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International Terrorism

Explore international terrorism and its effect on international business.

Adam Crutchfield

on 28 April 2010

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Transcript of International Terrorism

The Impact of International Terrorism on International Business The Age of Modern Terrorism:
20th Century
What is Terrorism?

"Terrorism is the calculated use of unlawful violence or threat of unlawful violence to inculcate fear; intended to coerce or to intimidate governments or societies in the pursuit of goals that are generally political, religious, or ideological."
- US Department of Defense

"Terrorism is the unlawful use of force and violence against persons or property to intimidate or coerce a government, the civilian population, or any segment thereof, in furtherance of political or social objectives."
"Terrorism is premeditated politically-motivated violence perpetrated against non-combatant targets by sub-national groups or clandestine agents, usually intended to influence an audience."
- US Department of State

Terrorism is the use of violence for political ends, and includes any use of violence for the purpose of putting the public, or any section of the public, in fear.“
- British Government, 1974 Nature of Terrorism First, anyone can be a victim.
Third, attacks need publicity.
Fourth, everything can’t be protected all the time
Brief History of Terrorism Assassins -
tactic of sending a lone assassin to successfully kill a key enemy leader at the sacrifice of his own life
Terror in Antiquity: 1st – 14th century A.D.
Zealots of Judea (dagger men) -

Motive was an uncompromising belief that they could not remain faithful to the dictates of Judaism while living as Roman subjects

The Zealot revolt became open, and they were finally besieged and committed mass suicide at the fortification of Masada.
century Communications were inadequate and controlled, and the causes that might inspire terrorism (religious schism, insurrection, ethnic strife) typically led to open warfare.
Anarchism: no authority at all
Entering the Modern Era: 19th century
The formation of small groups used to attack nation-states Group 7
Adam Crutchfield
Kathryn Lund
Dave Akins
Second, targets are not random.
Seemingly random attacks cause public anxiety and change public behavior – which is the point.
The intended audience must know the act is to cause fear. Targets are chosen for their symbolic value (The WTC) or their ability to cause the most amount of public anxiety (bombing or public places).
The French Revolution (1795)
The French Revolution provided the first uses of the words "Terrorist" and "Terrorism” in reference to the Reign of Terror initiated by the Revolutionary government.
Russian Narodnya Volya (Peoples Will) The rise of nationalism
1968, PFLP airline hijacking
Second Congo War –
approximately 3.8 million deaths from 1998 to 2003 Iraq War – a wide variation in the number of causalities quoted, ranging from the tens of thousands, up to approximately 1 million deaths (2003 – present) Darfur Conflict – approximately 400,000 deaths (2003 – present) Civil War in Cote d’Ivoire – 3,000 deaths (2002 – present) World Trade Center Attacks – 19 members of al-Qaeda hijacked 4 commercial airliners, intentionally crashing 2 of them into the World Trade Centers in New York City, and 1 into the Pentagon in Arlington, Virginia. The 4th plane’s intended target was the White House, but passengers aboard the plane resisted the initiatives of the hijackers and crashed the plane into a field in Pennsylvania. 2,997 people from 90 different countries died (9/11/2001) Indian Parliament Attack – terrorists storm the Indian Parliament building in New Delhi and kill 6 police officers (12/13/2001) Bali Terrorist Bombings – kill 202 people (10/12/2002) Attack on Madrid – terrorists attack several train stations on Spain’s capital Madrid, killing 191 people and injuring 1,247 (3/11/2004) London Bombings – suicide terrorist attacks shake London transport system killing 52 people and injuring 700 (7/7/2005) New Delhi Bombings – terrorists attack various markets in New Delhi, killing 61 people and injuring 188 more, right before the start of the festival season in India (10/29/2005) Mumbai attacks - a series of 10 coordinated terrorist attacks across Mumbai, India, killing 195 people and injuring 290 more (11/2008) How Has Terrorism Affected Business? For less than 1,000 USD, Al Qaeda achieved its two most important goals.

Goal 1: Punish the Spanish people for participating in the U.S.-led war in Iraq
Goal 2: Facilitate the withdrawal of all Spanish troops from that war

In addition, they altered the Spanish government as the Socialist Party took power in the wake of the bombings. Terror is simply not enough; the terrorists envision and aim towards the destruction of the economic foundations that make the West so powerful. For less than half a million dollars, the terrorists were able to kill nearly 3,000 people and leave a wake of destruction of ~50 billion dollars. Al Qaeda succeeded in ramping up the cost of travel by millions of dollars. The Institute for the Analysis of Global Security estimates that Federal emergency funds which include heightened airport security, sky marshals, government takeover of airport security, retrofitting aircraft with anti-terrorist devices, and the cost of operations in Afghanistan exceed 40 billion dollars. Terrorism has a hefty price tag. International businesses have to factor in the consequences of future attacks into all ongoing trade and investment decisions. Global supply chains (each step along the chain can become more and more costly)

Higher transportation costs can have a negative effect on emerging economies. (Ironic that the policies put in place by governing bodies to combat terrorism may inadvertently amplify the risk)

Poor countries are often burdened with higher security measures that keep poverty, the risk of political destabilization and terrorism high What is Being Done to Combat International Terrorism? border controls are being put in place
identity checks are common procedure
corporations must share intelligence about terrorist groups with one another as well as host governments Security will be integrated into every aspect of an MNC’s daily business operations.
Affect how the business operates and how much it ultimately will cost to operate. By being proactive, MNCs are avoiding the enormous costs implied in business interruption and sky-rocketing insurance premiums due to terrorism. Adapted a “layered defense” that includes the U.S. military, CIA, FBI, diplomatic, political, homeland defense, and humanitarian bodies. The National Commission on Terrorism:

good intelligence is the best weapon against terrorist groups

ability to obtain information about the “identities, goals, plans, and vulnerabilities” of these extremist groups is paramount to winning the war on terror

barriers must be removed that hinder the information collection on terrorists

information flow between law enforcement, policymakers, and analysts must be more streamlined. Since the 80s, the policy on terrorism has been the same:

Never make deals with terrorists, or terrorist groups.

Always punish the terrorists for their crimes.

Isolate and apply pressure to states that sponsor terrorism.

Help develop the counter-terrorism capabilities of countries that work closely with the United States. The report argues:

More pressure should be placed on states that harbor or aid terrorist groups.

Nations should bar terrorist groups from training, recruiting, funneling money, and hiding terrorists.

Focus on non-state support of terrorism and the disruption to the financial means that allow these groups to operate. 11 U.S. states have drafted legislation that divests public pension funds from companies that have ties with Iran and its petroleum, defense, and nuclear companies. U.S. Bureau of Customs and Border Protection’s Container Security Initiative uses intelligence systems that can identify potential threats within containers C-TPAT(voluntary) - conduct a self-assessment that takes a critical look at exactly how a corporation handles security security must be a comprehensive approach in international business in order to address the threat of terrorism

by addressing the security of a company’s personnel, products, and global supply chain an MNC can help protect the bottom line, helping to ensure the survival of its international activities tHE COST OF TERRORISM on International Business Both governments and global industries incur dramatic costs

Companies heavily reliant on international trade have suffered significant losses for hundreds of years

“Golden age” of maritime piracy

Motivations and methodologies have changed, the cost burden is still imminently present.
Potential for economic loss by private, international businesses is huge

Primary reason - noticeable shift in strategy by terror organizations such as al Qaeda from “hard targets” (military and government installations) to “soft targets” (locales of public assembly such as malls, hotels, and train stations).
Three Cost Categories

Direct economic damage as a result of an attack
Governmental response - passed down to both consumer and corporation
Costs incurred by the public’s response to fears brought on by terrorism. Also the concept of opportunity cost.
Trade From 1968 to 1979, terrorist incidents doubled, and over the same period bilateral trade between economies that were targeted decreased by six percent.

The closure of ports-of-call, airports and the like in response to terrorism warnings can greatly impact a business’s costs, made apparent after the month-long closure of 29 ports on the United States’ west coast in 2002.

This closure negatively affected the nominal GDP’s of numerous Asian nations, including Singapore and Malaysia (an estimated average 1.1 percent loss in nominal GDP).
Investment and Economic Growth Risk of investment in global corporations that are most susceptible to these incidents.

These perceived risks result in higher desired rates of return, lower investor confidence, and higher insurance premiums.

Higher premiums disproportionately affect developing nations, which depend more heavily on outside investment than developed ones.
Consequences Primary consequence of global terrorism on international business: Forcing multinational firms to accept the need for greater safety and security measures for employees and goods

Budget for these measures

Accept them as a standard cost of doing business that shows little sign of going away
For consumers Terrorism brings about consequences of utility

A correlation between prevalence of terrorist activity and overall life satisfaction

Persons and groups of people exhibiting low life satisfaction make significantly less positive contribution to the world economy than those with high life satisfaction
Conclusion Terrorism has been a part of human culture since the advent of recorded history.

The aim of the terrorist is always the same – to initiate fear in the heart of a nation and to become a disruptive force in the lives of its citizens.

Terrorism has a substantial effect on international business, and MNCs have had to adopt new methods of security

There is reason for optimism.

History has demonstrated that by calculating and coordinating effective responses to terrorism, nations can have a tremendously positive impact of the world economy.

When Europe as a whole set its mind to eliminating piracy in the early 1800s, the economic consequences were amazing.

Shortly after that they eliminated piracy, shipping costs fell by 80% and productivity increased by 500%.

Through careful analysis and proper security, the risk of disruption to economic activity can be minimized and MNCs can operate with minimal fear of terror.
? "Terrorism is an anxiety-inspiring method of repeated violent action, employed by (semi-) clandestine individual, group or state actors, for idiosyncratic, criminal or political reasons, whereby - in contrast to assassination - the direct targets of violence are not the main targets."
- United Nations, 1992
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