Appendices

Appendix A: The Eclectic Paradigm of International Production

1.     Ownership-Specific Advantages (of enterprises of one nationality (or affiliates of same) over those of others)

a.  Property rights and/or intangible asset advantages

Product innovations, production management, organizational and marketing systems, innovatory capacity; no-codifiable knowledge; ‘bank’ of human capital experience; marketing, finance, know-how, etc.

b.  Advantages of common governance

i.  Which those branch plants of established enterprises may enjoy over de novo firms.  Those due  mainly to size and established position of enterprise, e.g. economies of scope and spezialisation; monopoly power, better resources capacity and usage.  Exclusive or favoured access to inputs, e.g. labour, natural resources, finance, information.  Ability to obtain inputs on favoured terms (due to e.g. to size or monopsonic influence).  Exclusive or favoured access to product markets.  Access to resources of parent company at marginal cost.  Economies of joint supply (not only in production, but in purchasing, marketing, finance, etc., arrangements).

ii. Which specifically arise because of multinationality.  Multinationality enhances above advantages of offering wider opportunities.  More favoured access to and/or better knowledge about international markets., e.g. for information, finance labour, etc.  Ability to take advantage of geographic differences in factor endowments, markets.  Ability to diversity or reduce risks, e.g. in different currency areas, and/or political scenarios.

2.       Internalization-Incentive Advantages (i.e. to protect against or exploit market failure)

Avoidance of search and negotiating costs.

To avoid costs of enforcing property rights.

Buyer uncertainty (about nature and value of inputs (e.g. technology) being sold)

Where market does not permit price discrimination.

Need of seller to protect quality of intermediate of final products.

To capture economies of interdependent activities (see b. above)

To compensate for absence of future markets.

To avoid or exploit government intervention (e.g. quotas, tariffs, price controls, tax differences, etc.)

To control supplies and conditions of sale of inputs (including technology).

To control market outlets (including those which might be used by competitors).

To be able to engage in practices, e.g. cross-subsidization, predatory pricing, leads and lags, transfer pricing, as a competitive (or anti-competitive) strategy.

3.       Location-Specific Variables (These may favour home or host countries)

Spatial distribution of natural and created resource endowments and markets.

Input prices, quality and productivity, e.g. labour, energy, materials, components, semi-finished goods.

International transport and communication costs.

Investment incentives and disincentives (including performance requirements, etc.)

Artificial barriers (e.g. import controls) to trade in goods.

Infrastructure provisions (commercial, legal, educational, transport and communications)

Psychic distance (language, cultural, business, customs, etc. differences).

Economies of centralization of R & D production and marketing.

Economic systems and policies of government; the institutional framework for resources allocation.

(Source: Dunning, John H., Explaining International Production, Unwin Hyman Ltd, London, 1988, p.27.)

Appendix B: Uppsala Model Tested on Belgian Enterprises

Preliminary stages to the establishment of a production subsidiary abroad by Belgian multinational enterprises.

¹ Number of cases.

Source: Haex and Van Den Bulcke (1979, p. 63-65)

            Based on Newbould, Buckley and Thurlwell (1978)

Appendix C: Types of Foreign Production

1. Kind of activity today in China

2. Incentives to internationalize towards China

Appendix D: The Eclectic Model Applied

In table below is indicated how the observed enterprise are positioned in which kind of market.

Appendix E: The Establishment Chain

In graph below, the trading companies MDD and Microvert, and LBC are excluded, the latter because it is not really a SME and is only engaged in market research.  Ten enterprises are included. 

- Six of them started with occasional exports: Automatic Systems, Barco, IER, Ensysta (engineering activities on project base), Bekaert Textiles Trading and Picanol.

- One of them, Stow International, started with market research through a representative office.

- Two are doing market research without having an own representative office - they work in the representative office of Export Vlaanderen. (Sysmo Systems and Reynaers)

- One started by co-sponsoring with the Junior Management Program one of their employees. (Eonic/Windriver)

Appendix F:  WTO Press Release

WTO successfully concludes negotiations on China’s entry

The World Trade Organization today (17 September) successfully concluded negotiations on China's terms of membership of the WTO, paving the way for the text of the agreement to be adopted formally at the WTO Ministerial Conference in Doha, Qatar, in November.

International economic cooperation has brought about this defining moment in the history of the multilateral trading system, said Mike Moore, WTO Director-General, at the conclusion of the meeting of the Working Party on China's Accession. With China's membership, the WTO will take a major step towards becoming a truly world organization. The near-universal acceptance of its rules-based system will serve a pivotal role in underpinning global economic cooperation.

Under the chairmanship of Ambassador Pierre-Louis Girard of Switzerland, the Working Party concluded almost 15 years of negotiations with China and agreed to forward some 900 pages of legal text for formal acceptance by the 142 Member Governments of the WTO. Thirty days after China notifies its acceptance of the agreement, China legally becomes a member of the WTO.

As a result of the negotiations, China has agreed to undertake a series of important commitments to open and liberalize its regime in order to better integrate in the world economy and offer a more predictable environment for trade and foreign investment in accordance with WTO rules.

Among some of the commitments undertaken by China are the following:

• China will provide non-discriminatory treatment to all WTO Members. All foreign individuals and enterprises, including those not invested or registered in China, will be accorded treatment no less favourable than that accorded to enterprises in China with respect to the right to trade.

• China will eliminate dual pricing practices as well as differences in treatment accorded to goods produced for sale in China in comparison to those produced for export.  Price controls will not be used for purposes of affording protection to domestic industries or services providers.

• The WTO Agreement will be implemented by China in an effective and uniform manner by revising its existing domestic laws and enacting new legislation fully in compliance with the WTO Agreement.

• Within three years of accession all enterprises will have the right to import and export all goods and trade them throughout the customs territory with limited exceptions.

• China will not maintain or introduce any export subsidies on agricultural products.

• While China will reserve the right of exclusive state trading for products such as cereals, tobacco, fuels and minerals and maintain some restrictions on transportation and distribution of goods inside the country, many of the restrictions that foreign companies have at present in China will be eliminated or considerably eased after a 3-year phase-out period. In other areas, like the protection of intellectual property rights, China will implement the TRIPS (Trade-related Aspects of Intellectual Property Rights) Agreement in full from the date of accession.

• During a 12-year period starting from the date of accession there will be a special Transitional Safeguard Mechanism in cases where imports of products of Chinese origin cause or threaten to cause market disruption to the domestic producers of other WTO members.

• On the other hand, prohibitions, quantitative restrictions or other measures maintained against imports from China in a manner inconsistent with the WTO Agreement would be phased out or otherwise dealt with in accordance with mutually agreed terms and timetables specified in an annex to the Protocol of Accession.

Goods

The conclusion of the negotiations for market access on goods represents a commitment undertaken by China to gradually eliminate trade barriers and expand market access to goods from foreign countries. China has bound all tariffs for imported goods. After implementing all the commitments made, China's average bound tariff level will decrease to 15% for agricultural products. The range is from 0 to 65%, with the higher rates applied to cereals. For industrial goods the average bound tariff level will go down to 8.9% with a range from 0 to 47%, with the highest rates applied to photographic film and automobiles and related products. Some tariffs will be eliminated and others reduced mostly by 2004 but in no case later than 2010.

Textiles

Upon accession China will become a party to the Agreement on Textiles and Clothing and will be subject to its rights and obligations. As for all WTO members, quotas on textiles will end at 31December 2004, but there will be a safeguard mechanism in place until the end of 2008 permitting WTO Member Governments to take action to curb imports in case of market disruptions caused by Chinese exports of textile products.

Agriculture

China agreed to limit its subsidies for agricultural production to 8.5% of the value of farm output (per Article 6.4 of the Agriculture Agreement). China also agreed to apply the same limit to subsidies covered by Article 6.2 of the Agriculture Agreement.

(source: www.wto.org, WTO NEWS: 2001 PRESS RELEASES Press/243, 17 September 2001)

Appendix G: Useful Addresses & Websites

Export promoting offices in Belgium

www.brussels-exports.be: Brussels Export

www.export.vlaanderen.be: Export Vlaanderen

awex.wallonie.be: Agence Wallone à l’Exportation

www.bdbh.be: Belgische Dienst voor Buitenlandse Handel

Business Associations

www.cci.be:  Belgian Chambers of Commerce.

Junior Management Program

EU-China European coordination office
Jaakonkatu 28, 13100 Hameenlinna, Finland
Telefoon: (00) 358 36464920
Fax: (00) 358 36462230
E-mail: euchina@hamk.fi

Website of Author

www.mattiasgrillet.be.tf

mattiasgrillet.iam.cn