Questions:
1. National Differences
Answer the case study questions for the following case studies in the textbook (at end of chapters):
Chapter 2 Closing Case and Chapter 3 Closing Case
Develop a 2 to 3-page paper (in total, not for each case) answering these discussion questions.
2. Trade Papers
Develop a 3–4-page paper (double-spaced) that summarizes and provides an analysis of U.S. trade history from
1790 to 2020. Discuss the major legislation that affected trade, any trade barriers, the attitude (political) toward
trade, and the various trade agreements.
3. International Finance Cases
Answer the case study questions for the following case studies in the textbook (at end of chapters):
Chapter 10 case and Chapter 11 case
Develop a 2–3-page paper (in total, not for each case) answering these discussion questions.
4. Global Business Strategy
Answer the case study discussion questions for the following cases (at end of chapters):
Chapter 15 case, Chapter 17 case, and Chapter 18 case
Develop a 3–4-page paper (in total, not for each case) answering these discussion questions.
CLOSING CASE 2
Transformation in Saudi Arabia
The desert kingdom of Saudi Arabia is a rarity in the modern world, an absolute monarchy whose laws are based upon
interpretations of a religious text, the Qur’an, the holy book of Islam. Despite Saudi Arabia’s adherence to an archaic
form of government, the Saudi economy has historically performed well, primarily due to the country’s position as the
world’s largest oil exporter. In 2017, the country’s GDP per capita on a purchasing power parity basis was $54,500, not
far behind the $59,800 GDP per capita of the United States.
The oil sector accounts for around 87 percent of government revenues, 42 percent of GDP, and 90 percent of export
earnings. In times of high oil prices, the Saudi government has used oil revenues to finance a sprawling government
apparatus and to subsidize energy prices, which are among the lowest in the world. In 2014, however, oil prices
collapsed, wiping out an annual government surplus. In 2014, the government deficit ballooned to 15 percent of GDP,
and it hit 20 percent of GDP in 2016, forcing the country to issue more debt and draw down its foreign exchange
reserves. Higher oil prices improved the situation in 2017 and 2018, but the crisis exposed the vulnerability of Saudi
Arabia to a fall in oil prices.
To compound matters, Saudi Arabia has a young population—some 70 percent of the population is under the age of
30—and unemployment is high at 12 percent, a combination of factors that many see as a recipe for social unrest. The
high unemployment reflects the fact that while there are jobs available outside of the government sector, most of them
are taken by low-paid foreign workers, who account for 80 percent of the labor force.To compound matters, Saudi Arabia has a young population—some 70 percent of the population is under the age of
30—and unemployment is high at 12 percent, a combination of factors that many see as a recipe for social unrest. The
high unemployment reflects the fact that while there are jobs available outside of the government sector, most of them
are taken by low-paid foreign workers, who account for 80 percent of the labor force.
Not surprisingly, this vision has met with resistance, particularly from members of the sprawling royal family and
conservative clergy who have benefited from the status quo. To counter this, the crown prince consolidated his power,
removing members of the royal family that disagreed with him and putting his allies in positions of power. This
culminated in an unprecedented shake-up in November 2017 when scores of people, including some of the most
powerful princes in the kingdom, were arrested in a massive anticorruption sweep and jailed in, of all places, Riyadh’s
opulent Ritz Carlton.
Whether this power grab will help the crown prince achieve his goals for Saudi Arabia remains to be seen. The
government has had to backtrack on plans to reduce subsidies after strong resistance from the population, but it did
introduce a 5 percent value-added tax in January 2018.
Plans for the privatization of Saudi Aramco are under way, and the government budget deficit has been cut in half since
2015—although stronger oil prices have had a lot to do with that. Some of the stricter laws have also been relaxed.
Women are now allowed to drive, and some banned cultural entertainments once seen as decadent, including going to
the cinema, are now allowed. In the long run though, transforming the Saudi economy will require growth in the non-oil
private sector, and that is a challenging task.
Moreover, a scandal surrounding the murder of Washington Post journalist Jamal Khoshoggi by Saudi operatives in
Turkey in October 2018 has at the very least potentially weakened the power of the crown prince. Khoshoggi, a Saudi
citizen and U.S. resident, was a critic of the Saudi regime. Although the Saudi government has claimed that his killing was
the result of a rogue operation gone wrong, few believe that narrative. Many critics suspect that Muhammad bin Salman
was aware of plans to arrest Khoshoggi. Indeed, there is growing evidence that, back in 2017, MBS authorized a secret
campaign to silence dissenters, which included the surveillance, kidnapping, detention, and torture of Saudi citizens.
Khoshoggi was just the highest-profile case in that operation. In the wake of Khoshoggi’s murder, some foreign investors
have reconsidered their ties with the kingdom, and there is little doubt that the fallout from the scandal has made it
more difficult for the Saudis to attract foreign investment.
Case Discussion Questions
A. What long-term economic and political problems does Saudi Arabia face?
B. How might the reforms proposed by Muhammad bin Salman potentially address these problems? Who will gain
from these reforms? Who might object and push back against them?
C. Current plans for Saudi Aramco call for the state-owned oil company to be privatized. An initial public offering
(IPO) is tentatively scheduled for 2021. What are the potential benefits to Saudi Arabia of privatizing Saudi
Aramco? Is there a downside?
D. Is it morally correct for international businesses to invest in a country that denies basic rights to women?
E. Is it morally correct for international businesses to invest in an autocratic country where the current leader has
been implicated in ordering the murder of one of his critics?
CLOSING CASE 3
Brazil’s Struggling Economy
Between 2000 and 2012, Brazil had one of the fastest-growing economies in the world, expanding by over 5 percent per
year. In 2012, the Brazilian economy temporarily surpassed that of the United Kingdom, making it the world’s sixth-
largest economy. Brazil’s economic gains were partly due to booming international demand for commodities and high
commodity prices. Brazil is a major exporter of coffee, soybeans, and iron ore. The country also benefited from strongdomestic demand, cheap credit in international markets, inflows of foreign capital, tame inflation (important in a
country with a history of hyperinflation), and moderately conservative macro-economic policies. Since 2012, however,
Brazil has been beset by a deep economic malaise. Economic growth decelerated in 2013. The economy entered into a
serious recession in 2014. Economic activity contracted by over 3.5 percent in both 2015 and 2016 before growing by a
sluggish 0.7 percent in 2017 and just 1.1 percent in 2018.
Brazil’s economic problems were partly due to weaker demand for exports and a fall in global commodity prices. In
2010, exports grew 11.6 percent, but that growth stalled in 2012, and in 2014 exports contracted by 1 percent.
However, the country has other deep structural problems that led to a fall in domestic demand. Under the leadership of
President Dilma Rousseff and her left-of-center Workers’ Party, between 2011 and 2014 the government spent
extravagantly on higher pensions and unproductive tax breaks for favored industries. When the economic slowdown hit,
unemployment surged to over 12 percent and tax revenues slumped. As a result of higher outlays and lower tax
revenues, the fiscal deficit swelled from 2 percent of GDP in 2010 to 10 percent in 2015. This pushed up total
government debt to 70 percent of GDP and required higher interest rates to sell government bonds, which were seen as
increasingly risky. The government also raised interest rates to keep inflation in check, which historically has been a
problem in Brazil. Because of high interest rates, the cost of servicing government debt expanded to 7 percent of GDP—
and, of course, higher interest rates, by raising borrowing costs for consumers and businesses, further depressed
economic activity.
Given high interest rates, the only way for the government to get the fiscal deficit under control is to cut spending and
raise taxes. This has not been easy to do. A central problem in Brazil is the country’s pension obligations. The pension
system entitles Brazilians to retire, on average, at just 54. Pension obligations already account for 13 percent of GDP.
Without reform, that figure could balloon to 25 percent by mid-century as the population ages.
In addition, tariff barriers protecting inefficient local enterprises from foreign competition, labor laws, and burdensome
tax laws have long been seen as a drag on the Brazilian economy. A typical manufacturing firm spends 2,600 hours a
year complying with the country’s complex tax code; the Latin American average is 356 hours. Labor laws make it
expensive to fire even incompetent workers. And protection from international competition has resulted in
manufacturing productivity that is low by international standards. To compound matters, the country has been beset by
a massive corruption scandal that has reached into the highest levels of government. This resulted in the impeachment
of Rousseff in 2016 and further damaged confidence in the economy (see the Country Focus “Corruption in Brazil” in
Chapter 2).
In 2016, Michel Temer replaced Rousseff as President. He made a promising start to reforming the economy. He froze
public spending in real terms for the next 20 years. He also overhauled the country’s labor laws, making it much easier
to fire unproductive workers. Inflation moderated significantly, and a rise in commodity prices helped increase exports.
This allowed the central bank to reduce interest rates to 6.75 percent (they were as high as 12 percent), further boosting
economic growth. There was also a rash of privatizations—including that of the leading electric utility, Eletrobras—as
the government sought to raise capital by selling state assets and tried to increase the efficiency of the economy. What
remains is to fix the country’s pension problems. This would require raising the retirement age significantly. Temer ran
up against strong resistance. His initial proposals failed to garner enough votes in the Brazilian congress to change the
law on pensions.
In October 2018, Brazil held elections. Temer’s left wing Worker’s Party lost the election. The victor, Jair Bolsonaro of
the right-wing Social Liberal Party, ran on a law-and-order ticket, promising to fix Brazil’s high crime rate. He also stated
he would make necessary reforms to the country’s pension system.
Case Discussion Questions
A. Brazil was seen as one of the world’s fastest-growing developing economies in the 2000–2010 period. What
were the foundations of this success?
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