Country Focus: Is China a Neo-Mercantilist Nation? This feature analyzes claims that China is a neo-mercantilist nation. Exports are largely responsible for China’s recent rapid economic growth. The country, capitalizing on its cheap labor force, has been focused on converting raw materials into products that are exported to developing countries like the United States. In 2005, China’s trade surplus was a record $121 billion, and its holdings of foreign exchange reserves were over $800 billion. Another Perspective : Students may also want to read the following article { http://www.usatoday.com/money/world/2005-09-13-us-china-relations_x.htm } for more information on this issue. The article specifically addresses the role of China’s President, Hu Jintao in the country’s trade policy.
Mercantilism suggests that countries should design policies that lead to an increase in their holdings of gold and silver. This was usually done by increasing exports and limiting imports. This economic philosophy was used by Europeans from about the 1500s to the late 1700s. It fueled colonialism in Britain, France, the Netherlands and Spain. Nations increase their wealth by maintaining trade surpluses. The key problem with the mercantilist view is that it views trade as a zero sum game, where if one country benefits the other must lose. As an economic philosophy, mercantilism is flawed. Yet many political views today have the goal of boosting exports while limiting imports by seeking only selective liberalization of trade.
In 1776, Adam Smith attacked the mercantilist assumption that trade is a zero-sum game and argued that countries differ in their ability to produce goods efficiently, and that a country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it. According to Smith, countries should specialize in the production of goods for which they have an absolute advantage and then trade these goods for the goods produced by other countries.
Country Focus: Moving U.S. White Collar Jobs Offshore This feature goes to the heart of a debate that has been played out many times over the past half century—the transference of jobs from the United States to lower-wage countries. The difference now however, is that rather than blue-collar jobs being transferred, the new trend is for white-collar jobs to move, jobs associated with the knowledge-based economy. Another Perspective : Oracle, the software maker, recently made a move to shift more of its jobs offshore to India. To learn more about why this company chose this strategy visit { http://www.businessweek.com/technology/content/jan2006/tc20060111_680145.htm?chan=search }. Another Perspective : The outsourcing of health care is becoming more and more common. Ask students to discuss this trend, and consider what it means to consumers and to workers in the healthcare industry. Duke University recently conducted a study on the outsourcing of jobs, the results of the study can be found at { http://www.businessweek.com/globalbiz/content/nov2006/gb20061108_738883.htm?chan=search }
The answer is a.
The answer is c.
The answer is d.
The answer is c.
Basic factors: Natural resources Climate Geographic location Demographics While basic factors can provide an initial advantage they must be supported by advanced factors to maintain success. Advanced factors: The result of investment by people, companies, and government are more likely to lead to competitive advantage. If a country has no basic factors, it must invest in advanced factors.
Management Focus: The Rise of Finland’s Nokia This feature is about the growth of the cellular telephone equipment industry, and more specifically, about the rise in competitiveness of Nokia, a Finnish cellular telephone company. The feature explains the reasons that Nokia was particularly well positioned to take advantage of the growth of the global cellular telephone industry. Teaching Tip : For more information on the company, go to Nokia’s homepage at { http://www.nokia.com /}
Porter’s theory should predict the pattern of international trade that we observe in the real world. Countries should be exporting products from those industries where all four components of the diamond are favorable, while importing in those areas where the components are not favorable.
