Global Business: The Financial Side of Trade

When were talking about trade, you’ll probably hear the words “investments”, “portfolios”, “capital”, “debit and credit”, and BOP (thats balance of payments). These words to global trade advisors and financial aficionados are like second nature, but to those just breaking into the world of International Business, they can be daunting words. Let’s use an example  that will give you a visual picture of just how everything comes together to understand how countries measure international business activity, balance payments, and look at exchange rates and altered trade prices.

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Consequences of the Euro-Zone’s Declining Economy

As unemployment rises, another quarter of recession looms for the European economy. On Friday, February 21 some nations reported missing their government deficit targets despite many rounds of spending cuts. The region’s economy is expected to grow later this year, but during the last three years the 17 country union has been the slumps. The Obama administration is concerned about the effect of  the European Union’s declining economy on the United States. In his State of the Union Address at the beginning of February 2013, President Obama mentioned  free-trade talks with the European Union in an effort to promote American and European trade. The key question is whether such an arrangement will be primarily pursued to address trade issues or whether its main purpose is the foundation of a political counterbalance to China.

Danger of the Euro-Zone’s Declining Economy

As unemployment rises, another quarter of recession may occur in the European economy. On Friday, February 21 some European nations forecasted missing their government deficit targets despite many rounds of spending cuts. The region’s economy is expected to grow later this year, but the 17 country union has spent the last three years in the slumps.

 

The Obama administration worries how the European Union’s declining economy will affect the United States.  President Obama hopes that talks of free-trade with the European Union will promote American and European trade. A key question is whether such an agreement is mainly focused on trade or on developing a political counterbalance to China.

Politics of Iceland-UK Relations

The effects of politics on international marketing is determined by both the bilateral political relations between home and host countries and the multilateral agreements governing the relations among groups of countries.

The government-to-government relationship can have a profound effect, particularly if it becomes hostile. Numerous examples of the linkages between international politics and international marketing exist. One such example involves British-Icelandic relations, following the Icelandic government’s 2008 decision to assume control of three of the country’s largest banks hit hard by the global credit crunch.

Iceland initiated a deposit freeze that affected deposits of approximately 4.5 billion pounds from British citizens.

The British government promptly used its anti-terror law to seize and estimated 4 billion of Icelandic resources, which, in turn, forced Iceland to cover the losses of British depositors at a cost to Icelandic taxpayers of more than 2.2 billion pounds. With a population base of only 300,000 people, such new debt was huge.

While the U.K. chose to adopt this “stick” approach, the Dutch government secured a commitment from Iceland to pay back its savers using a different tactic, perhaps more conducive to long-term good neighborly relations. It offered to loan Iceland the money.

Excerpt from the 9th Edition of International Marketing by Michael Czinkota and Ilkka Ronkainen.