...Business (Trade) Theories Objectives After reading this unit, you should be able to : • understand the analytical foundations of international business • be familiar with the international trade theories • explain the FDI approaches to international business. Structure 2.1 Foundations of International Business 2.2 International Trade Theories Theory of Mercantilism Theory of Absolute Cost Advantage Theory of Comparative Cost Advantage Heckscher-Ohlin Model Leonief Paradox 2.3 FDI Theories Market Imperfections Approach Product Life Cycle Approach Transaction Cost Approach The Eclectic Paradigm 2.4 Summary 2.5 Key Words 2.6 Self-assessment Questions 2.7 Further Readings 2.1 FOUNDATIONS OF INTERNATIONAL BUSINESS The analytical framework of international business is build around-the activities of MNEs enunciated by the process of internationalisation. The FDI on the part of an MNE attempts to overcome the obstructions to trade in foreign countries. The strategies relating to the functional areas, such as production, marketing, finance and price policies, are adopted by the MNEs in such a manner that an amicable relationship between home and host nations is created. Foreign direct investment can be distinguished from the other forms of international business, such as exporting, licencing, joint ventures and management contracts. Basically, it reacts to the restrictions in foreign trade, licensing...
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...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 — Table 2.8 B. Production and Consumption...
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...advantage denotes that a country should aim to specialise its production as to channel resources efficiently and achieve economies of scale nationally. The increasing trend in globalisation has meant an increase in the availability of goods and services increasing our Gross Domestic Product (GDP) through benefiting from increased trade and maxamising on the benefits of fluctuations in the international business cycle. The gains from free trade agreements such as advances in technology and capital equipment have effectively made Australian production far more efficient. In combination, they provide a sufficient argument to conclude that purchasing goods unbiasedly is far healthier for the economy than strictly purchasing Australian made goods. Key Words: Globalisation, Comparative Advantage, Free Trade, Economies of Scale, Economic Growth, Production Introduction As more countries move toward a market capitalist model, a broader range of substitute goods become available, and this increase in choice between substitute goods proves a time consuming issue for the average consumer in today’s society. Therefore, whilst buying Australian made goods is healthy for the economy, in an increasingly globalised society with continuing integration of economic systems, it is far more beneficial for consumers to purchase goods unbiasedly. The economic theory of comparative advantage, effects of globalisation, and free trade agreements all support this notion audibly....
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...HOW FAIR IS FAIR TRADE? ** BY ROBBERT MASELAND AND ALBERT DE VAAL* Summary This paper investigates to what extent fair trade programmes, are indeed ‘fair.’ This is accomplished by comparing fair trade with free trade and protectionist trade regimes on their compliance of the criteria set by the fair trade movement itself. This comparison is made using comparative cost based models and economies of scale models. It is found that whether or not fair trade is superior to free trade or protectionism is highly dependent on a number of characteristics of the products to which fair trade is applied as well as on the context within which international trade takes place. 1 INTRODUCTION A long-standing debate in development economics has been the one between advocates of free trade and proponents of protectionism in developing countries. While the former argued that free trade would offer large opportunities for poor countries to improve their situation, the latter considered trade to be harmful to poorer countries and typically preferred a combination of protectionism and development aid. This opposition tended to dominate the discussion about the role of international trade in the Third World. Bhagwati 1993 , Krueger 1990 However, in recent years, a third position has come up. This position maintains that international trade can be beneficial to developing countries as long as it is performed in a just manner. The idea behind this is that, in conducting trade, we have a moral...
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...period of war in Europe has ended with one or more treaty (e.g. 30 years war → Westfalia, Napoleonic war → Vienna Congress, WW1 → Versailles) The end of WW2 produced a series of treaties which, among other things (UN), laid down the founding pillars of the modern European Union The First 40 years (1950 – 89) Its acknowledged that the start of the European integration can be identified in the “Schuman declaration” a speech by French foreign minister in 1950. He proposed that France and Germany and other nations wishing to join, pool their coal and steel resources. It was an opening of credit to Germany (only 5 years after the first tank left Paris) and it implicitly recognized the new world order with france and germany allied with the US. It was also a security measure for France with respect to Germany (the historical enemy) as coal and steel are the vital war resources and now were under independent common control. The opening of the programme to other European states was perfectly consistent with the evolution of European relations with respect to the US under the NATO treaty. France, Germany, Italy, Belgium, Luxembourg and the Netherlands signed the Paris treaty and the European Coal...
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...1. Introduction At the very basic level, Environment, trade, and investment are fundamentally linked as the environment provides various basic inputs of economic activity – forests, fisheries, metals, minerals and also the energy used to process those materials. Trade and I investment, are thus affected by environmental concerns, because producers and investors have to comply with environmental regulations and markets have to address the consumer demand for greener goods. Apart from these physical and economic connections, there are certain legal institutions which govern trade, investment and the environment. Institutions like the World Trade Organization (WTO) and also regional & bilateral trade agreements include trade and investment rules. Multilateral environmental agreements (MEAs), regional agreements, and also the national and sub-national regulations encompass the environmental law. Fundamental goals of WTO are sustainable development and protection and preservation of the environment. These are included in the “Marrakesh Agreement”, which established the WTO, and also complement the WTO’s objective to reduce the trade barriers and eliminate discriminatory treatment in international trade relations. Though, there is no specific agreement which deals with the environment, as per WTO rules members can adopt trade-related measures aimed at protecting the environment, following a number of conditions to avoid the misuse of such measures. The WTO contributes in protection...
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...A Report On “Impact of protectionist trade policy on the domestic industry and economy” Course Name International Economics Course Code FIN: 2210 Submitted To: Shaikh Masrick Hasan Lecturer Department of Finance Jagannath University Submitted By: Sohel Rana On behalf of Group-06 2nd Year 2nd Semester, 6th Batch Department of Finance Jagannath University Date of Submission: 22-02-2014 Group Members SL. NO. | NAME | ID NO. | 1 | SOHEL RANA | B 110203076 | 2 | NURNOBY RAHMAN | 115234 | 3 | UZZWAL HALDER | B 110203046 | 4 | IMAM HOSSAIN | B 110203026 | 5 | FARHANA BHUIYAN | B 110203106 | 6 | SUMAIYA YASMIN | B 110203104 | 7 | HAFIZUR RAHMAN | B 110203025 | 8 | FATEMA AKTER | B 110203006 | 9 | KHALILUR RAHMAN | B 110203055 | 10 | TOHIDUL ISLAM | B 110203024 | Letter of Transmittal Shaikh Masrick Hasan Course Coordinator Money and Banking Dept. of Finance Jagannath University Subject: To submit a report on “Impact of protectionist trade policy on the domestic industry and economy” Sir With a great respect, we are informing you that we have prepared a report on “Impact of protectionist trade policy on domestic industry and economy.” We feel great pleasure for submitting this report to you, which will...
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...GANGAN 14 NEHA GAONKAR 15 INDEX 1. WORLD TRADE ORGANISATION GATT Principles of WTO Objectives & Function 2. INDIA & WTO 3. INDIAN ECONOMY 4. INDIAN AGRICULTURE Agricultural Trade Agricultural Support Policies Importance Of Indian Agriculture 5. AGREEMENT ON AGRICULTURE The Three Boxes: Green, Amber and Blue Trend In Pattern Of Consumption Implication Of Agreement : Short Term and Long Term 6. WTO & INDIAN AGRICULTURE India’s Commitment India’s Agricultural Trade Under WTO Regime 7. A STUDY & ITS FINDINGS 8. SUGGESTIONS 9. BIBLIOGRPHY ACKNOWLEGEMENT We would like to acknowledge and express our sincerest gratitude for the efforts and timely guidance of our professor Mrs. Neelam Shetty of Managerial Economics for providing us the opportunity to study the impact of WTO agreements on the Indian economy especially focused on the agricultural sector. We would also like to thanks and express our gratitude towards professor Mr. Agnelo Menezes of economics from the Bachelors of Arts faculty and his student from XRCVC Master Prashant Lindayat. Each and every team member gave in his best to make sure that this report has all the necessary inputs and is completed on time. We definitely had a knowledgeful and enriching experience. WORLD TRADE ORGANISATION The WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all, thus contributing...
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...environmental resources. Some of these are geographical, terrestrial, aquatic and country-specific resources while others transcend national boundaries of two or more countries within the region or continent. Since World War II, Africans have embarked on the massive utilisation of their environmental resources for improving their quality of life and that of their global business partners (Frobel et al. 1988; French 2000). In spite of the abundance of these resources, local communities, predominantly smallholder farmers and pastoralists, whose production systems are based on Traditional Environmental Knowledge Systems (TEKS), are now unable to meet their basic needs, sustain environmental productivity and even have an equitable share of the global wealth (ADALCO 1990). The predominance of international trade over local needs fostered, among other things, specialisation in spatial production and exchange of goods and services on a global scale, what evolved today as theories of Absolute and Comparative Advantage. Consequently, it is evident that in some geographical areas, natural resources are still sustainably utilised, while in others there is evidence of environmental degradation or inefficient utiliatization (Stebbing 1935; Timberlake 1985; Blaikie 1989; Juma and Ford 1992; Rugumamu 1993; Boyce 2002). Yes! The resources are available in Africa; but in the light of some challenges Africa has a large quantity of natural resources including oil, diamonds, gold, iron, cobalt, uranium...
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...(Part I) Classical theories of international trade propose that comparative advantage resides in the factor endowments that a country may be fortunate enough to inherit. Factor endowments include land, natural resources, labor, and the size of the local population. Michael E. Porter argued that a nation can create new advanced factor endowments such as skilled labor, a strong technology and knowledge base, government support, and culture. Porter used a diamond shaped diagram as the basis of a framework to illustrate the determinants of national advantage. This diamond represents the national playing field that countries establish for their industries. The complete Porter’s Diamond system (Porter, 1998, pg 127) The individual points on the diamond and the diamond as a whole affect four ingredients that lead to a national comparative advantage. These ingredients are: The availability of resources and skills, Information that firms use to decide which opportunities to pursue with those resources and skills, The goals of individuals in companies, The pressure on companies to innovate and invest. The points of the diamond are described as follows: I. Factor Conditions A country creates its own important factors such as skilled resources and technological base. The stock of factors at a given time is less important than the extent that they are upgraded and deployed. Local disadvantages in factors of production force innovation. Adverse conditions such as...
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...(Krugman) Chapter 9 The Political Economy of Trade Policy 9.1 The Case for Free Trade 1) The efficiency case made for free trade is that as trade distortions such as tariffs are dismantled and removed, A) government tariff revenue will decrease, and therefore national economic welfare will decrease. B) government tariff revenue will decrease, and therefore national economic welfare will increase. C) deadweight losses for producers and consumers will decrease, hence increasing national economic welfare. D) deadweight losses for producers and consumers will decrease, hence decreasing national economic welfare. E) None of the above. Answer: C Question Status: Previous Edition 2) The opportunity to exploit economies of scale is one of the gains to be made from removing tariffs and other trade distortions. These gains will be found by a decrease in A) world prices of imports. B) the consumption distortion loss triangle. C) the production distortion loss triangle. D) Both B and C. E) None of the above. Answer: E Question Status: Previous Edition 3) Judging by the changes in the height of tariff rates in major trading countries, the world has been experiencing a great A) trade liberalization. B) surge of protectionism. C) lack of progress in the trade-policy area. D) move towards regional...
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...but at the international level as well. The WTO is one part of the architecture of multilateral cooperation. It provides a framework of disciplines to facilitate global trade and serves as a forum to negotiate further trade openness. Freer trade is not an end in itself; it is tied to crucially important human values and welfare goals captured in the WTO's founding charter, the Marrakesh Agreement. Among these goals are raising standards of living, optimal use of the world's resources in accordance with the objective of sustainable development, and protection and preservation of the environment. The issue of climate change is not part of the WTO's ongoing work program and there are no WTO rules specific to climate change. However, the WTO is relevant because climate change measures and policies intersect with international trade in a number of different ways. First, trade openness can help efforts to mitigate and adapt to climate change, for example by promoting an efficient allocation of the world's resources (including natural resources), raising standards of living (and hence the demand for better environmental quality) and improving access to environmental goods and services. Second, the WTO is relevant because national measures to mitigate and adapt to climate change may have an impact on international trade (as they may modify conditions of...
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...Textiles & Likely future trends Presented to :Gherzi Eastern Ltd Mumbai Prepared by :Madhav Mehta UTI Institute of Capital Markets Table of Contents Acknowledgements Executive Summary Objectives of the Study Terms of Reference Data Collection & Sources Assessment of Supply Side International Trade Data Analysis Assessment of Demand International Trade Historical Trends and future projections Evaluation of manufacturing costs Assessment of other business considerations Growth in capacities required to meet projected capacities and likely candidates Case: India Statement of Limitations 3 4 5 6 7 8-20 21-28 29-33 34-36 37-44 45-49 49-50 51-59 60 2 Acknowledgements At the outset, I would thank Gherzi Eastern Ltd for providing me an opportunity to work with them. My special thanks to Mr. Durga Prasad for acting as a conduit to this opportunity with Gherzi Eastern Ltd as also for his valuable guidance & insights. I have extreme gratitude for Mr. V.N.Karvir who has been all through with me in this project, shared his experiences, provided utmost necessary and valuable guidance to me. Without, his assistance and guidance this report & its contents would not have taken shape in the manner in which it is prepared, analyzed and presented. I would also like to thank my friend and batch mate Mr. Amol Agrawal for making known to me some important data sources and for being a good listener all times to my approaches and ideas. Last but not the least I thank all Gherzi staff...
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...Who’s Eating All the Fish? The Food Security Rationale for Culling Cetaceans A Report to Humane Society International By Wilf Swartz and Daniel Pauly Presented at IWC 60 June 23, 2008 Santiago, Chile Table of Contents Executive Summary ...................................................................................................................... 1 Introduction................................................................................................................................... 2 A re-packaging of the whaling debate ........................................................................................ 2 Fish and food security................................................................................................................. 3 Fish (and food security) in crisis................................................................................................. 4 Marine Mammals: Threat to Food Security? ............................................................................ 7 The ‘whales-eat-our-fish’ argument ........................................................................................... 7 Flaws of the argument................................................................................................................. 7 Political success of the ‘whales-eat-our-fish’ lobby ................................................................. 10 Globalization of Fisheries: A Real Threat to Regional Food Security..............
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...Phattaranit Prabpai Q1. The effects of international trade on a country’s development are often related to four basic economic concepts: efficiency growth, equity and stability Briefly explain what is meant by each of these concepts as it relates to the theory of international trade. The whole economic basis for international trade rests on the fact that countries do differ in their resource endowments, their preferences and technologies, their scale economies, their economic and social institutions, and their capacities for growth and development. Developing countries are no exception to this rule. Some are very populous yet deficient in both natural resources and human skills, at least in large regions of the country. Others are sparsely populated yet endowed with abundant mineral and raw material resources. Still others are small and economically weak, having at present neither adequate human capital nor the material resources on which to base a sustained and largely self-sufficient strategy of economic and social development. A statistical summary of recent LDC trade performance and patterns. There follows a simplified presentation of the basic neoclassical theory of international trade and its effect on efficiency, equity, stability, and growth. We then provide a critique of pure free-trade theories in the light of both historical experience and the contemporary realities of the world economy. Like free markets, free trade has many desirable theoretical features, not the...
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