...Outline I. Introduction II. International Trade Versus Interregional Trade ( international trade occurs for the same reasons as interregional trade ( gains from technology and gains from trade III. Trade in an Individual Product ( trade in cloth (U.S./India) — Figure 2.1 ( supply and demand ( the effects on India and the U.S. IV. Trade Based on Absolute Advantage A. Absolute Advantage ( PASSPORT: Football Games, Rats, and Economic Theory ( PASSPORT: Mercantilism ( Table 2.1 B. The Gains from Specialization and Trade with Absolute Advantage ( gains from trade — Table 2.2 ( the labor theory of value V. Trade Based on Comparative Advantage A. Comparative Advantage ( Table 2.3 ( David Ricardo ( Babe Ruth B. The Gains from Specialization and Trade with Comparative Advantage ( PASSPORT: Principal Exports of Selected Countries — Table 2.4 ( Change in world output — Table 2.5 VI. Trade Based on Opportunity Costs A. Opportunity Costs ( PASSPORT: Labor Costs as a Source of Comparative Advantage — Table 2.6 B. The Gains from Specialization and Trade with Opportunity Costs ( Table 2.7 ( Autarky VII. The Production Possibilities Frontier and Constant Costs A. The Production Possibilities Frontier...
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...US, Mexico, and Canada sign the North American Free Trade Agreement? Which sectors would you expect to gain most from this agreement? NAFTA allowed for the free flow of goods and services between the three parties, US, Mexico and Canada by immediate or phased elimination of tariffs on numerous goods. This free trade would in turn lead to comparative advantage i.e. each country could specialize in producing goods/ services in which they are relatively more productive than their trading partners, increasing overall productivity and output. Hence, the parties to NAFTA signed the agreement so that companies can leverage aggregating and arbitration opportunities within the region leading to overall more trade, more jobs and higher GDP. On the side, the countries also hoped for some other interrelated non-economic benefits such as reduction in illegal immigrants from Mexico to US due to availability of more earning opportunities within Mexico. The sectors which were expected to gain most from this agreement were- automobiles (in Canada), textile and apparel (in Mexico), agriculture (in all countries, particularly US), financial and banking services (in US) and energy (especially in US and Canada). 2.!Has NAFTA been beneficial for the countries that signed it? There were numerous positive economic developments after the signing of NAFTA such as: •! Increase in international trade: Mexico’s trade as a % of GDP almost doubled after the NAFTA agreement, new trade was generated...
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...actually help: 1. Mexico has always portrayed itself as one of the most pro-trade countries in the world. For instance, we have a free trade agreement with the United States and Canada, and another one with the European Union. We are active members of the WTO, the OECD, the APEC, the Pacific Alliance, and have also signed multiple bilateral agreements with many nations, most of them deemed “strategic”. Answer the next two questions in your own words: a. What are the potential costs and benefits of adopting such a free-trade strategy? International trade allows a country to specialize in the manufacture and export of products that it can produce efficiently, and in the meantime, to import products that can be produce more efficiently in other countries and helps reduce cost of tariffs. b. What can it be done to reduce the costs and maximize the benefits? They can buy raw materials in the foreign and labor; produce only products that can be more efficient and have economies of scale. 2. Drawing upon the new trade theory and Porter's theory of national competitive advantage, outline the Mexican case for one of these national industries: (1) oil and petrochemicals, (2) agriculture and foods, (3) mining, (4) manufacturing, (5) automotive, (6) entertainment and sports. Choose only one out of the six, and answer: a. What kind of trade and economic policies would you recommend that the federal government adopt in order to build national competitive advantage in that specific...
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...1. How has the implementation of NAFTA affected Walmart’s success in Mexico? Walmart’s marketing campaign has been “everyday low prices”. This was not the case in Mexico prior to NAFTA. Walmart was paying higher tariffs to import American goods. Once NAFTA was implemented, Mexico became a free trade zone. This made it possible for Walmart to reduce its tariffs from 10% to 3% creating a level playing field with its competitors. With the signing of NAFTA, it also opened up the doors to foreign investment in Mexico. Walmart was also paying huge fees for goods to be shipped from Europe and Asia into Mexico. Once these companies knew that building manufacturing plants in Mexico they could keep the costs low by using Mexican labor, they facilitated it. This allowed Walmart to purchase these products without paying high import tariffs. “NAFTA resulted in better suppliers due to an increase in competition, competitiveness and efficiency among the companies in order to gain the trust of their clients. Better supplies also increased the variety of products available to consumer with wider price ranges, which allowed Walmart to offer customers better savings and thus increase their purchasing power. NAFTA also helped Mexico achieve greater economic growth at a lower rate of inflation, which also added to the purchasing power of consumers.”(Daniel & Radenbaugh, pg. 321) 2. How much of Walmart’s success is due to NAFTA, and how much is due...
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...I. LEVELS OF ECONOMIC INTEGRATION A. THE FREE TRADE AREA—ALL BARRIERS TO TRADE AMONG MEMBER COUNTRIES ARE REMOVED, BUT MEMBERS MAY DECIDE THEIR OWN TRADE POLICIES TOWARD NONMEMBERS B. The Customs Union—Free Trade Area plus a common trade policy toward nonmembers C. The Common Market—Customs Union plus free flow of labor, capital, and technology among members (factor mobility) D. The Economic Union—Common Market plus integration of economic policies such as monetary policies, taxation, government spending, and a common currency II. Arguments Surrounding Economic Integration A. Trade Creation and Trade Diversion 1. Trade creation—increased exports by new member to other members resulting from membership 2. Trade diversion—decreased exports to members of the economic union by nonmember nations often resulting in the advantage shifting away from the lower-cost producer to the higher cost producer B. Reduced Import Prices can result from importers efforts to remain competitive despite tariffs imposed C. Increased Competition and Economies of Scale 1. The larger market created also means more competing firms which can result in greater efficiency and lower consumer prices 2. Economies of Scale—lower production costs resulting from greater production for an enlarged market D. Higher Factor Productivity 1. Factor mobility leads to movement of labor and capital from areas of low productivity to areas of high productivity 2. Poorer countries may lose badly needed investment...
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..._____________________________________________________________ Course Name: Foreign Trade and Economic Development Course Code: 153400106 Tutor’s Name: Sahar Rad _____________________________________________________________ Title of Essay: Discuss how trade leads to the convergence of factor prices in the Heckscher-Ohlin Model. Does empirical evidence validate the propositions of this theory? Word Count: 2,909 words Essay 1 : Discuss how trade leads to the convergence of factor prices in the Heckscher-Ohlin Model. Does empirical evidence validate the propositions of this theory? Abstract The Heckscher-Ohlin model (H-O model) states that a country possesses comparative advantage for those goods whose factors of production are in relatively abundant supply in the country’s endowment. Input combinations depend on the relative factor prices and these in effect, influence the goods prices. Factor prices and the goods prices have a one-to-one relationship. Countries tend to export goods, whose production makes intensive use of the resources. There are four components to the H-O model, and these are: The Heckscher-Ohlin Theorem, The Stopler-Samuelson Theorem, The Rybczynski Theorem and The Factor-Price Equalisation Theorem. The Heckscher-Ohlin model (H-O model) was developed by Eli Heckscher and Bertil Ohlin at the Stockholm School of Economics [Krugman and Obstfeld, 2003]. This model states that a country possesses comparative advantage for those goods whose factors of production are in relatively...
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...The economic and social consequences of trade agreements have become a major area of research in recent years. Much of this has to do with regional economic integration, where countries in a geographic region, reduce and remove tariff and non-tariff barriers to the free flow of goods, services and production between each other (Hill, 2005). On the 1 January, 1994, such a trade agreement came into affect between America, Mexico and Canada. This was known as the North American Free Trade Agreement (NAFTA). This removed all barriers to the trade of goods and services within the member countries, the protection of intellectual property rights, application of national environmental standards and the establishment of two commissions with power to impose fines and remove trade privileges when such standards are ignored involving the environment, health and safety, wages and child labour (Hill, 2005). There is a belief that agreements designed to promote free trade within regions will benefit trade for all the countries involved, and also the rest of the world (Abbott and Moran, 2002). While regional economic integration, or foreign direct investment, is seen as a good thing, some observers worry that it could lead to a world in which regional trade blocs compete against each other. We are seeing the formation of many trading blocs continuing today as the need for it has become essential for countries and their firms to compete in the global market place (Seid, 2002). Although...
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...whose importation, exportation, or possession is forbidden. 2. Contrabandism: the illegal actions about trade of some company or organizations. ACTUAL STATE: With the economy crisis and lots of difficulty in business, many companies choose the way of illegal trade to enhance their flow of work as well as increase the amount of profits, such as smuggling, hoarding, and tax evasion… THE RELATING TO INTERNATIONAL BUSINESS: Nowadays, the globalizing trade is more and more developing and the need of exchanging products of countries has immensely contributed to world’s economy. Taking these advantages, some firms have maximized their profits through the action of contrabandism. This status has caused many issues to our economy and raise the number of crime involving smuggling, drug dealing, contraband… Furthermore, this kind of this action will cause the bad effect to consumer’s benefits and their belief in some kinds of products. Take contraband cigarettes, for example. Not only is contraband cigarettes killing small businesses and threatening the livelihoods of many convenience store owners, but it is also robbing government millions of dollar every year because these are cigarettes that are being illegally imported among countries with absolutely no government inspection, testing, oversight and taxation. Moreover, many organized crime groups use the lucrative trade in contraband tobacco to finance other, more serious criminal activities such as contraband drugs and guns...
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...Luca Cantadori Matricola: 14771 Anno Accademico : 2012/2013 Anno Accademico : 2012/2013 CONSEQUENCES OF ECONOMIC GROWTH ON THE ENVIRONMENT:Focus on International Trade i. Economic growth and the environment ii. Environmental Kuznets curve: a. Kuznets Curve:Income inequality and growth b. Income inequality , growth and the environment iii. Population growth: how increasing population could affect the environment iv. Economic impacts of environmental policies: c. Economic growth: investment and innovation d. Effect on competitiveness v. International Trade and the environment vi. Effects of Trade on the environment vii. Trade due to differences in Environmental Policies: e. Pollution Haven case viii. Trade not due to differences in Environmental policies: f. Comparative advantage and environment: how factor endowments can influence environment ix. Conclusion x. References xi. Abstract i.Economic growth and the environment In the first half of the twentieth century there was and incredible explosion of international trade: indeed international trade almost triplicate its size.( According to data from www.worldbank.org) A lot of changes contributed to this expansion, first of all technological changes that allowed to reduce distances between countries, the most significant...
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...YUM! BRANDS, PIZZA HUT, AND KFC Teaching Note Overview This case describes the evolution of the global fast-food industry and Yum! Brands, Inc.’s development of the Pizza Hut and KFC franchises worldwide. It focuses on international business risk assessment and develops a model of country evaluation that students can use to analyze international business and market entry decisions in a variety of industries, regions, and countries. Teaching Objectives 1. Develop skills in industry analysis 2. Develop skills in global industry analysis. 3. Develop knowledge of franchising and the costs and benefits of expanding globally using franchises versus company-owned stores. 4. Develop skills in international business risk analysis. 5. Develop skills in country portfolio evaluation and assessment. Suggestions for Using the Case This case has been used successfully in undergraduate, MBA, and Executive MBA classes in strategic management, marketing management, and international business. It can be used in undergraduate courses to develop student skills in industry structure analysis, strategy analysis, and international business risk assessment. The teaching note is designed to give students practice in each of these three areas. Instructors may choose to use the case to discuss only one of these three areas during a single class period or to cover all three areas over two class periods. The case can be also...
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...Walmart: Global Strategic Expansion - Executive Summary Since introducing its first international store in 1991, Walmart has transformed itself from an American retail giant into a global one, leveraging a wealth of resources to strategically expand operations. Although Walmart must contend with several formidable competitors, the retailer has successfully opened thousands of stores across the globe; most frequently, it has added international units through the acquisition of foreign retailers, which simultaneously reduces its competition and furthers its dominance. Walmart has differentiated itself by coupling its understanding of political, economic, legal, and cultural systems within target markets with its low-cost, high-quality approach to mass retail. Utilizing simultaneous strategic multiple thrusts, Walmart has developed layers of competitive advantage to establish itself as the world’s leading retailer. Focusing on strategic expansion, Walmart currently operates 9,826 stores across twenty-eight countries, allowing it to capture global scale efficiencies by creating a coordinated and integrated network of interdependent stores. Each unit within its network is regarded as a source of ideas and capabilities, and innovation is diffused across the company through initiatives such as a market-by-market training program that helps increase the company’s responsiveness to local demands and preferences. Thus, Walmart has established itself as a transnational corporation by developing...
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...Budniewski, Nicholas Case Analysis #2 Wal-Mart de Mexico MKT 611-1 April 10, 2015 I. HISTORICAL OVERVIEW/COMPANY PROFILE The present case pits a Mexican retail chain, Comercial Mexicana S.A. (Comerci) against a multinational conglomerate (Walmart), while affording a context through which to measure the many documented benefits of oft-celebrated free trade against its shortfalls. II. PROBLEM IDENTIFICATION The problem for Comerci is the entrance of Walmart into the Mexican market in 1991 amidst trade negotiations between Canada, Mexico and the United States, which eventually resulted in NAFTA (1994). Walmart, through a series of innate and systemic advantages, as well as favorable external conditions (i.e. relaxation of trade protectionism, opening to foreign investment, infrastructural improvement, rise of manufacturing supply base), was able to undercut its domestic rivals on the basis of price. Comerci’s problem regards how, and whether, to compete with Walmart. Beyond a motion filed with the Mexico’s Federal Competition Commission, which seems a longshot, the company is faced with the following options: 1. Remain independent, hoping for more favorable terms with suppliers; or 2. Pursue a merger with a local or foreign retailer. III. STRATEGIC ANALYSIS I have selected Porter’s Five Forces as a strategic analysis tool. This is owing to its incorporation of buyer, supplier and competitive factors, all of which are critical to resolving...
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...Switzerland vs. Mexico Switzerland My research paper will individually concentrate on Switzerland and Mexico in its history, competitive advantage, export, trading, and globalization. I will then compare and contrast both countries by their competitive advantage in the market, government intervention, trading, export, and globalization. The Switzerland economy is founded on an exceedingly competent labor force and skilled work. The principal areas consist of micro technology, hi-tech, biotechnology, and pharmaceuticals, also, includes banking and insurance knowledge. Switzerland was not the success story that it is today; in the late nineteenth century Switzerland was a poor nation and its major exports were mercenaries and emigrating citizens. By the early period of the twentieth century, Switzerland had emerged as an industrial nation of importance despite its small size. Switzerland was one of the richest nations in the postwar period and by the 1960 using some measures, Swiss per capita income was the highest in the world. The wealth of Switzerland is the outcome of national competitive advantage where there are shockingly numerous competitors in a wide range of advanced manufacturing and service industries and Switzerland a small nation was able to establish their competitive advantage over large nations and their competitors. The industrial success has allowed Swiss citizens to be employed at high wages and for many years the unemployment has affected...
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...internet system, for example Facebook or other social network. 2.4.1 I think Obama is an ethical leader, because he leads the whole government to improve the quality of the country, and he has performed well performance in improving the economy. He creates belief and share value to citizens. He is good at planning the policy and leading the team to achieve the goals. 2.5.1 First, students are the stakeholders in the university. The university needs to ensure the students are treated by teachers fairly and to provide a safety environment for studying. Second, teachers are the stakeholders in the university. The university needs to provide salary stably, to ensure they have enough time to rest and have lunch. 3.1.1 John has the absolute advantage. As they have the same resources and experience in writing a report, but John is faster than Jennifer in both work....
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... Contents Executive Summary 3 Problem Statement 4 Situation Analysis 4 Alternatives 5 Recommendation 9 Action Plan 9 Contingency Plan 10 References 11 Appendix A-B 12 Executive Summary Palliser Furniture (Palliser) is a key player in the highly competitive North American residential furniture market. They are under constant pressure to stay competitive and profitable in an ever changing market place. The volume of furniture solid is highly correlated to new homes sales and the industry has been slow to bounce back from the recession of 2008. Import penetration from countries with emerging economies is putting pricing pressures on domestic furniture manufacturers. To leverage its key success factor of low shipping costs and short delivery times Palliser has focused on strategic locations for their factories by identifying the different target markets for its comprehensive product lines and have made expansion decisions appropriately. Our recommendation is that they continue with their current location strategy as it meets their operation goals and allows them to access the highest number of market segments and is the best strategy to grow the business. In assessing new locations for strategies we recommend the company determine which of their product lines or revenue streams have the highest consumer demand and are the most profitable. Once it is...
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