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Introduction
fully aware of their political and legal environments and how these environments can impact
their businesses. Therefore, international and local business managers need to understand the
meaning of international law and the manner in which it applies to their immediate business
environments. International law can simply be defined as the principles and rules that nations,
sovereign states, and such other entities that have been granted international personality
consider binding upon themselves (Von Glahn, & Taulbee, 2015). Two interesting
characteristics of international law emerge following this definition. The first characteristic is
that individual nations are the determinants of their laws and the impact of the international
law is only to the extent that the individual nation is willing to relinquish its rights. The
second characteristic revolves around the fact that there lacks an adequate international
administrative and judicial body or framework of law that can form the basis for an
The international business and environment are also subject to political orders
structured by governments both at home and in the host nations. Home and host governments
can apply different measures to deal with disapproved entities or parties. For instance, home
governments can implement disciplinary measures to such parties such as withdrawing their
export guarantee covers or imposing a restriction in the granting of their export license. The
host nation may, on the other hand, take measures such as expropriation, operating
Research Background
role in determining international trade decision-making processes. There are several cultural,
INTERNATIONAL LAW 3
social, economic, and political reasons that support government interventions in international
trade. One of these reasons involves the protection of specific industries and jobs. About
national security issues, some industries can be perceived as vital and crucial components
such as the telecommunications and defense industries. For instance, government concerns
may arise regarding the owners of ports within the country’s boundaries. Exports and imports
may be adversely affected due to national security concerns regarding the flow of advanced
technological information leaving the country and finding its way to potentially threatening
countries.
Businesses in democracies comprehend that most of the democratic rules that are
present and being practiced can withstand the changes in governments. If changes occur in
environments as opposed to changes in the main government players. This differs with
authoritarian governments where democratic principles are regarded simply as either a token
process or are not in effect. One outstanding example is China, which is characterized by
limited individual rights amid its strong communist government. However, China has
recently pursued a new approach in trying to balance out the degree to which the state
manages and plans the national economy. As much as the government retains the ultimate
controlling force, there has been an increased emergence in private businesses. Against the
Problem Statement
their approach and nature. They both have driving forces that motivate the processes and
structures that define their eventual outcomes. For instance, political factors are driven by the
between governments and related entities or individuals. On the other hand, legal factors
comprise of internationally accepted principles and standards that oversee the international
business activities of companies and organizations. An impartial comparison between the two
factors suggests that despite their overarching similarities and differences, further studies into
the legal dimension can profoundly assist governments and other entities in shaping and
configuring their political outfit towards achieving a more integrative and synchronized
global environment.
Research Questions
It is evident that the legal concerns that surround a multinational corporation in any
country are almost similar when taken into account using the internationally accepted
principles and standards that govern business activities. This brings into the picture the tussle
between political factors that affect an international business enterprise and the associated
legal factors that shape the structure of international trade. The paper intends to answer the
How much emphasis should be directed towards addressing the legal factors?
Unlike the political factors that can be assessed by the respective governments,
What are the main issues that all businesses engaged in internal trade should
analysis?
INTERNATIONAL LAW 5
Research Feasibility
the tussle between legal and political concerns affecting international trade, trade may be
consumers from illegal factors and exploitation and promotes economic growth. In the
comprehensively with the regulatory measures, legal factors, and regional tax measures that
determine the manner in which the business is affected. Taking into account the regional
economic analysis is an additional measure that can assist businesses to adapt to the legal
issues within the business environment effectively. This paper seeks to accurately identify the
business legal and political environment that is fundamental and crucial in determining the
Literature Review
companies can easily outsource services and goods from other nations. It is a common
perception by most business managers that international business definitions purely apply
situation where the movement, distribution, or production of services and goods transcends
across country borders. Greater opportunities are created for international businesses through
the shift towards an integrated and more interdependent global economy. Globalization can
However, the reality is that the definitions of international business encompass a wide
range of professional and personal activities since the world has transcended simple industrial
involves two or more nations that are actively engaged in a wide range of cross-border
exchanges and business activities relating to resources, services, and goods. Such exchanges
can go beyond monetary transactions of services and goods to involve international transfers
people.
instruments, provision of future services to foreign customers, or the right of using selected
foreign assets while intellectual property may involve brand trademarks, copyrights, or
businesses around the globe in several countries. This wider scope of international business
also includes activities by nonprofits such as political favors, corporate social responsibilities,
or triple bottom lines as well as activities by profit-making organizations that have cross-
border transactions.
The study of political systems is complex and extensive. A political system is the
regulations, and a complete set of rules. The key differentiators of political systems lie within
the philosophy of each system regarding the role of the government, rights of the individual,
as well as rights of the group. The policies that govern the business environment and local
economy are extensively influenced by the philosophies of each political system. There are
several types of governments, each consisting of multiple variations. However, all these types
INTERNATIONAL LAW 7
of governments revolve around two outstanding extremes that contain different political
philosophies.
At one end of the extreme backed up by its political philosophy is totalitarianism that
contends that a strong central government should be the focus and machinery that dictates
and controls every aspect of an individual’s life. At the other extreme is anarchism that
presupposes the contrary and contends that public government is both unwanted and
unnecessary and that political activities should be controlled by individuals. In reality, neither
extreme can be envisaged to exist in its purest form. Therefore, the majority of countries have
combined both extremes into a suitable and favorable balance that is often a reflection of the
religion, culture, and history of that particular country. This combination is known as
pluralism, which argues that in a well-functioning political system, both private and public
As much as the political structure of the majority of countries is pluralistic, they may
tend to lean on one extreme more than the other. Governments across the globe exercise
different levels of controls about the daily lives of its citizens. As much as authoritarianism
and totalitarianism may be treated as synonymous by the vast majority of people, there is a
small selected group of leaders or in one particular strong leader who assumes full authority.
Authoritarian leaders are not democratically elected, and as such, they do not owe the
country’s people any form of social, economic, or political accountability (Boix & Svolik,
2013).
takes place when a distinct type of ideology such as communism motivates the authoritarian
leadership. The ideology in totalitarianism is what controls or influences the people and not
just a single party or person. Authoritarian leaders tend to lack any guiding philosophies and
INTERNATIONAL LAW 8
use more of corruption and fear to maintain control. The most common form of government
There are some practical and theoretical variations in democracy, some of which
provide more freedoms and better representations for their citizens than others. It is
imperative that businesses focus on the manner in which the economy of the country, as well
as particular industries and firms, are affected by the political system in place in their
country. Companies need to examine the balance to determine the manner in which their
businesses will be affected by the regulations, rules, and policies in place. Companies can
also assess the political stability and risk that exists in a country depending on the degree of
entry and exit freedoms present in conjunction with the duration of time that the company
As much as there is no country that is purely exempt from risk, some countries
provide or offer much more secure business environments than others. A key attraction to
foreign investments in any country is the political stability being maintained in that country.
includes the perception of the country about capitalism. The overall perception of capitalism
authoritarian and capitalist regimes tended to employ state-controlled approaches. High levels
the United States, Australia, Japan, Western Europe, and Canada. As much as there are
functioning democracies in Latin America and Asian countries, the stability of their trade and
Legal systems are mainly affected by the economic and political ideologies that define
countries. Three types of legal systems are practiced by multinationals and international
or religious laws, civil laws, and common law practices. The majority of countries have a
hybrid legal system that combines these systems in international and domestic trade practices.
Common law is essentially based on precedence and traditions. Judges have the discretion to
interpret the law in common law cases, and the judicial rulings that they make can set
precedence for other courts to apply in cases with similar characteristics (Burnham, 2016).
The most extensive and universal legal system is civil law. It focuses on the manner in
which the law is applied to particular facts using a detailed set of laws that comprise a code.
The theocratic or religious law is essentially based on the guidelines contained in the
particular religion. Sharia or Islamic law is the most widely known and mentioned example
of religious law. It governs a number of Islamic communities and nations throughout the
globe in addition to being the religious law system that is most widely and internationally
accepted. Other additional religious law systems include the Christian Canon system that is
extensively observed in the Vatican City and the Jewish Halacha. However, these additional
religious systems are not practiced at national levels in any country in the world unlike Sharia
or Islamic law that is practiced nationally by some North African and oil-producing countries.
The most evident and direct impact on businesses around the world can be seen in Islamic
law.
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Regarding perceiving and defining this law as a legal system, Islamic law is more
attuned to the moral concepts as opposed to commercial ideologies. For instance, businesses
operating under the Islamic law are directly affected by the concept of interest that is
contained in the law. According to this law, it is inappropriate for banks or other financial
institutions to benefit from interest earned in the course of business. Consequently, entire sets
of strategies and financial products that stimulate profits or interest have been generated by
businesses and companies operating under this law because they have the options of
Constant and intense challenges are faced by international managers that require them
to have a comprehensive understanding and proper training of the foreign environment. The
management of the business in a foreign country demands that managers are well equipped to
deal with the vast majority of environmental and cultural differences. In this regard, it is
Some laws have been created by the American federal government that concerns the
regulation of the activities involving American businesses that are engaged in international
trade. Nevertheless, these laws may differ substantially with the laws of other nations
concerning the same. In this case, it is incumbent upon the business or firm carrying out
business activities in the host country to fully comprehend the laws of the host nation and the
manner in which they may affect the operations or profitability of the particular business. The
international law asserts that all business activities being carried out within a country’s
borders must conform to the laws of the land in conjunction with the international and
For instance, it is a criminal offense in the U.S. to either bribe or accepts a bribe under
any circumstances. However, this may not be the case in other countries where accepting
the degree of strictness involving patents and copyrights may differ across the globe causing
some countries to overlook these laws thereby transgressing the laws associated with the
particular product according to laws governing the production of such goods at their
business managers can adequately and accurately assess the manner in which legal factors
affect other vital political and economic elements affecting their businesses and evaluate how
these factors can be synchronized towards the overall improvement of international trade
practices.
This paper will employ a critical analysis approach in establishing the legal and
political factors that affect the impact of international trade. To establish and identify the
independent and dependent variables between political factors and legal factors affecting the
impact of international trade, the paper will begin with defining international law and its
various determinants. The relationship between international business and international law
The paper will then delve into critically analyzing the political and legal systems affecting
international trade.
Each system will be critically examined within the fundamental subsets that constitute
the major determinants of the political and legal systems. Before giving an insight on the
legal and political factors affecting international trade, the paper will highlight the importance
of the study and the correlation between these two factors. A discussion involving the two
factors will then be presented comparing between the effects of political factors and the
INTERNATIONAL LAW 12
impact of legal factors. The discussion will include a comparative analysis establishing that
these two factors are interrelated in their effects on international trade. The paper will then
give recommendations particularly on bolstering the legal factors that seemingly lack an
serve as a fundamental pillar to all other factors including the political, sociocultural,
References
Boix, C., & Svolik, M. W. (2013). The foundations of limited authoritarian government:
Burnham, W. (2016). Introduction to the law and legal system of the United States. West
Academic Publishing.
Press.
Institute of Technology.
Von Glahn, G., & Taulbee, J. L. (2015). Law among nations: an introduction to public