Questions and Answers on Bob Davis’ Rise of Nationalism Frays Global Ties: Trade, Environment, Face New Threats; Balkanized Internet
Q1: Why is economic nationalism on the upswing? Why do rising food and energy forces force national governments to take action? What kinds of action are they taking?
A1: Economic nationalism has grown due to the global financial crisis that largely affected the US and European countries. The decline of financial markets is due to the lack of state regulations, hence prompting countries to impose regulations on immigration, foreign investment and other globalized market activities. National governments prevented the rise of food and energy commodity prices by instituting and enforcing stricter regulations. Countries have established export barriers in order to motivate food self-sufficiency. Oil-producing countries have nationalized oil assets previously owned by foreign petroleum companies (Davis, 2008).
Q2: How are these forces altering the bargaining power between developed and developing countries? Why is Brazil becoming a new power broker? What do the developing countries hope to attain in current trade talks?
A2: Developing countries have learned to go against the will of the international community – dominated mostly by developed countries, as they strengthened economic nationalism through stricter regulations such as export barriers and nationalization. Brazil’s new designation as a power broker came due to its efforts to promote agricultural liberalization and maintain limits on domestic market openings for foreign investors. In that sense, the developing countries targeted lower prices on commodities by limiting foreign market activities (Davis, 2008).
Q3: What is "country risk?" According to the mentioned survey, how many respondents rated this risk as relatively high? What does this indicate?
A3: Country risk is a business term used by companies to classify risks pertaining to problems that are geopolitical and natural in nature. Around 30% of the respondents of AMR Research Inc. treat country risk as the highest risk in doing business in other countries. Such indicates that companies see economic nationalism as a threat for their global operations. Companies such as Royal Dutch Shell PLC and Pitney Bowes, Inc. have underlined concerns over the takeover of their overseas operations by the host-states (Davis, 2008).
Q4: What tactics are companies using to deal with such country risk? What can firms do to protect themselves in case unfriendly nationalists gain power in countries in which these firms have large investments?
A4: In dealing with country risk, companies have started to undertake measures enabling them to foresee certain results under different economic scenarios. Royal Dutch Shell PLC, for instance, has assigned its economists to come up with various scenarios in order to help them envision their next moves. Pitney Bowes Inc. started hoarding components of its products and backing up data in their servers. Other companies started transferring their overseas operations in countries that have less country risk. Some US companies, for instance, transferred their operations to Mexico – a country that shares a free trade agreement with the US (Davis, 2008).
Reference
Davis, B. (2008, April 28). Rise of nationalism frays global ties: Trade, environment, face new threats; Balkanized Internet. Wall Street Journal. Retrieved from http://online.wsj.com/article/SB120934738145948747.html?mod=djem_jiewr_MG&apl=y&r=790372
