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Kunz_Garner_Ch8_Compatibility_Mode_ - Objectives Introduce...

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10/12/2011 1 Chapter 8 Politics and Political Positioning Objectives Introduce the role of politics in trade Explore the concept of unfair competition 2 Examine political positions adopted by different segments of the textile and apparel industry, including labor activists and trade associations Introduce regionalization of global trade Introduction Different segments of the textile complex often take different political positions Traditionally manufacturers and retailers held opposite positions on free trade 3 Trade associations and labor unions also take conflicting politically active roles In the WTO’s NAMA (Non-Agriculture Market Access) negotiations both the United States and the EU are seeking significant new competitive opportunities for domestic export businesses through cuts in tariff rates and reduction of nontariff barriers from potential recipients of exports Economic Systems of Government In totalitarian government systems one family or some other entity maintains complete political and economic control under a dictatorship Capitalism is an economic system in which Private ownership of property exists Income from business operations accrue to the individuals or firms that own it Individuals and firms are free to compete for 4 economic gain Profit motive is basic to economic life Mostly associated with democratic political system In socialism or communism , resources are cooperatively or state owned Political Manipulation of Trade Relationships “Politics are everywhere.” Political strategy makes it possible for governments, firms, other organizations, and individuals to deal with and manipulate important and powerful components in their environments A government subsidy is a payment 5 from a government to a company (reverse tax). Production subsidies were regarded by GATT 1994 as an form of unfair competition The United States ignored a 2005 ruling by the WTO to discontinue subsidies for cotton production 1. How do politics relate to power? Politics, both in the corporate world and in government, control decisions related to setting priorities as well as the allocation of resources to support them. This, in part, constitutes the power. 2. What types of U.S. companies would have paid the cotton subsidy price if Brazil had been allowed to retaliate by lifting intellectual property protections? In textiles and apparel most intellectual property protection relates to valuable brands. If intellectual property rights were withdrawn, 6 companies like Levis and Calvin Klein would no longer have exclusive use of their brand names. Companies in Brazil could have made products and sold them on the world market using U.S. owned brand names. 3. In what ways might Brazil’s retaliation have affected the global apparel industry?
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