The purpose of this assignment is to measure how well (a) you have absorbed the problem-solving tools on which we have worked in class; (b) you can integrate what you have learned in the program (and in life) and apply it to international trade problems; (c) you can organize and present your thoughts in writing.
With respect to the decision memo described below, you are required to respond to trade policy problems formulated in factual settings. The case indicates the perspective from which you should address the given problem. Please present your response in the form of a memorandum to the Prime Minister. You will find attached a format you should use for your response. Please take the format shown below, insert it into a Word document, complete the memorandum. I expect your response to be carefully considered and well organized. Look for creative (but plausible) solutions using the international trade and investment policy tools that we have discussed in class or that are addressed in course materials. Explore leverage and linkages. Be concise.
DO NOT EXCEED 750 WORDS IN YOUR RESPONSE. Do not include the headings (e.g., your name, “ISSUE”) in the word count.
It must be the product of your own efforts and not based on communication with any other person. You may review any written materials you wish, including our assigned readings, but the responses must be your own work. Please note that, with respect to the decision memorandum, if you find yourself restating long passages from assigned readings, you probably are not addressing the question in the way that was intended. THIS IS NOT A RESEARCH PAPER – THIS IS YOUR ASSESSMENT OF THE PROS AND CONS OF VARIOUS OPTIONS AND THEN A RECOMMENDED COURSE OF ACTION TO A PRIME MINISTER.
PLEASE FORMAT YOUR RESPONSES USING THE FOLLOWING STANDARD DECISION MEMO FORMAT:
MEMORANDUM
TO: H.E. Prime Minister of Astra
FROM: [Your Name]
DATE: [On or before 15 June]
SUBJECT: Services and Investment Issues in Cardonia and Escazu
ISSUE
[State the issue or issues briefly in one or at most two sentences. Catch the reader’s interest. Why should they care about this?]
BACKGROUND
[Summarize the key facts that will allow the reader to understand your analysis.]
OPTIONS
[Provide pros and cons for each option you provide. This should be the longest section. For your response to the Astra/Cardonia/Escazu problem, you might separate your discussion according to issue (a) and (b).]
RECOMMENDATIONS
[Explain succinctly which option or options you recommend and why.]
* * *
HERE ARE THE FACTS AND THE TWO PROBLEMS YOU SHOULD ADDRESS IN YOUR MEMO
You are the chief international economic policy advisor to the Prime Minister of Astra, a medium-sized developed country. The Prime Minister has just forwarded to you a memorandum that she had received from Aki Backerman, a leading Astran businessman and the Prime Minister’s financial patron for most of her long political career. In the memorandum, Backerman informs the Prime Minister that he has identified two nearby countries — Escazu (not a WTO Member) and Cardonia (a WTO Member) — as important and underdeveloped markets for Backerman Enterprises’ largest business line – gaming services. Backerman makes clear in the memorandum that he expects the Prime Minister to help him “win” these markets.
Astra is a WTO Member; has a bilateral investment treaty (that provides for investor-state dispute settlement) with Cardonia, but not with Escazu; and has no free trade agreements.
Backerman’s business controls most of the legal gaming and gambling arenas in Astra, including horse racing and casinos. In the last decade, Backerman has expanded to neighboring countries, but has been unable to break into the market in Escazu. Generally, Backerman likes to enter a new market through long-term service contracts with a local owner, providing all of the management and gaming services for an annual fee plus a percentage of gross revenue. Later, Backerman typically will seek to purchase an equity interest in a foreign casino or race track. Escazu currently prohibits foreign ownership of gambling establishments and denies gambling service licenses to foreign service firms. Backerman desperately wants to eliminate Escazu’s market access barriers. In contrast, Backerman has been able to invest directly in Cardonian gambling establishments, but not without difficulties. Just last month, Backerman urged the Prime Minister to intervene with her Cardonian counterparts when the Cardonian Gambling Commission refused to renew Backerman’s casino license unless he agreed to buy 75 percent of all the beer and wine served in the casino from local Cardonian producers. (Backerman argued that Cardonian beer and wine is undrinkable and would make it difficult to attract foreign tourists.) When the Prime Minister was unable to reach a political accommodation, Backerman had no choice but to pursue expensive litigation in Cardonia’s corrupt local courts to save his troubled investment. Backerman would like to defeat this 75 percent local content rule and would also like an alternative to local courts in which to fight the battle.
Backerman’s “request” could not have come at a worse time. Religious leaders and civic groups in Astra have been highly critical of the Prime Minister’s pro-gambling policies. Fueled by support from the opposition party in Astra’s legislature, these NGOs had raised increasingly threatening questions about the Prime Minister’s relationship with Backerman. Even members of the Prime Minister’s own party have begun to press for regulatory limits on gambling activities. The last thing the Prime Minister needs is to be seen as aggressively pursuing a new pro-gambling initiative in foreign markets for the sake of Backerman’s interests.
But that is exactly what the Prime Minister wants you to help her do. In her cover note to Backerman’s memorandum, the Prime Minister has asked you to provide her a brief paper that discusses options (including the pros and cons of each option) and makes recommendations (taking into account the domestic political environment) to address at least the following problems raised in Backerman’s memorandum:
(a) Services — Escazu’s market access barriers to foreign gambling services
(b) Investment — 75 percent local content rule for wine and beer served in Cardonia’s gambling establishments
Please address both problems in your recommendations.
