Page 433 - Encyclopedia of Business and Finance

eobf_I 7/5/06 3:04 PM Page 410

International Business

General Motors plant sign in front of the General Motors plant in Silao, Mexico, March 12, 1996. © DANNY LEHMAN/CORBIS

GOVERNMENTAL INTERNATIONAL example, the U.S. Congress passed the Hawley-Smoot
TRADE POLICIES Tariff Act. This placed protective tariffs on some of
Domestic sales are those made where both seller and buyer imports. The legislation was popular among U.S. voters.
are conducting business within the same borders. Domes- The legislative analysts determined it was a large mistake.
tic business organizations of all types—such as retail, To correct the error, Congress reduced the price of
wholesale, manufacturing, and agriculture—look to their affected products by 50 percent.
government to protect them against firms from other
nations taking away their customers and their sales. CULTURAL DIFFERENCES
A tariff is an example the kind of protective legisla- With most foreign countries, there are cultural differences
tion used by governments that seek to provide this kind of
about which it is essential to question and to learn:
protection. Suppose, for example, that $500 is the typical
price of an item imported by Country A. When the resi- • Do men and women shake hands with each other?
dents of Country A learn they can buy the item from • In business meetings, do participants “get right
within the bounds of Country A from a foreign source for down to business” or would that be considered
$500, they will tend to buy the lower-cost item, even if
impolite?
the item must be purchased from a foreign source. Impo-
sition of a tariff by Country A would have the effect of a • Should the American visitors’ clothing be approxi-
tax on the items. It would raise the real cost to a figure mately the same as the foreign hosts?
higher than the domestic cost. • If the Americans bring their families, are there any
Sometimes a country suffering from a protective tar- special rules about associating with the children in
iff will enact a tariff of its own on a product. In 1930, for that country?

410 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION