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July 13, 2013

Essay on International Business

International Business

The developed countries for the last several years have been increasing their pressure to ensure a mutual investment agreement that prevents countries from controlling TNC investment activities and the activities of portfolio investors. In developed countries such as US, free trade and free investment are considered to be the main sources of its riches and resourcefulness. An examination of the historical experiences of a number of today’s developed countries the USA, the UK, France, Germany, Finland, Ireland, Japan, Korea, and Taiwan, shows that they have all regulated, often severely, foreign investment when it was in their national interest. (Chang, 2003)
In short, the economic stability and regulations of foreign investment go hand in hand because the more balanced the foreign investment laws, the more stable the economy will become.  
    In the US, stringent laws govern foreign investments from other countries as well as US investments in other countries because they have a direct effect on the development and stability of the country. The real estate industry in US exercises strict restrictions with respect to owning land. These regulations allow the government to keep a check on buying and selling activities of this sector. The US government promulgated a law in the early 1990’s that prevented the immigrants of other countries from owning agricultural land with the exception of Japanese descent pre-war farmers who were allow to retain their property. Similarly, in the wake of 9/11 terrorists attack, there came more regulation to tighten and monitor the flow of foreign investments into the country. From the early days of independence, many state governments barred or restricted non-resident foreign investment in land. (Wilkins, 1989)

The regulation disallows foreign firms in banking and insurance sector and also prohibits foreign investment in coastal shipping. According to this regulation, all directors of national banks must be American citizens and foreign shareholders do not enjoy voting rights in federally-chartered banks. The opportunity for foreign owned enterprises to invest in the communications field (telephone, telegraph, radio, and television) is severely limited by federal statute, prohibiting foreign-owned or foreign-controlled corporations from receiving a license to operate an instrument for the transmission of communications.(Vila,1982)
However, foreign-owned or registered vessels enjoy the freedom to operate to and from US ports though it is prohibited to sell out a US flag vessel to a non-citizen without prior approval of the Secretary of Transportation. In terms of power generation, foreigners cannot own nuclear power facilities as it is incumbent on the Atomic Energy Commission not to issue licenses of production or utilization of atomic power to foreign government, company, or individual.
It is pertinent to point out that the foreign investment laws are placed on all investors as a reporting law. They are not meant to deter or stop the flow of foreign investment. The most famous US law regarding investment is the International Investment and Trade in Services Survey Act of 1984, formerly International Investment Survey Act of 1976.
The major concerns that appear in foreign investment are that of screening the potential markets and their assessment. At first, the availability of export statistics that indicate the volume of export to other countries should be ensured. It can obtained using the National Trade Data Bank(NTDB).
Secondly, the identification of growing markets for the firm’s products is equally important. The growth potential of the market amid economic recession or any other crisis should be analyzed.  Identify some smaller but fast-emerging markets that may provide ground-floor opportunities. If the market is just beginning to open up, there may be fewer competitors than in established markets. Growth rates should be substantially higher in these countries to qualify as up-and-coming markets, given the lower starting point.(Daley, Scott, 2000)
Examining the trends of company products that can influence or increase demand is also necessary. The sources of competition and the extent of domestic industry should be ascertained. The firm should know about the market of the firm it is competing against. The analysis of factors that affect the market is crucial. The company should also analyze three to four most statically promising markets to set their goals in that particular market. Moreover, identify any foreign barriers (tariff or nontariff) for the product being imported into the country and also the barriers (such as export controls) that affect exports to the country.  Identify any U.S. or foreign government incentives that promote exporting of your particular product or service.(Daley, Scott, 2000)  In case the company has just begun exporting its products then it should focus only on one or two to three markets because it will not endanger their domestic sales and marketing.
In conclusion, it can be said that the foreign investment regulations are not supposed to discourage exporters and entrepreneurs. The purpose of regulation is solely to keep a check on the flow of these investments on the grounds of national security. 


References
Chang, Ha-Joon,( 2002). Kicking Away the Ladder – Development Strategy in Historical Perspective, London, Anthem Press.
Wilkins, Mira, (2004). The history of foreign investment in the United States, 1914-1945, Harvard University Press
Vila, Adis M.,(1982) Legal Aspects of Foreign Direct Investments in the United States", 16 Int'l. Law

Daley, M, William, Scott. T.Daniel(2000) A Basic Guide to Exporting, Diane Publishing

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