Chapter 10: The International Legal Environment

Question 1

Methods of Engaging in International Business

Answer 1

• Foreign trade
• Foreign contractual relationships
• Foreign direct investments

Question 2

Foreign Trade: Import Controls

Answer 2

• Tariffs
• Quotas
• Licenses
• Prohibited imports

Question 3

Foreign Trade: Methods of Payment

Answer 3

• Cash in advance
• Open account
• Draft
• Letter of credit (LOC)

Question 4

Foreign Contractual Relationships

Answer 4

Two main types:

• Product licensing
• Franchising

Question 5

Foreign Direct Investment

Answer 5

Two forms:

• Subsidiaries
• Joint ventures
  • Three categories of companies:
    
    • Resource seekers
    • Market seekers
    • Market followers

Question 6

Legal Systems

Answer 6

Two major categories:

• Civil-law system
  
  • Roman (and French)
  • German
  • Scandinavian (Nordic)
• Common-law system

Question 7

Civil Law

Answer 7

The typical civil-law case usually is divided into these three stages:

• The preliminary stage
• The evidence stage
• The decision stage

Question 8

International Law

Answer 8

• Public international law
  
  • Between nation states
  • Governed by treaties
• Private international law
  
  • Between individuals and corporations

Question 9

Multinational Organizations and Agreements

Answer 9

• United Nations (UN)
• World Trade Organization (WTO)
• The North American Free Trade Organization (NAFTA)
• European Union
• Associations of Southeast Asia Nations (ASEAN)
• Asia-Pacific Economic Cooperation (APEC)

Question 10

United Nations

Answer 10

Five UN bodies:

• General Assembly
• Security Council
• Economic and Social Council
• International Court of Justice
• Secretariat

Question 11

World Trade Organization

Answer 11

Three primary WTO agreements:

• The General Agreement on Tariffs and Trade (GATT)
• The General Agreement on Trade in Services (GATS)
• The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement)

Question 12

Financial Considerations in International Business

Answer 12

• Currency and foreign exchange markets
• Expropriation
• Accounting issues
• Taxation issues
• Tax havens

Question 13

Tax Havens: Types of Corporate Tax Structures

Answer 13

• Low or minimum taxes
• No corporate taxes
• No taxes on foreign income
• Special tax concessions

Question 14

Non-Legal Factors Affecting International Business

Answer 14

• Language
• Culture
• Time differences
• Distance and space
• Types of government

Question 15

Types of Government

Answer 15

• Democratic
• Military
• Monarchal
• Single-party
• Theocratic

Question 16

Democratic Rule

Answer 16

Forms of democratic rule:

• Nonparty democracy
• Parliamentary democracy
• Presidential democracy
• Multiparty democracy