International Relations
Dozens of issues populate the Global Issues Matrix. There are myriad interrelationships among them. The issues have been grouped into seven major headings. Below are global issues under the general heading of International Relations, with comments on their characteristics and relationships. How governments relate to one another is changing, and countries frequently do not see eye-to-eye regarding international relations.
Foreign Direct Investment – When businesses or individuals of one country invest in another country, it can be done for the benefit of both countries. Foreign direct investment (FDI) includes investment in production facilities, buying or expanding existing companies, and investing in real estate. FDI in a developing country generates employment, increases productivity, and raises the standard of living for affected workers. FDI also occurs between developed countries, such as China’s investment in real property in England. Multinational corporations have for decades invested in subsidiaries in foreign countries, and continue to do so. Since the Great Recession, automakers Renault of France, Volkswagen of Germany, and General Motors of the U.S. have put money into their plants in Spain as Spain continues its recovery. Coca-Cola will invest an additional $500 million in a plant in Egypt from which it distributes to more than 40 countries. The European multinational Unilever has a Dubai-based branch that markets to Middle Eastern countries.
Investors are keen to evaluate local conditions before making investment decisions, and are not shy about expressing concerns over local norms, such as government regulation and labor practices. Security is a huge issue, as Egypt is finding while trying to attract investment to its battered economy. Street protests and bombings have caused companies to pull staff out of the country, and import times are not always dependable. Yet with 90 million people, investment is returning to Egypt. French retailer Carrefour has 20 stores in Egypt, and Sweden’s IKEA opened a furniture store in 2013.
Foreign Direct Investment is one of the principal measures of the extent of globalization.
Globalization – The movement of people, goods, capital, and information among nations of the world has increased to such an extent that we are said to live in a globalized world. While international trade has existed for centuries, rapid improvements in transportation and communications have made globalization a force in the lives of most of the world’s population. It is generally accepted as an overall good, bringing developing countries into international trade relations, thereby providing employment and raising living standards. But there has also been backlash.
From a U.S. perspective, the international connections that characterize globalization have led U.S. businesses to use overseas operations as a means of lowering their costs. Multi-national corporations have employees in several countries, often coordinating the production of goods and services across international borders to reach a final assembly point. The question of whether an automobile is “American made” has devolved to an analysis of what percentage of the parts were manufactured in the U.S. or shipped into the U.S. for final assembly.
Moving U.S. jobs off-shore has multiple consequences. Most importantly, it means loss of employment for U.S. workers. Although labor is cheaper in the receiving country, the new jobs’ income raises the standard of living for those newly-employed. In the aggregate, these higher-paid workers are a new source of demand for U.S. goods and services. At the same time, U.S. consumers benefit from savings they realize when purchasing goods produced in low-cost countries.
More recently, forces have been working in the other direction, to return jobs to the U.S. Low-cost countries see their workers demand higher wages. Transportation costs, including fuel, shipping containers and limited container port capacity, are rising to offset labor savings. Supply lines can become interrupted by natural disasters, overcrowded ports, or political instability. Off-shoring frequently results in loss of control over patents and counterfeiting of products.
International Trade – The World Trade Organization (WTO) is a forum serving over 150 member countries. The successor to the General Agreement on Tariffs and Trade, the WTO assists members in negotiating trade agreements and settling trade disputes. It operates under a system of rules developed to assure that trade flows as freely as possible.
In addition to distribution of goods and services, international trade provides access to capital to developing countries. Benefits for developing countries include credit for infrastructure projects, further increasing opportunities for expansion of trade; investment in education that enables access to employment and reduction of poverty; and trading relationships that reduce the likelihood of aggression, as prosperity and a greatly improved standard of living are reached by peaceful means.
The degree of global interconnectedness was made apparent when a volcano erupted in Iceland on April 13, 2010. The volcano spewed smoke and ash in a seven mile high plume, which drifted over Europe for several days. Air traffic across Europe came to a near standstill as 102,000 flights were cancelled over a period of a week. Much of world trade, especially for small, high-value goods or perishables, moves by air. Auto plants in Germany and Japan closed temporarily due to delays in arrival of parts. Kenya was unable to ship 10 million flowers, as well as asparagus, broccoli, and green beans, part of its 1,000 tons of daily exports of fresh goods. Diamond shipments from Antwerp and London to India were disrupted. Fish destined for Europe sat in a plane in the Middle East.
Military Power – The history of the world is written in the outcomes of military conflicts, according to some historians. For the span of recorded history, military force has been engaged in the pursuit of territory, resources, slaves, and religious conquest. The history of war is the history of increasing the efficiency of killing. The world’s horror at the carnage of the First World War led some to call it the “War to End All War.” That lasted less than a quarter century. The post-WWII bi-polar world was a weapons race for the two world powers to accumulate as much killing power as they could. Military power was seen as a deterrent to attack from the enemy, and firepower reached the point of achieving Mutual Assured Destruction if either attacked the other. The appropriate acronym was MAD
Security – The effects of globalization are evident when the U.S. declares that violence in the Middle East has implications for U.S. national security. The global reach of terrorism and the free flow of oil through the world economy are frequently cited as security risks to the U.S. In the decade following the September 11, 2001, attacks, the U.S. spent $360 billion on Homeland Security. International security is at the core of the North Atlantic Treaty Organization (NATO). If diplomacy fails to resolve conflicts, NATO has the military power to undertake measures in response to a threat.
State Sovereignty – Non-interference by one country in the internal affairs of another country has been an accepted practice in international relations since the Peace of Westphalia in 1648. Civil wars, atrocities, and genocide perpetrated by one faction within a country against another have occurred throughout history, and were largely ignored by other countries. But that began to change when communications technology made it possible for broadcast journalists to deliver live coverage to viewers around the world. Startled citizens became activists urging their governments to intervene. Violence in Rwanda captured the publics’ attention, but 800,000 people died without foreign governments stepping in. That situation changed when Yugoslavia disintegrated, and more recently, Afghanistan, Iraq, and Libya have seen major roles played in their internal affairs by NATO powers. Non-interference continues to be an issue between China and the U.S., heightened by events at Tiananmen in 1998. Because Russia and China have more traditional concepts of state sovereignty, they have vetoed proposed actions by the UN Security Council to intervene in internal affairs of sovereign states in situations involving human rights or safety of those states’ populations. However, this attitude did not prevent Russia from unilaterally annexing the Crimea, a part of the territory of Ukraine.
Tariffs – If a government wants to restrict importation of specific goods, it can impose tariffs (also called duties) on those goods coming from other countries. By increasing the price of the imported good, locally-produced goods can more easily compete with imports. The purpose of the tariffs may be to raise government revenue or protect jobs in particular industries. Tariffs may also be justified by the imposing country as necessary to help new industries grow and mature. While countries more advanced in the development of those industries may object to the tariffs, developing countries are correct when they assert that developed countries employed the same practices in their developing years. However, even a developed country can claim unfair practices. The United States, accusing China of charging artificially-low prices for its solar panels in order to control the growing market for the panels, imposed tariffs on importation of Chinese solar panels to the U.S.