and German

governments are. The task is to right these internal imbalances without recreating the external ones. The solution is well known: consumers in China and other emerging economies, and in thrifty rich countries like Germany, must become bigger engines of demand, while the former bubble economies, such as America, must continue the shift towards saving and exports. How hard will this be? *...+ the detailed to-do list differs from one country to the next, but three broad requirements stand out: a change of mind set for many policymakers; greater

macroeconomic coordination than hitherto; and bolder microeconomic reforms. The shift in mind set is most necessary in surplus economies. Too many German leaders seem to take the economy’s export orientation as immutable. Few even grasp the need to nudge it towards domestic spending. China’s authorities want to shift towards consumption, but are reluctant to

COMMERCE PAPER No.11: International Business

MODULE No.16 : Role of Legal Environment in International Business

pull 010-IBE-Applications.doc Page 4 Of 41 the obvious lever: allowing the yuan to

strengthen faster. Macroeconomic coordination will be necessary, especially to ensure that the fiscal tightening which must follow the stimulus does not strangle the recovery. While central bankers are laying out their exit strategies from monetary looseness in detail, few finance ministers have done anything similar on the fiscal side. In the big economies they claim they will cut their deficits substantially in 2011, but there are few details, even on the appropriate mix of tax reforms and spending cuts. The hardest part, however, will be the microeconomic reforms required to smooth the macroeconomic adjustments. China’s leaders need to boost household income (for instance by encouraging more labour-intensive growth and forcing state enterprises to pay fatter dividends) as well as improve health-care and pension provision so that people feel less need to save. Japan and Germany both have to encourage investment in services, by freeing markets from health care to education. America must counter the rigidities that have arisen after its asset bust. Millions of people with negative equity in their homes, for instance, cannot move to get a new job. The to-do list is a long one, the risk of missteps is high, and it will take years to complete. That is why the world economy is not yet out of the woods

Source: http://www.wiwi.uni-siegen.de/wiwi/vwl-

tpa/internationales/kursmaterialien_von_gastdozenten/ditter/010-ibe-case_studies.pdf

Did You Know?

GERMAN Advertising Law: A Duty to Provide Information

A court in Germany recently held that a travel company’s advertising failed to fulfil German advertising law obligations to provide basic information to consumers.

Information on the company’s address and identity were missing. Here is an overview of company obligations concerning advertising.

German advertising law and the duty to provide information

It can be derived from § 5a of the German Unfair Competition Act, that the obligation to provide basic company information in advertising exists if – (a) products or services are offered; and (b) they are offered in such a way that an average consumer can enter a transaction.

This generally means that the obligation to provide information arises once there is sufficient information in an advertisement about the characteristics or price of a product or service which enable a consumer or decide whether to make a purchase or not.

The Higher Regional Court of Schleswig-Holstein stressed in a recent case that the duty to provide information exists when the fundamental contractual provisions are made public (case ref.: 6 U 28/12). In this particular case, it was sufficient that the contractual conditions that were made available enabled the consumer to make a decision to purchase.

It follows from this that advertisements containing images and so-called reminder

advertisements do not have to fulfil the information requirements.