Internationalization towards China after its Accession to the WTO. Are There Opportunities for European SMEs? (Mattias Grillet)

 

home list theses contence previous next  

 

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

 

 

 

Production and sales in China

 

present in China for sales or trade, no production.

 

market research, start-up, no sales-subsidiary.

 

1

Sismo Systems

 

 

X

2

Stow

X

 

 

3

MDD

X

 

 

4

Eonic

 

X

 

5

Automatic Systems

 

X

 

6

Barco

 

X

 

7

IER

 

X

 

8

Ensysta

X

 

 

9

Bekaert Textiles Trading

(X)[12]

X

 

10

Microvert

 

X

 

 

LBC

 

 

X

 

Picanol

X

 

 

 

Reynaers

 

 

X

 

TOTAL

4

6

3

 

 

2. Incentives to internationalize towards China

 

 

Incentive for foreign activity

resource seeking

market seeking

 

natural resources

labor

following suppliers or customers

adapting

lowering costs  *

global positioning

1

Sismo Systems

n/a

n/a

no

yes

n/a

yes

2

Stow

Secondary

yes

yes

yes

yes

yes

3

MDD

Secondary

yes

no

yes

n/a

n/a

4

Eonic

no

yes

no

yes

n/a

yes

5

Automatic Systems

Secondary

secondary

yes

yes

n/a

yes

6

Barco

no

no

no

yes

n/a

yes

7

IER

no

no

yes

yes

n/a

yes

8

Ensysta

no

yes

yes

yes

yes

yes

9

Bekaert Textiles Trading

yes

yes

no

yes

yes[13]

yes

10

Microvert

n/a

no

no

yes

n/a

no

 

LBC

No

no

yes

yes

n/a

yes

 

Picanol

yes

yes

no

yes

yes

yes

 

Reynaers

n/a

n/a

n/a

yes

n/a

no

 

 

 

yes

Secondary

no

NA

resource seeking

natural resources

2

3

5

3

labor

6

3

4

2

market seeking

following suppliers or customers

5

0

7

1

Adapting

13

0

0

0

Lowering costs

4

0

0

10

Global positioning

10

0

2

1

 

 

Appendix D: The Eclectic Model Applied

 

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

 

 

 

 

important player in niche market

player in specialized market

no niche-market player

1

Sysmo Systems

 

X

 

2

Stow

 

X

 

3

MDD

 

 

X

4

Eonic

X

 

 

5

Automatic Systems

 

X

 

6

Barco

X

 

 

7

IER

 

X

 

8

Ensysta

 

X

 

9

Bekaert Textiles Trading

 

X

 

10

Microvert

 

 

X

 

LBC

X

 

 

 

Picanol

X

 

 

 

Reynaers

 

 

X

 

 

Appendix E: The Establishment Chain

 

 

 

Occasional exports to China

Exports through agent(s)

Representative  Office for market research

Market research without being present in China with rep office *

Sales subsidiary or representative office for supporting sales

Production subsidiary

(start-up year)

1

Sysmo Systems

No

No

No

Feb 2002- Feb 2003 by expats; Feb 2003 by agent

No

No

2

Stow

No

No

1995

No

No

1995

3

MDD

n/a

n/a

n/a

n/a

n/a

n/a

4

Eonic/Windriver

No

No

No

1999-2000

2001

No

5

Automatic Systems

Yes

Yes

2002 (rep office of

mother company IER)

No

2002 (rep office of

mother company IER)

No

6

Barco

Yes

Yes

1995

No

Yes

No

7

IER

Yes

No?

1997

No

1997

(rep office)

No

8

Ensysta

Yes

No

No

No

No

Yes

9

Bekaert Textiles Trading

Yes

1998-2000

No

1996

2000

End 2003

10

Microvert

n/a

n/a

n/a

n/a

n/a

n/a

 

LBC

n/a

n/a

n/a

March 2002 ->

n/a

n/a

 

Picanol

Yes

Yes

Yes

No

Yes

Yes

 

Reynaers

No

No

No

2003

No

No

 

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:

 

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

 

home list theses contence previous next  

 

[12] Bekaert Textiles is planning to start up a production unit before the end of 2003

* “Lowering costs” means it is cheaper to serve a certain market by producing in that certain market than exporting to it –as explained in Part One of this thesis.

[13] Bekaert Textiles is planning to start up a production unit before the end of 2003.

* In this category, we count the enterprises, which did some kind of market research before they set up an enterprise or representative office in China.  In that case, research is done by expats send out by the company or by scholarship students, who after the research done became employees of the company.