Many areas politics and law are not immutable. Viewpoints can be modified or even reversed, and new laws can supersede old ones. To achieve change, however, some impetus for it – such as the clamors of a constituency – must occur.
The international manager has various options if rules are disliked.
One high-risk option is to simply ignore prevailing rules and expect to get away with doing so. A second option is to provide input to trade negotiators and expect any problem areas to be resolved in multilateral negotiations. Drawbacks are that this is a time-consuming process, and issues remain outside the control of the firm.
A third option involves the development of coalitions and constituencies that can motivate legislators and politicians to implement change. Even simple changes, such as the way key terms are defined, can positively influence the business environment. Consider, for example, the change in terminology used in the United States to describe trade relations between two nations. For years, attempts to normalize relations with China by granting “most – favored nation” (MFN) status drew the ire of objectors who questioned why China deserved to be treated in a “most favored” way. Lost in the debate was the fact that the term “most favored nation” was taken from WTO terminology and indicated only that China would be treated like any other nation for the purpose of trade. When the term was changed to “normal trade relations,” tension eased.
Beyond the recasting of definitions, firms can effect change in other ways. A manager may, for example, explain the employment and economic effects of certain laws and regulations and demonstrates the benefits of change. The firm might also enlist the supporting help of local suppliers, customers, and distributors to influence decision makers. The public at large can even be involved through public statements or advertisements calling for action. Developing coalitions is not easy task. Companies often turn to lobbyists for help, particularly when addressing narrow economic objective or single-issue campaigns. Lobbyists are usually well-connected individuals and firms who can provide access to policymakers and legislators in order to communicate new and pertinent information. Brazilian citrus exporters and computer manufacturers, for example, use U.S. legal and public relations firms to provide them with information about relevant U.S. legislative activity. The Banco do Brasil has used lobbyists to successfully restructure Brazilian debt and establish U.S. banking regulations favorable to Brazil.
Although representation of the firm’s interests to government decision makers and legislators is entirely appropriate, the international manager must also consider any potential side effects. Major questions can be raised if such representation becomes very impactful and overt. Short-term gains may be far outweighed by longer-term negative repercussions if the international firm is perceived as bullying or exerting too much political influence.
Based on Fundamentals of International Business, 3rd. by Michael R. Czinkota, Ilkka A. Ronkainen, and Michael H. Moffett.
Michael Czinkota (email@example.com) teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent. His latest book, forthcoming in October 2018, is “In Search for the Soul of International Business”.