Question 1
Performance competition
Pfizer’s corporate inversion aims at encouraging performance competition within the firm. Despite criticism about the merger of the company with Allergan’s, what matters to them is the immediate impact of the fusion. The Executives at Pfizer defended the organization saying that it aimed at lowering the high taxes charged in the United States but had good intentions to its consumers. Other competitors in the same market did not experience huge taxes, and this served as a competitive advantage. The firm had evaluated the legal, regulatory, and political factors before deciding to merge with Allergen in $152 billion deal. The company’s objective is to improve their performance in the market by benefiting the consumers and at the same time bringing value to shareholders. Pfizer’s international rivals pay a much less amount of taxes and since time immemorial, they have always won takeover contests by offering higher bids.
Predatory competition
Predatory competition is simply the intention of big companies to buy or merge with the smaller companies so that they can reduce the existing competition. Pfizer’s merger with Allergan’s meant that the smaller firm could stop existing in the market. Pfizer was taking advantage to operate from Switzerland where the taxes were subsidized compared to the high tax rates in the US. Pfizer could use Allergan’s like a bridge that would boost their operations and at the same time maximize profits. Predatory competition would help Pfizer to avoid high taxes and use the resources to expand its global market. In the process, it would be in a position to face their main rivals with much ease because of the new political landscape. Predatory competition would ensure that Pfizer merges and attain a top position in the competition.
Question 2
The United States is said to be a small and medium-sized enterprise (SME). As a matter of fact, SMEs are the backbone of the US economy. Data indicates two-thirds of the developing jobs in the private sector is provided by 30 million SMEs in the US. For those that deals with the exportation of goods, their revenue is drastically improved, as they create more employment opportunities and also pay higher wages compared to other enterprises. The government support SMEs and as a result, they strengthen the trade and investment opportunities for these businesses. The US is considered an SME because most goods that are exported, and most consumed imported goods are used by the small and medium-sized companies.
The success of SMEs is attributed to the efforts of the government to streamline its services. For example, the government launched USTR in October 2009, to ensure that SMEs succeeded on the international stage. The Free Trade Agreement (FTA) Tariff Tool was also introduced to assist the small exporters to have an online resource that provided tariff information on more than 85% of goods in the overseas market. The government discussed trade agreements with the foreign government to empower SMEs to operate in their markets. The government is working on reducing the trade barriers affecting SMEs in the international market. The government has addressed the issue of high tariffs in business. It has also facilitated the customs procedures as it allows the free flow of goods and services. The intellectual property rights of SMEs are protected to empower the trade partnership between SMEs.
Question 3
The proposal of Trump to impose 45% tariff on goods that are imported from China into the US is a controversial and debatable issue.The losers of the proposal when implemented, will be the lower-middle class people in the US. On a wider perspective, the policy would cause massive harm to the US economy. Clearly, the proposal is blatantly WTO-inconsistent as China would approach WTO to express it concerns over the policy. The American exporters may be affected by sanctions that might be presented by WTO. The economic pain that comes, as a result, would greatly affect the lower-middle class. The prices of basic commodities imported from China would hike, and the lower-class population would not afford them. The US importers are the ones who will suffer more because they will need to pay the 45% tariffs on the imported goods from China to the government. As a result, the American families would be required to pay more for food, electronics, clothing, and any other substances that are exported from China.
In my opinion, the only group that seem to benefit from the high tariff is the central government of the US. This is because it will increase revenues from imported goods from China. The government will also use this platform to encourage domestic markets and improve on the consumption of local goods. Investors of local industries might also reap big since citizens will boycott China products due to high prices and buy the domestic product. But in actual sense, the proposal will not solve problems facing the US economy as it contradicts the regulations set by the WTO. It is, therefore, necessary to revisit the plan and analyze what will be good for both the government, investors and the people.
Bibliography
Acs, Zoltan J., Randall Morck, J. Myles Shaver, and Bernard Yeung. "The internationalization of small and medium-sized enterprises: A policy perspective." Small business economics 9, no. 1 (1997): 7-20.
Caporaso, James A., and Mary Anne Madeira. Globalization, Institutions and Governance. Sage, 2012.
De la Merced, Michael, David Gelles, and Lesley Picker. "Pfizer Chief Defends Merger With Allergan As Good for U.S. - The New York Times." The New York Times - Breaking News, World News & Multimedia. Accessed March 7, 2016. http://www.nytimes.com/2015/11/24/business/dealbook/pfizer-allergan-merger-inversion.html?_r=0.
Habberman, Maggie. "Donald Trump Says He Favors Big Tariffs on Chinese Exports . Political News, Now. - The New York Times." First Draft. Last modified January 7, 2016. http://www.nytimes.com/politics/first-draft/2016/01/07/donald-trump-says-he-favors-big-tariffs-on-chinese-exports/.
World Bank Group. "The Winners and Losers of Globalization: Finding a Path to Shared Prosperity." World Bank. Last modified 2016. http://www.worldbank.org/en/news/feature/2013/10/25/The-Winners-and-Losers-of-Globalization-Finding-a-Path-to-Shared-Prosperity.
