CONSORTIUM APPROACHES
CONSORTIUM APPROACHES
As mentioned earlier, a company may at times be able to play one country against another, or a government may be able to do the same with international firms. When in a relatively weak position, companies or countries may be able to join together in a consortium to present a united front when dealing with the previously more powerful entity.
Petroleum
The Aramco case at the beginning of the chapter offers a good example of how companies have banded together on one side and countries have joined forces on the other side. The unity has strengthened both sides and at different points has helped to give advantages to one over the other.
ANCOM
ANCOM, as discussed in Chapter 11, sought a common policy toward foreign capital, trademarks, patents, licenses, and royalties. By unifying the policy the aims were to limit the role of MNEs and to prevent them from serving all the member countries by locating in a country with less stringent regulations. This attempt to get ANCOM members to adhere to the common stance has been less than successful; nevertheless it contrasts to the approach of the European Community, which has not had a common policy. When France wished to restrict the growth of MNE penetration within its market by withholding ownership permission, that country was helpless. MNEs could serve the French market through production in Belgium, Ireland, or Spain, where they were welcome.
Arab Boycott
In the Arab boycott efforts have been made to weaken Israel by boycotting purchases of Israeli goods and by refusing to do business with firms that sell strategic tools and certain resources to Israel.31 This is a loose agreement among participants rather than a highly structured agreement; the looseness of the boycott is in some ways a strength in that it has allowed Arab countries to buy from some firms selling to Israel when they desperately needed the goods themselves. The prevention of trade between Israel and Arab states is not an unusual type of practice, nor does it have much impact on MNEs. What is different about this arrangement is that it often forces MNEs headquartered in other countries to make a choice of selling either in the Arab countries'or in Israel, but not in both. (China at times has also retaliated by disallowing certain business with a given country whose firms did sensitive business with Taiwan.) By banding together, the Arab countries represent a very formidable market. Although it is impossible to measure the precise impact of the boycott activities, the big difference in market size undoubtedly has caused many MNEs to think twice about doing business with Israel.
A second distinguishing feature is the nature of a so-called secondary boycott. For example, Ford Motor Company is boycotted by the Arab League. Ford was involved in negotiating a joint venture in the United States with Toyota; however, Saudi Arabia threatened retaliation against any firm that concluded a joint venture or production-licensing agreement with Ford. Since Saudi Arabia was the world's second-largest importer of Japanese cars, the Saudi warning had to be considered seriously.32 Toyota subsequently broke off the negotiations with Ford but did not indicate that the threatened boycott was a factor in the decision.
A third distinguishing feature for U.S. firms is that they are prohibited by the U.S. Export Administration Act from providing information on their directors when registering operations in Arab countries. Both Sara Lee and Safeway Stores received fines for breaking this law, even though the information they provided was available from public sources.33 A fourth feature is that U.S. firms are prohibited from terminating Israeli business in order to do business in Arab countries, which brings up questions of motives. For example, Baxter International, a company blacklisted by the Arab League, divested from Israel and signed a joint venture agreement in Syria a year later. Baxter officials claim the Israeli move was made simply because of inadequate financial performance; however, critics have contended that the motive was to gain the ability to operate in Arab countries.34
As mentioned earlier, a company may at times be able to play one country against another, or a government may be able to do the same with international firms. When in a relatively weak position, companies or countries may be able to join together in a consortium to present a united front when dealing with the previously more powerful entity.
Petroleum
The Aramco case at the beginning of the chapter offers a good example of how companies have banded together on one side and countries have joined forces on the other side. The unity has strengthened both sides and at different points has helped to give advantages to one over the other.
ANCOM
ANCOM, as discussed in Chapter 11, sought a common policy toward foreign capital, trademarks, patents, licenses, and royalties. By unifying the policy the aims were to limit the role of MNEs and to prevent them from serving all the member countries by locating in a country with less stringent regulations. This attempt to get ANCOM members to adhere to the common stance has been less than successful; nevertheless it contrasts to the approach of the European Community, which has not had a common policy. When France wished to restrict the growth of MNE penetration within its market by withholding ownership permission, that country was helpless. MNEs could serve the French market through production in Belgium, Ireland, or Spain, where they were welcome.
Arab Boycott
In the Arab boycott efforts have been made to weaken Israel by boycotting purchases of Israeli goods and by refusing to do business with firms that sell strategic tools and certain resources to Israel.31 This is a loose agreement among participants rather than a highly structured agreement; the looseness of the boycott is in some ways a strength in that it has allowed Arab countries to buy from some firms selling to Israel when they desperately needed the goods themselves. The prevention of trade between Israel and Arab states is not an unusual type of practice, nor does it have much impact on MNEs. What is different about this arrangement is that it often forces MNEs headquartered in other countries to make a choice of selling either in the Arab countries'or in Israel, but not in both. (China at times has also retaliated by disallowing certain business with a given country whose firms did sensitive business with Taiwan.) By banding together, the Arab countries represent a very formidable market. Although it is impossible to measure the precise impact of the boycott activities, the big difference in market size undoubtedly has caused many MNEs to think twice about doing business with Israel.
A second distinguishing feature is the nature of a so-called secondary boycott. For example, Ford Motor Company is boycotted by the Arab League. Ford was involved in negotiating a joint venture in the United States with Toyota; however, Saudi Arabia threatened retaliation against any firm that concluded a joint venture or production-licensing agreement with Ford. Since Saudi Arabia was the world's second-largest importer of Japanese cars, the Saudi warning had to be considered seriously.32 Toyota subsequently broke off the negotiations with Ford but did not indicate that the threatened boycott was a factor in the decision.
A third distinguishing feature for U.S. firms is that they are prohibited by the U.S. Export Administration Act from providing information on their directors when registering operations in Arab countries. Both Sara Lee and Safeway Stores received fines for breaking this law, even though the information they provided was available from public sources.33 A fourth feature is that U.S. firms are prohibited from terminating Israeli business in order to do business in Arab countries, which brings up questions of motives. For example, Baxter International, a company blacklisted by the Arab League, divested from Israel and signed a joint venture agreement in Syria a year later. Baxter officials claim the Israeli move was made simply because of inadequate financial performance; however, critics have contended that the motive was to gain the ability to operate in Arab countries.34
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