Political Environment (Chapter 4)

Political Environment (Chapter 4)

PURPOSE OF CHAPTER

Whether political interests precede or follow economic interests is debatable, but certainly the two are

closely interrelated. A country or company may play politics in order to pursue its economic interests, but economic means may also be used to achieve political objectives. As in the case of the steel industry, President Bush imposed the tariffs in 2002, ranging from 8 percent to 30 percent, on foreign-made steel so as to give the domestic industry time to regroup to become more competitive. Even after the WTO’s ruling that the tariffs violated global trade laws, Bush’s political advisers did not want to remove the tariffs because it could harm his chance of winning re-election in such steel-making states as Pennsylvania, West Virginia, Ohio, Indiana, and Illinois.

Often, politics and economics do not mix well. For a very long time, the USA imposed economic censure against Vietnam. While the economic sanction was achieving the desired goal of adversely affecting international investment and trade with Vietnam, Asian and European companies took advantage of the absence of American firms and entered the market. 

Vietnam is an attractive market – not only for its market size and natural resources, but also because of other economic reasons. Vietnam welcomes foreign investment in all economic sectors (except defense industries), offers generous tax concessions and duty exemptions, allows 100 percent foreign ownership, imposes no minimum capital requirement, and promises the unrestricted repatriation of capital and profits. In addition, the political climate has greatly improved. The US government finally permitted American companies to enter the Vietnamese market in the mid-1990s.

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