Global Competitive Strategies in the New World Economy

Part 2: Regionalism and Europe

Part 2 could more appropriately be entitled “Japanese Corporations in the EU”. The first part, that deals with a typology of globalisation strategies, could be combined with Chapter 20 on integration within MNC. This could clarify the terms “global”, “transnational”, “international” and “multinational” early in the text and permit their consistent use throughout the text. The discussion of Japanese Regional Headquarters (RHQs) in the EU is interesting in its conclusions, i.e. that these have not been successful. The reasons for lack of success include: the European market is not homogeneous (cf. the USA, Japan), there is a perception that RHQs are an unnecessary reporting layer – “roof over‐a‐roof” – and hence RHQs are often bypassed. The difficulties of creating learning organizations and motivating employees in the EU are highlighted. The conditions in Eastern Germany are examined with a view to explaining the low Japanese investment after the collapse of the Berlin Wall and the demise of Communism. In my opinion the principal explanations of low Japanese investment in Eastern Germany (and Europe) were the comparatively better returns from ASEAN and East Asia. It can also be argued that any demand increases from Eastern Europe could be met from Japanese plants in the EU; and, finally, the Japanese economy was performing poorly and international investment suffered in general.

Part 3: Regionalism and North America

A study of NAFTA is important; as Graham and Wilkie note, “NAFTA was the first comprehensive trade and investment agreement between developed and developing countries – that enabled a jointly satisfactory outcome” (p. 97 (italics added)). In the next paragraph the authors note, “It is undeniable that substantial elements of the long‐standing US official agenda are embodied in the investment provisions”. One gets the impression that the USA got almost all it wanted; while Canada and Mexico were able to reduce problems of access into the US market. NAFTA presents some useful lessons for developing countries; however, Mexico is not a typical developing economy, given the degree of liberalisation that preceded joining NAFTA. One notices that intra‐NAFTA benefits are limited by clauses on reservations and exceptions. On the other hand, investors from outside NAFTA will be disadvantaged by rules of origin; there will continue to be pressure to locate in the USA (as opposed to Canada, and Mexico); there is protection of incumbent corporations (against new investors) and the relatively weak provisions on competition policy (cf. Treaty of Rome). A close examination of the Free Trade Agreement (FTA) between Canada and the USA gives the impression that Canadian businesses did not gain much, since US companies have continued to use trade remedy laws, leading some to suggest that the USA was not abiding by the spirit of the FTA by continuing this adversarial approach (Crawford, 1992). In addition to these trade barriers, the Americans have used GATT/WTO provisions to protect their home market; they have used various border measures to impede Canadian imports. All these US protectionist measures suggest that Canada is not an effective gateway into the USA despite the FTA and NAFTA.

Part 4: Regionalism and Asia

This part starts with a discussion of growth triangles and notes that growth triangles generally develop from government initiatives but can also develop without any formal government interventions (e.g. Southern China Growth Triangle), especially where regions have linguistic or cultural affinity. However, fundamental to growth triangles are complementarity of resources, differences in stages of economic development (to allow for metropolitan spill‐overs), differential labour cost, and an adequately developed infrastructure. The concept of growth triangles probably has some applicability in other regions in developing countries, where national boundaries are meaningless and artificially separate identical communities. However, there are political and equity challenges that need to be addressed for effective regional integration.

The chapter on the ASEAN Free Trade Area (AFTA) suggests that most simulation studies indicate limited benefits from AFTA in the short to medium term. This appears surprising, given the benefits associated with integration in NAFTA and the EU. One wonders if this conclusion reflects the paucity of hard data for forecasting or the inadequacy of the available forecasting models. Or is the region so dynamic that medium‐ to long‐term forecasts are not very informative? Many changes have occurred and one gets the feeling that this chapter has been overtaken by events – the financial and currency crisis, and the political upheavals (e.g. Indonesia and the Philippines).

The pattern of Japanese investment in East Asia and the Pacific clearly shows these as priority areas. Because of psychological similarities, Japanese businesses see these regions as extending from domestic to regional and international networks. However, the success of Japanese production in East Asia is leading to a “hollowing‐out” of the Japanese economy through dramatic shifts of production facilities to Asian countries. This is a challenge Japanese businesses have to address. The Taiwanese have followed the Japanese through carefully balancing between US, EU and Asian markets with, as a result, similar “hollowing‐out” effects from subsidiaries located in ASEAN countries and China.

The final chapter in this part relates to Turkish investments in Central Asia and Russia. The contributors identify political risks, financial risks, risks associated with macro‐environmental management and credibility. However, the issue is that Turkey is probably going to be an important gateway into central Asia, given its cultural, linguistic and religious affinity to the region.

Readers might feel some disappointment that no chapter attempts to relate the trading blocs to multilateralism. This would have brought readers to reflect on the issue of whether trading blocs, e.g. EU, NAFTA and ASEAN, are leading to international convergence or fragmentation or whether these have been used as substitutes for WTO. Another area in which the book is silent relates to the desirability or otherwise of globalisation. Vocal criticisms of globalisation (as evidenced by the Seattle and Prague demonstrations) cannot continue to be ignored. Academics should be challenged to investigate these issues, taking into account the interests of the various stakeholders.

This book will be used as a resource for marketing academics and practitioners, since the company case studies make interesting and insightful reading. To the extent that the book focuses on Japanese and other Asian outbound trade and investment, it succeeds.