Introduction

As the international cooperation became popular in world area, More

and more companies are relying on the overseas market, that made

international trade became hot especial in recently years. Political risk

became the vital factor in their long tern strategy report for overseas

markets developing plans. These risks always are considered from a

trade process especial for the beginning of the new markets also

considering the effects that the political risk effects that multinational

companies have on the typical country and what factors the companies

need to look at before the trading in this country. Additional give a

suggestion scenario that may be occurred because the politics changed

or transformation, which may have the potential of greatest damage as

well. (Superstition03)

This report explores how the political risks affect the international

trade and show several ways that the political risks that can

confront an international trader like the change of government,

violent conflicts, and trade sanctions to affect trade. The

reports will identify the political risk in world area trade.

Additional the report is supported by academia theory in order

to make more powerful persuasion. (V. Kumar)

Furthermore, this report observes some of the case study, which will

be chosen are from different continent's country: Asian (China),

African (South African), Europe (UK), South American (Brazil), Oceania

(Australia), and North American (American) we analyse the research

about political risk in international trade, which based on four factors,

they are national law, labour condition, political situation, and

terrorism analyse. The result will be used to support our point of view.

Because those countries all have a different resource on how they are
going to perform economically. The aim of the four factors analyses

are going to figure out those countries competitive advantage and

comparatively advantage. It will be listed in the next separate

concerns in order to make a generally conclusion to this research.

Political risk in Brazil

As a democratic federal republic, Brazil is made up of 26 states and 1

federal district . In recent years, Brazil's policies are made by four political

parties: the PSDB ( Brazilian Social-Democratic Party); the PT ( Worker's

Party); the DEM (Democrats) and the PMBD (Brazilian Democratic

Movement Party) (UK trade & investment,2009). The current president ,

Luiz Inacio Lula da silva, won the presidential election in October 2002

and continued to win the election in 2006 (Latin America monitor,1984).

The key issues for his government are to make progress in vital areas,

such as social security and tax and set up a firm coalition in Congress

(U.S. Department Of State,2009).

Although Brazil provides plenty of advantages to attract foreign investors,

the high entry barriers still remained at the high level. High taxes are

collected from the import and the government helps to develop the local

enterprises by offering subsidies. In addition, the foreign companies which

plan to set up branches in Brazil might be suffered from more risk in high

entry barriers as some of the largest and most of the successful

businesses are controlled by the government. This policy may give a

potential risk in Brazil's long-term growth. (UK trade & investment,2009)

In other hands, corruption is another factor to handicap foreign

companies to invest Brazil. Although Brazil is a signatory of Economic

Cooperation and Development (OECD) Anti-Bribery Convention and

has laws to control the corruption, the effectiveness still remains

inconsistently (Latin America monitor,1984). According to the

Transparency International of Corruption perception index (CPI) 2008,

Brazil's score is 3.5, which 0 means corruption and 10 means not.

The force labour of Brazil reached 86 million in 2009, comprising large-

scale of skills in different areas and industries. 66 percent Brazilian

workers are employed in the service sector, 19 percent in agriculture

sector, and 15 percent in manufacturing sectors and retail

(Encyclopedia of the Nations, 2007).

The 30 days of annual leave are guaranteed for formal sector workers

and an annual bonus are available equaling to one month's salary and

the extra pay are also included for non-reason dismissal.

A labor courts system is also set up in Brazil, which helps to resolve the

disputes such as working conditions, unfair dismissal , salary disputes and

other complaints.

The firms which build up in Brazil must make sure that their workers at

least two-thirds are Brazilian nationals if the firms have three or more

workers and the salary of the Brazilian nationals must occupy at least

two-thirds of total wage bill (Encyclopedia of the Nations, 2007).

The Brazil labor law regulates that the Children, who are under 16 ages

are not allowed to work except in certain apprentice programs.

Nonetheless, this law cannot have a significant effectiveness and the

figures published by the Brazilian Geography and Statistics Institute

(IBGE) showed that there were more than 1.4 million illegal child

labourers who the age between 5 to 13 is hired in Brazil in

2006(Thaindian News, 2007). Furthermore, the law limits the working

hour to 44 hours per week. However, many employees work more than 44

hours, causing an unsafe working condition throughout the country

(Coface North America, 1990).

As Brazil is the host of the 2014 FIFA World Cup and the Olympic Games

in Rio de Janeiro in 2016, Brazil will pay more attention to the high levels

of gang activity in the future. Rio is particularly considered as the home of

favelas, in which gangs based and drug trafficking also caused violence

and killings. In the following decade, the government must guarantee the

gangs problem can be overcome in order to make sure the safe of foreign

visitors and athletes. (Latin America monitor,1984)

Political risk in South Africa

South Africa is a constitutional democracy which the power is shared

by president and the Parliament. The economic system of South Africa

is mainly based on the free enterprise principles,which guarantees

freedom of trade, profession and occupation. These principles are

protected by the national laws and generally, most of the private

enterprises in South Africa respect these principles (Coface North

America, 1990). At present, the threat of South Africa is not from the

competitors for regional political hegemony or immediate enemies or

other powerful countries. The real threat is from a large number of

illegal immigrants. The poor and unemployed South Africans are

suffered from this issue, and it is becoming the most important issue

to South Africa. As the poor economic environment in Zimbabwe,

thousands and hundreds refugees immigrate to South Africa,

causing local people's hostile and overburden Government's economy

and social welfare capacity (Glath,2008).

Corruption is also a problem in South Africa. According to the

Transparency International, The score of the Corruption Perceptions

Index (CPI) of South Africa is 4.9. The government is often in the news

of corruption. For example, in 2008, the policy chief,Jackie Selebi was

accused of corruption and had been arrested on graft charge, including

perjury and fraud. (Mailonline, n.d.)

Furthermore, according to the Statistics South Africa, the

unemployment in 2009 in South Africa is 24.5% which higher than

past 5 years (Statistics South Africa,2009). This is considered as one

of the most social political problems to the government. In addition,

the cap between wealth people and poor people also remains at a high

level. There were about 17 million people can be deemed as extremely

poor, which the monthly incomes were less than R 1000 and less than

500 000 people can be described as wealthy, which family incomes are

higher than R250 000 per annum. This factor will affect the political

risk for investors as the government will increase tax of wealthy and

adopt various methods to discriminate them. (Coface North

America,2009)
Although since 1994, serious terrorism and riots have reduced as the

democratisation of the country, the potential risk of riotous behaviour

still remains. For example, Cape Town during 1998 to 2001 was

suffered from the bombing campaign which was caused by the People

Against Gangsterism and Drugs (The Investigation project on

terrorism, 1995). However, at present, the terrorism is not a serious

problem in South Africa.

Political risk in American

National Law

The laws governing U.S. trade are numerous and complex.

Federal Trade Commission

FTC deals with issues that touch the economic life of every American.

It is the only federal agency with both consumer protection and

competition jurisdiction in the broad sectors of the economy.

Free Trade Area of the Americas - FTAA

The effort to unite the economies of the Americas into a single free

trade area began at the Summit of the Americas, which was held in

December 1994 in Miami, U.S.A.

U.S. Trade - Customs and Border Protection

U.S. Customs and Border Protection will facilitate about $2 trillion in

legitimate trade this year while enforcing U.S. trade laws that protect

the economy, the health and the safety of the American people

(HG.org, 2010).

Labor Conditions

70 years since the 20th century, the neo-liberal reforms led to the U.S.

"business unionism," into a deep crisis. Facing a crisis, the United

States began a comprehensive reform of trade unions. Some scholars

believe that trade unions in the reform of the United States are

rebuilding its "social movement organizations" status, while the U.S.

labor movement began to radiate out of the 20th century, since the

age of 30 has never had the vitality (Johnston, 2000). The U.S. labor

movement since the 90s to promote the revival of the labor studies

theoretical innovation. In recent years, a large number of American

scholars with a social movement emerged in the Perspective of labor

studies, these studies raised the old "institutionalism" or "neo-

institutionalism," a new research paradigm neglected issues, such as

trade unions as the choice of actors and strategies, trade unions and

community organizations, alliance-building, grass-roots mobilization

and participation of workers and other issues (Turner, 2004).

Political Situation

In the United States, trade policy is the result of multi-power game.

Political factors in U.S. trade policy have played a pivotal role. The use

of various interest groups lobbying, collective action, political

contributions, and social issues influence the political decision-making

process to achieve income redistribution. At the same time, the

political parties in the formulation of trade policy will take into account
the interests of the midpoint of the electorate; trade policy will be

treated as a means of electioneering.

Terrorism

We know that the United States is the main target of terrorist attacks,

since the 911 incident, the United States made the fight against terrorism

as the focus of safeguarding national security, although the United States

launched the war in Afghanistan and Iraq, but not only did not solve their

fundamental problems, also caused more problems. In fact, the main

reason of terrorism against the United States is due to the implementation

of the hegemonic policy of the United States for many years.

Political risk in China

National Law

China's National Development and Reform Commission and the

Ministry of Commerce jointly revised and promulgated November 7

Foreign Investment Guidance Catalog of Industry, 2007 (“new

directory"), which replaces the 2004 version and the entry into force,

and in December 1, 2007 (China’s National Development and Reform

Commissioin, n.d.). Amendments to reflect the new directory attitude

and the highest level of foreign investment in China, the authority's

policy and comply with other restrictions on foreign M & A activity, has

recently taken measures to abolish the tax on foreign-invested

enterprise preferential treatment, and cancel its support for export-

oriented enterprises . According to the new directory, foreign

investment in traditional manufacturing and export-oriented projects,

will no longer be encouraged, on the contrary, in the high-tech, new

materials production, high-end equipment, modern agriculture and

high-end services, such as modern logistics, investment, has been a

new encouragement. Heavy pollution, high resource consumption of

projects, and explore the important non-renewable mineral resources

will be banned. However, some environmentally friendly energy-saving

projects will be more and more popular (Bill H. Zhang, 2010).

Labor Conditions

We know that China is a labor-intensive country, manufacturing

products in China, costs are relatively the United States, the cheaper.

Every year, the United States to prosecute companies dumping

products in China, the Chinese-made products relative the United

States of products low price , leading to the United States companies is

difficult to survive. China's products overseas, the reason why there

are price advantages, mainly because of China's labor resources and

low cost.

Political Situation

Since the reform and opening up, China's economy maintained stable

and rapid development trend of the average annual GDP growth has

remained at around 10%.'s Rapid economic development has also led

to China's growing international status. China has always been the

pursuit of peace developing country, the country's political stability and

economic development also have created a good environment for

development. Of course, now China's politics, there are some

problems, such as Taiwan, Tibet, Xinjiang, China's political problem on

the development of a possible threat, But as a whole, China is not only

for their own enterprises secure and stable environment for

development, but also ensures the safety of foreign enterprises in

China's investment environment.

Terrorism

In China, mainly the existence of "East Turkistan terrorist organization"

and part of the Tibetan separatist elements, they are China's political

and economic stability has brought a great impact. In the era of

economic globalization, international terrorism, not only for the

situation in the region and international peace and pose a serious

threat, but is increasingly becoming the world's economic stability and

growth impact of a new factor. Therefore, the fight against terrorism is

not a country’s individual tasks, but to the world’s countries to

strengthen cooperation in order to prevent terrorism attacks

effectively.

Conclusion
Different countries have Different policy systems. So there have different

policy risk in trade between those counties. There have serious corruption

in government in South African, Brazil and China. U.S. companies get the

benefit in their Implementation of the hegemonic policy.

At terrorism part Brazil has a serious gang problem in Brazil but South

African and China are not. It has serious terrorism attacked in US, but it

is different to other countries, the main reason of terrorism against the

United States is due to the implementation of the hegemonic policy of the

United States. It is affected by US diplomacy issues. However, it has a

large gap between rich and poor in South Africa additional Zimbabwe's

National often smuggled to South Africa, it made pressure to South Africa

Economic burdens and security issues.

Brazil imports relatively high tax and government support to their

home made company to help the local company’s developing

additional most of the pillar-based industries are controlled by Brazil's

government. Brazil still has a serious problem of child labour and most

people work more than 44 hours per week that broke the stipulated by

the Government of the working time. At the opposite of ocean,

Australian operate the same action about high import tax then made

the Multinational companies in a disadvantage position compare the

local companies. Australian uses their unique location and rich mine of

resources to attract the cheap labour from Asia that made all the

company can reduce the labour cost. As the Australian employment

rate pressures the local companies will receive more financial support

and protection from government. However, its foreign debt is very

large. UK government set a law called “fair trade law” to help local

multinational companies comparative and competitive advantages, like

reduce the export tariffs.

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