Introduction
In a multinational market, the degree of integration, as well as the ease and speed of flow of commodities, are low, while national and local governments are strong and institutional investors weak. In a global market, the degree of integration and the speed of flow of commodities are high, while national and local governments are weak, and institutional investors strong. Although for many products the world economy represents one market, saturation, together with a large number of competitors, cultural differences, and local government barriers and business practices, make competition around the globe rather complex. New forms of packaging, demand for recycling, more efficient use of resources, greater responsibility for protecting the environment, limiting toxic waste, as well as the need to educate consumers and to develop more user friendly products are all compounding the tasks and demands placed on the organization ( 1999).
The transformation of the world economy from a multinational to a global market has unleashed unprecedented competitive forces across national borders and local markets, dictating a new competitive paradigm and organizational structure for international businesses ( 1999). One global market that is gaining popularity is carbon emission trading. Given the growth in global markets for emissions and other forms of carbon trading the paper will explain how such markets in Australia operate. The paper will also explore the strategic implications for MNE’s of such operation.
Australian economics and businesses
In Australia’s early decades the economy rode on the sheep’s back, with assistance from other agricultural exports. It was the 1930s depression, accompanied by social chaos in rural and mining areas that effectively forced the country into the import-replacing industrialization that became the basis for a post-war economic boom. Thus Australia ran a bipartisan protection strategy till the early 1980s which allowed reasonably high wages, low unemployment and a diverse manufacturing sector while achieving reasonable import replacement. This strategy was abandoned in 1983-85 as the Labor government worked to bring Australia out of the era of protectionism and into a new era of open competition and manufacturing for global markets. The company became global because Australia could not stay wealthy by selling commodities, especially after Europe’s transformation from being the world’s biggest food importer to its biggest food exporter ( 1999).
Also, many countries have minerals besides Australia. In the twenty years to 1995, Australia’s terms of trade fell almost 20% and their manufactures were too expensive to compete on world markets which, in any case, were turning away from old industries such as steel and motor vehicles. Competitiveness was ravaged by high inflation from 1973 to 1983. Tariffs were cut rapidly and imports surged, paid for by borrowing funds attracted through high interest rates. Interest payments on such borrowings are now a significant component of the balance of payments deficit ( 1999).Unemployment, exacerbated by technological change, soared as imports replaced Australian-made goods, although not enough to reduce demand to inflation-squashing levels. Australia’s trade balance moved from a surplus of $A183 million in 1983-1984 to a deficit of $A3274 million in 1985-1986; its current account deficit over those three years rose from $A7.3 billion to $A14.3 billion. The deficit on merchandise trade in 1994-19995 was still a very high 1.8% of GDP. The late 1970s through the 1980s was also a period of financial deregulation, meaning removal of all controls on interest rates, exchange rates, capital flows and credit. Globalization of financial markets has the effect of narrowing interest rate and equity yield differentials between countries. It also weakens the link between a country’s domestic saving and investment, making it possible for investment to grow for long periods without a corresponding rise in saving ( 1999).
Notwithstanding these problems, productivity has continued to grow, sluggishly, since the end of the long boom in the 1970s. Real GDP per head increased by over a third between 1972 and 1995 and this performance puts us somewhere in the top ten of the OECD growth league. Over the last five years Australia’s per capita growth performance ranks among the top five. Between 1963 and 1993 manufacturing’s share of GDP declined from 26% to 15% while services plus dwellings increased from 59% to 74% of GDP. 12 Mining and agriculture have expanded relatively in Queensland and Western Australia, dragging linked industries along with them. Meanwhile, the rest of Australia, where manufacturing is relatively more important, has been focusing on restructuring its textiles, clothing, and footwear industries, metals industries and so on, and has lagged behind the frontier states. Perhaps the single most important shift in the product mix has been the marked growth in international tourism ( 1999). Doing business in Australia can be a good or bad thing depending on the industry and the economic trend the country is experiencing.
Emissions and Carbon Trading
Environmental markets can operate in many ways. One can trade rights to the use of water bodies or to the use of the atmosphere of the planet for disposing of greenhouse gases. In environmental markets the traders can be individuals or corporations. They can also be countries. Because emission markets assign a price to the right to emit, they add a cost to the use of the atmosphere. The cost involved arises either from the need to purchase permits when one exceeds one’s allotment or from the opportunity cost of using one’s permits allotment rather than selling them at the market price. In all cases environmental markets make environmental resources more expensive and thus discourage their use ( & 2000).
Thus, they can induce more rational use of resources globally. This is how markets can help control the overuse of natural resources. Although the idea of using markets to increase the cost of resources is simple, environmental markets themselves are somewhat complex and as yet little understood. The purpose of this book is to advance our understanding of environmental markets so that they can achieve their full potential as a tool of environmental policy ( & 2000).
Two main characteristics separate environmental markets from traditional markets. The first is that environmental markets trade public goods, which means goods that are not rival in consumption. An example is the fraction of carbon dioxide in the planet’s atmosphere, an amount that is the same for all. The second distinguishing characteristic is that the public goods that are traded are not standard but are privately produced public goods. This means that they are produced by individuals in the course of their everyday lives: By driving cars and choosing to heat their homes, they produce atmospheric quality. Thus, environmental markets trade privately produced public goods ( & 2000).
Carbon can be taxed indirectly by taxing fossil fuels. Taxing fossil fuels works because their carbon content is easily ascertained, and no viable option for end-of-pipe carbon abatement currently exists. A fossil fuel tax could be collected in several ways. However, the farther upstream the tax is levied the less carbon leaks out through uncovered activities such as oil field processing. Implementing such a tax would be relatively straightforward in the United States and most other developed countries, given existing tax collection systems, but more challenging in developing countries that have less effective institutions for levying taxes and monitoring behavior ( & 2000). Carbon trading is somewhat more complicated than a carbon tax. One has to decide where to assign property rights for carbon: downstream, upstream, or some combination of the two. In principle, a downstream approach encompasses all emissions. In practice people who heat their homes with fossil fuel and/or drive a car would be required to buy and sell carbon permits ( & 2000).
Operating and overseeing such a market would be an administrative nightmare. In contrast, an upstream system would be easier to administer because the number of market actors is smaller. Comprehensive policy would have to account for imported refined products as well as domestic fossil energy supplies and to address non combustion uses of fossil fuels. One possibility is a system in which emissions of large sources are regulated directly and small sources are regulated through limits on their fossil fuel supplies ( & 2000). Emission and Carbon trading is becoming one of the fast rising markets in the world. More countries are becoming aware of this new business trend. This trend affects businesses because it fully relates to the global problem of pollution and global warming.
Carbon Emissions trading in Australia
For Australia, there are two vitally important linked opportunities: to environmentally renew economic activity and to turn around environmental degradation. The Australian Conservation Foundation sees an urgent need for stronger voices across the country to urge for ratification of the Kyoto Protocol. A better informed constituency that understands the threat from climatic change is needed to scrutinize the arguments opposing ratification ( & 2003). The foundation urges the international community to remove Australia’s land clearing exemption. High levels of land clearing are the prime cause of dry land salinity; and the exemption provides a loophole for developing countries with high rates of forest destruction to exploit, as they join the Kyoto Protocol ( & 2003). The Kyoto Protocol is a purely political compromise created by exhausted negotiators. To sign up to it because of the lobbying of vested interests and sheer ignorance of the range of implications in an uncertain world would be foolish. The Howard Government has made a decision not to ratify the Kyoto Protocol. But that cannot be the end of the debate. What is needed is for the Government to implement a clear alternative within Australia so that institutions can be created and incentives put in place to begin to deal with carbon emissions domestically ( & 2003).
The Government also needs to convince other countries to adopt a more sensible approach because as a major fossil fuel exporter, even if Australia does not participate in the entrails of the Kyoto protocol, the possible contraction in the participating economies has the potential to inflict costs on Australia. Leading world opinion by example is very much in Australia’s interest when it comes to climate change policy ( & 2003). For Australia by signing in the Kyoto Protocol and eventually having a carbon trading market means that it will let other individuals control the country’s activities and interfere in its internal affairs. The country is not fully convinced that the Kyoto Protocol and Carbon trading is the one that can help solve its problems.
Strategic implications for MNE’s
The financial situation in Asia, naturally, has had an impact on U.S. business interests there. American exporters are concerned about current and future business dealings in the region. The impact of the Asian financial crisis is beginning to hit the United States in the form of reduced revenues at bellwether technology companies such as Motorola. Although there may be reduced service levels from financially struggling vendors, the ripple effect of lower component prices and competition may actually be beneficial to information technology buyers. Asia’s currency devaluation continues to lower prices for PC components that are manufactured. In this increasingly interconnected world, there are few events that do not have a transnational impact. Southeast Asian economies are dependent on Japan and that, in a sense, has given them the right to demand that Japan adopt measures to stimulate its economy ( 1999).
Furthermore, an economy powered by open and sound financial policies will be better able to adjust to the global market than an economy that is closed and hobbled by financial favoritism. Compared with Indonesia, Thailand, and Korea, Malaysia has done its best to keep a distance from Asia’s financial crisis. But for a country that technically is not part of the turmoil, Malaysia is getting lots of worried attention from global policy makers. Despite a raft of serious economic problems, Malaysia has not yet turned to the International Monetary Fund for a bailout package. The country has, to date, avoided that step by trying to regain the confidence of the financial markets. Patience with austerity appears to be wearing thin. Weakening conditions there could carry a high cost for nations already pummeled by twelve months of financial turmoil. Malaysia is now in recession. Its currency remains nearly 50 percent below its year-ago level ( 1999).
Carbon & Emission Trading has different strategic implications for Multinational Enterprises (MNE) one strategic implication is the possibility of lower sales for the MNEs. Carbon Trading will create modernizations and restrictions on certain products that emit Carbon related substances, most MNE creates products that make use of such chemicals thus their sales will be affected by such markets. Another strategic implication for MNE is additional competitor. The market of carbon trading proves to be difficult competitors for MNE since there is a global demand for such kind of markets. The only way for MNEs to counter such threat is to think of newer and better kinds of market. Moreover a strategic implication for MNE is additional expenses. MNE’s will have to upgrade products specifications and components so that their products can pass standards set by these kinds of market. Lastly a strategic implication for MNE is changing their procedures and policies to cope up with the demands being set by the new market. MNEs will have to change their procedures so that the products can be acceptable to the standards of the market.
Conclusion
The current global market are frequently dominated by a few large firms or interest groups, which, because of their size and geographical scope, can exploit such market failures as information asymmetries, monopoly power, and privileged access to markets; and, where it is perceived to be in their interests, engage in unacceptable social or moral behavior. Emission and Carbon trading is becoming one of the fast rising markets in the world. More countries are becoming aware of this new business trend. This trend affects businesses because it fully relates to the global problem of pollution and global warming. This trend creates an imminent need for changes in businesses and a sudden need for changes in business plans. One country that has ups and downs in business and economics is Australia. Doing business in Australia can be a good or bad thing depending on the industry and the economic trend the country is experiencing.
For Australia by signing in the Kyoto Protocol and eventually having a carbon trading market means that it will let other individuals control the country’s activities and interfere in its internal affairs. Carbon & Emission Trading has different strategic implications for Multinational Enterprises (MNE) one strategic implication is the possibility of lower sales for the MNEs. Another strategic implication for MNE is additional competitor. Moreover a strategic implication for MNE is additional expenses. Lastly a strategic implication for MNE is changing their procedures to cope up with the demands being set by the new market.
References
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