Question

3. In international business, what political barriers/risks are particularly relevant to (1) foreign direct investment, and (2) foreign trade (especially exporting)? Can there also be political benefits for international business?

Answer 1

1) In any country if the tax rules are complicated than it will effect the FDI as the tax rules are complicated the investor will think that he may loose his money and he stop investing.

If there is political instability in that country also effects the FDI. No person want to invest in a country where is no political stability. If there is no political stability in that country it means that there is no good relationship between the government and the people which means there are always some kind of problems between government and people.

Economy of the country. If the country is having economic downturn and it is still no able to overcome it's problems also effects the FDI. No Investor wanted to invest in a country which is not profitable for him.

2) In any foriegn trade tariffs play a major role in importing and exporting the goods and services. If there is no trade agreement between than these people have to tariffs to the government which will effect the export and import of good if the tariffs are higher.

Political instability also effects the foriegn trade because if the country to which goods are political instable the exporter may loose money due to riots , civil war and Terrorist activities that took place in the country. So political instability also effects foreign trade.

Environmental political risk is that where the government nationalize the assets. So if this type of cases may happen than also trade gets effected.

Trade agreements also play a major role in foreign trade as if there is an agreement between countries the import export tariffs and the restrictions will be less.

Yes there also political benefit in international business like government agreeing to the terms of other countries government which helps the investor and business people to gain profit due to these negotiations etc.