The document discusses international trade theory and the benefits of free trade. It covers theories such as absolute advantage, comparative advantage, Heckscher-Ohlin theory, product life cycle theory, new trade theory, and Porter's diamond of competitive advantage. These theories explain patterns of trade between countries and how free trade allows specialization and gains from trade. The document also discusses concepts such as the balance of payments and whether a current account deficit is problematic.
International trade is the exchange of capital, goods, and services across international borders or territories.
international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, salt roads), its economic, social, and political importance has been on the rise in recent centuries.
To understand the pattern in international trade, Different trade theories are postulated. Some famous trade theories are:
Mercantilism
Absolute Advantage Theory
Comparative Advantage Theory
Hecksher-Ohlin Factor endowment theory
Product Life Cycle Theory
New Trade Theory
Porter’s Diamond Theory for competitive advantage
Restrictions on imports – tariff barriers, quotas or non-tariff barriers.
Accumulation of foreign currency reserves and gold and silver reserves. (known also as bullionism)
Granting of state monopolies to particular firms especially those associated with trade and shipping.
Subsidies of export industries to give competitive advantage in global markets.
Government investment in research and development to maximize efficiency and capacity of domestic industry.
Allowing copyright / intellectual theft from foreign companies.
Limiting wages and consumption of the working classes to enable greater profits to stay with the merchant class.
Control of colonies, e.g. making colonies buy from Empire country and taking control of colonies wealth.
England Navigation Act of 1651 prohibited foreign vessels engaging in coastal trade.
All colonial exports to Europe had to pass through English first and be re-exported to Europe.
Under British Empire, India restricted in buying from domestic industries and were forced to import salt from the UK. Protests against this salt tax, led to ‘Salt tax’ revolt led by Gandhi.
In seventeenth Century France, the state promoted a controlled economy, with strict regulations about the economy and labour markets
In the modern world, mercantilism is sometimes associated with policies, such as.
Undervaluation of currency e.g. government buying foreign currency assets to keep the exchange rate undervalued and make exports more competitive.
Government subsidy of industry for unfair advantage. China has been accused of offering too much subsidised investment for industry, leading to over supply of industries such as steel – meaning other countries struggle to compete.
Surge of protectionist sentiment, e.g. tariffs on imports.
Copyright theft
International trade is the exchange of capital, goods, and services across international borders or territories.
international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, salt roads), its economic, social, and political importance has been on the rise in recent centuries.
To understand the pattern in international trade, Different trade theories are postulated. Some famous trade theories are:
Mercantilism
Absolute Advantage Theory
Comparative Advantage Theory
Hecksher-Ohlin Factor endowment theory
Product Life Cycle Theory
New Trade Theory
Porter’s Diamond Theory for competitive advantage
Restrictions on imports – tariff barriers, quotas or non-tariff barriers.
Accumulation of foreign currency reserves and gold and silver reserves. (known also as bullionism)
Granting of state monopolies to particular firms especially those associated with trade and shipping.
Subsidies of export industries to give competitive advantage in global markets.
Government investment in research and development to maximize efficiency and capacity of domestic industry.
Allowing copyright / intellectual theft from foreign companies.
Limiting wages and consumption of the working classes to enable greater profits to stay with the merchant class.
Control of colonies, e.g. making colonies buy from Empire country and taking control of colonies wealth.
England Navigation Act of 1651 prohibited foreign vessels engaging in coastal trade.
All colonial exports to Europe had to pass through English first and be re-exported to Europe.
Under British Empire, India restricted in buying from domestic industries and were forced to import salt from the UK. Protests against this salt tax, led to ‘Salt tax’ revolt led by Gandhi.
In seventeenth Century France, the state promoted a controlled economy, with strict regulations about the economy and labour markets
In the modern world, mercantilism is sometimes associated with policies, such as.
Undervaluation of currency e.g. government buying foreign currency assets to keep the exchange rate undervalued and make exports more competitive.
Government subsidy of industry for unfair advantage. China has been accused of offering too much subsidised investment for industry, leading to over supply of industries such as steel – meaning other countries struggle to compete.
Surge of protectionist sentiment, e.g. tariffs on imports.
Copyright theft
International economics deals with the economic relations among nations. The resulting interdependence is very important to the economic well-being of most nations of the world and is on the increase. The economic relations among nations differ from the economic relations among the various part of a nation. This gives rise to different problems, requiring somewhat different tools of analysis, and justifies International Economics as a distinct and separate branch of “Applied” Economics.
International economics deals with
1) The Pure Theory of Trade. This examines the basis for trade and the gains from trade.
2) The Theory of Commercial Policy. This studies the reasons for and the results of obstructions to the free flow of trade.
3) The Balance of Payments. This examines a nation’s total payments to and total receipts from the rest of the world. These involve the exchange of one currency with others.
4) Adjustment in the Balance of Payments. This deals with the mechanism of adjustment to balance of payments disequilibria under different international monetary systems.
> To define globalization and international business and show how they affect each other
> To understand why companies engage in international business and why international business growth has accelerated
> To discuss globalization’s future and the major criticisms of globalization
> To become familiar with different ways in which a company can accomplish its global objectives
> To apply social science disciplines to understanding the differences between international and domestic business
> To define globalization and international business and show how they affect each other
The trade theory that first indicated importance of specialization in production and division of labor is based on the idea of theory of absolute advantage which is developed first by Adam Smith in his famous book The Wealth of Nations published in 1776.
Smith argued that it was impossible for all nations to become rich simultaneously by following mercantilism because the export of one nation is another nation’s import and instead stated that all nations would gain simultaneously if they practiced free trade and specialized in accordance with their absolute advantage. Smith also stated that the wealth of nations depends upon the goods and services available to their citizens, rather than their gold reserves. While there are possible gains from trade with absolute advantage, the gains may not be mutually beneficial. Comparative advantage focuses on the range of possible mutually beneficial exchanges.
Adam Smith argued that a country has an absolute advantage in the production of a product when it is more efficient than any other country producing it.
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
In economics, principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources.
The theory of comparative advantage, first developed by English economist David Ricardo in 1817, is a theory about the potential gains from trade for companies, countries or people that arise on account of differences in factor endowments or technological progress.
Theoretical Part Topics:
1. Introduction to International Trade
2. Trade Barrier & Imperfect Competition
3. Trade Body, Trade Law and Product introduction
4. World Apparel Market and BDG RMG Sector
5. Market and Demand Analysis
6. World Market analysis and Potentialities
7. Introduction to Marketing and Export Promotion
8. Communication Strategy
9. Process of Export and Import
the political economy of international trade
,
instrument of trade policy
,
what is the political reality of international tr
,
how has the current world trading system emerged
,
what is the future of the world trade organization
,
what do trade barriers mean for managers
,
how do governments intervene in markets
,
why government intervene
,
3:import quota
egional economic integration
,
levels of economic integration
,
free trade area b) customs union c) common marke
,
the political case for regional integration
,
the economic case for regional integration
,
mercosur
,
regional economic integration in europe
,
evolution of the european union
,
impediments to integration
,
the case against regional integration
,
the andean community
,
classroom performance system
,
the north american free trade agreement
,
asia-pacific economic cooperation
,
regional economic integration elsewhere
,
regional trade blocs in africa
,
political structure of the european union
,
enlargement of the european union
,
the single european act
,
the establishment of the euro
,
central american common market and caricom
International economics deals with the economic relations among nations. The resulting interdependence is very important to the economic well-being of most nations of the world and is on the increase. The economic relations among nations differ from the economic relations among the various part of a nation. This gives rise to different problems, requiring somewhat different tools of analysis, and justifies International Economics as a distinct and separate branch of “Applied” Economics.
International economics deals with
1) The Pure Theory of Trade. This examines the basis for trade and the gains from trade.
2) The Theory of Commercial Policy. This studies the reasons for and the results of obstructions to the free flow of trade.
3) The Balance of Payments. This examines a nation’s total payments to and total receipts from the rest of the world. These involve the exchange of one currency with others.
4) Adjustment in the Balance of Payments. This deals with the mechanism of adjustment to balance of payments disequilibria under different international monetary systems.
> To define globalization and international business and show how they affect each other
> To understand why companies engage in international business and why international business growth has accelerated
> To discuss globalization’s future and the major criticisms of globalization
> To become familiar with different ways in which a company can accomplish its global objectives
> To apply social science disciplines to understanding the differences between international and domestic business
> To define globalization and international business and show how they affect each other
The trade theory that first indicated importance of specialization in production and division of labor is based on the idea of theory of absolute advantage which is developed first by Adam Smith in his famous book The Wealth of Nations published in 1776.
Smith argued that it was impossible for all nations to become rich simultaneously by following mercantilism because the export of one nation is another nation’s import and instead stated that all nations would gain simultaneously if they practiced free trade and specialized in accordance with their absolute advantage. Smith also stated that the wealth of nations depends upon the goods and services available to their citizens, rather than their gold reserves. While there are possible gains from trade with absolute advantage, the gains may not be mutually beneficial. Comparative advantage focuses on the range of possible mutually beneficial exchanges.
Adam Smith argued that a country has an absolute advantage in the production of a product when it is more efficient than any other country producing it.
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
In economics, principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources.
The theory of comparative advantage, first developed by English economist David Ricardo in 1817, is a theory about the potential gains from trade for companies, countries or people that arise on account of differences in factor endowments or technological progress.
Theoretical Part Topics:
1. Introduction to International Trade
2. Trade Barrier & Imperfect Competition
3. Trade Body, Trade Law and Product introduction
4. World Apparel Market and BDG RMG Sector
5. Market and Demand Analysis
6. World Market analysis and Potentialities
7. Introduction to Marketing and Export Promotion
8. Communication Strategy
9. Process of Export and Import
the political economy of international trade
,
instrument of trade policy
,
what is the political reality of international tr
,
how has the current world trading system emerged
,
what is the future of the world trade organization
,
what do trade barriers mean for managers
,
how do governments intervene in markets
,
why government intervene
,
3:import quota
egional economic integration
,
levels of economic integration
,
free trade area b) customs union c) common marke
,
the political case for regional integration
,
the economic case for regional integration
,
mercosur
,
regional economic integration in europe
,
evolution of the european union
,
impediments to integration
,
the case against regional integration
,
the andean community
,
classroom performance system
,
the north american free trade agreement
,
asia-pacific economic cooperation
,
regional economic integration elsewhere
,
regional trade blocs in africa
,
political structure of the european union
,
enlargement of the european union
,
the single european act
,
the establishment of the euro
,
central american common market and caricom
Free trade refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country.
JM Chapter 1 Overview of International Business.pptxJesilin James
Define International Business and concept of globalization
Differentiate between IB and Domestic Business
Explain the importance of IB
Part 2: Fundamental of International Trade Theories
Outline the theories that attempt to explain why certain goods are traded internationally
Summarise the theory of mercantilism
Detail the theories of absolute advantage and comparative advantage
Detail the factor proportions theory of trade
Define conflict and conflict behavior in organizations
Distinguish between functional and dysfunctional conflict
Understand different levels and types of conflict in organizations
Analyze conflict episodes and the linkages among them
Explain why conflict arises, and identify the types and sources of conflict in organizations.
Describe conflict management strategies that managers can use to resolve conflict effectively.
Understand the nature of negotiation and why integrative bargaining is more effective than distributive negotiation.
,managing conflict ,politics ,and negotiation
,
capital budgeting
,
concept of capital budgeting
,
the capital budgeting process
,
significance of capital budgeting
,
classification of investment project proposals
,
techniques of capital budgeting
,
types of project
basic organization of computer
,
input unit
,
output unit
,
storage unit
,
arithmetic logic unit (alu)
,
computer codes
,
computer for organization
,
business communication
,
payroll system
,
management information system
operating system
,
os
,
what is an os?
,
types of os
,
logical architecture of a computer system
,
basic task perform by os
,
task switching
,
utility software
,
main functions of an os
,
ddata communications and computer networks
,
basic elements of a communication system
,
coaxial cable
,
star network
,
data transmission media
,
ring network
,
hybrid network
,
completely connected network
,
multi-access bus network
,
network linking devices
,
network interface card (nic)
International Business basic concept of international business
,
approaches to international business/ modes of ent
,
barriers to international business
,
absolute advantage and comparative advantage
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
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what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
what is the future of Pi Network currency.DOT TECH
The future of the Pi cryptocurrency is uncertain, and its success will depend on several factors. Pi is a relatively new cryptocurrency that aims to be user-friendly and accessible to a wide audience. Here are a few key considerations for its future:
Message: @Pi_vendor_247 on telegram if u want to sell PI COINS.
1. Mainnet Launch: As of my last knowledge update in January 2022, Pi was still in the testnet phase. Its success will depend on a successful transition to a mainnet, where actual transactions can take place.
2. User Adoption: Pi's success will be closely tied to user adoption. The more users who join the network and actively participate, the stronger the ecosystem can become.
3. Utility and Use Cases: For a cryptocurrency to thrive, it must offer utility and practical use cases. The Pi team has talked about various applications, including peer-to-peer transactions, smart contracts, and more. The development and implementation of these features will be essential.
4. Regulatory Environment: The regulatory environment for cryptocurrencies is evolving globally. How Pi navigates and complies with regulations in various jurisdictions will significantly impact its future.
5. Technology Development: The Pi network must continue to develop and improve its technology, security, and scalability to compete with established cryptocurrencies.
6. Community Engagement: The Pi community plays a critical role in its future. Engaged users can help build trust and grow the network.
7. Monetization and Sustainability: The Pi team's monetization strategy, such as fees, partnerships, or other revenue sources, will affect its long-term sustainability.
It's essential to approach Pi or any new cryptocurrency with caution and conduct due diligence. Cryptocurrency investments involve risks, and potential rewards can be uncertain. The success and future of Pi will depend on the collective efforts of its team, community, and the broader cryptocurrency market dynamics. It's advisable to stay updated on Pi's development and follow any updates from the official Pi Network website or announcements from the team.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
2. 5-2
Why Is Free Trade Beneficial?
Free trade - a situation where a government does
not attempt to influence through quotas or duties
what its citizens can buy from another country or
what they can produce and sell to another country
Trade theory shows why it is beneficial for a
country to engage in international trade even for
products it is able to produce for itself
International trade allows a country
to specialize in the manufacture and export of products
that it can produce efficiently
import products that can be produced more efficiently
in other countries
3. 5-3
Why Do Certain
Patterns Of Trade Exist?
Some patterns of trade are fairly easy to
explain
it is obvious why Saudi Arabia exports oil,
Ghana exports cocoa, and Brazil exports coffee
But, why does Switzerland export
chemicals, pharmaceuticals, watches, and
jewelry?
Why does Japan export automobiles,
consumer electronics, and machine tools?
4. 5-4
What Role Does
Government Have In Trade?
The mercantilist philosophy makes a crude case
for government involvement in promoting exports
and limiting imports
Smith, Ricardo, and Heckscher-Ohlin promote
unrestricted free trade
New trade theory and Porter’s theory of national
competitive advantage justify limited and selective
government intervention to support the
development of certain export-oriented industries
5. 5-5
What Is Mercantilism?
Mercantilism suggests that it is in a
country’s best interest to maintain a trade
surplus -to export more than it imports
advocates government intervention to achieve
a surplus in the balance of trade
Mercantilism views trade as a zero-sum
game - one in which a gain by one country
results in a loss by another
6. 5-6
What Is Smith’s Theory
Of Absolute Advantage?
Adam Smith argued 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
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
7. 5-7
How Does The Theory
Of Absolute Advantage Work?
Assume that two countries, Ghana and South Korea, both
have 200 units of resources that could either be used to
produce rice or cocoa
In Ghana, it takes 10 units of resources to produce one ton
of cocoa and 20 units of resources to produce one ton of
rice
Ghana could produce 20 tons of cocoa and no rice, 10 tons of rice
and no cocoa, or some combination of rice and cocoa between the
two extremes
In South Korea it takes 40 units of resources to produce
one ton of cocoa and 10 resources to produce one ton of
rice
South Korea could produce 5 tons of cocoa and no rice, 20 tons of
rice and no cocoa, or some combination in between
8. 5-8
How Does The Theory
Of Absolute Advantage Work?
Without trade
Ghana would produce 10 tons of cocoa and 5 tons of rice
South Korea would produce 10 tons of rice and 2.5 tons of cocoa
With specialization and trade
Ghana would produce 20 tons of cocoa
South Korea would produce 20 tons of rice
Ghana could trade 6 tons of cocoa to South Korea for 6 tons of rice
After trade
Ghana would have 14 tons of cocoa left, and 6 tons of rice
South Korea would have 14 tons of rice left and 6 tons of cocoa
If each country specializes in the production of the good in
which it has an absolute advantage and trades for the
other, both countries gain
9. 5-9
How Does The Theory
Of Absolute Advantage Work?
Absolute Advantage and the Gains from Trade
10. 5-10
What Is Ricardo’s Theory
Of Comparative Advantage?
David Ricardo asked what might happen when one
country has an absolute advantage in the
production of all goods
Ricardo’s theory of comparative advantage
suggests that countries should specialize in the
production of those goods they produce most
efficiently and buy goods that they produce less
efficiently from other countries, even if this means
buying goods from other countries that they could
produce more efficiently at home
11. 5-11
How Does The Theory Of
Comparative Advantage Work?
Assume
Ghana is more efficient in the production of both cocoa
and rice
in Ghana, it takes 10 resources to produce one ton of
cocoa, and 13 1/3 resources to produce one ton of rice
So, Ghana could produce 20 tons of cocoa and no rice,
15 tons of rice and no cocoa, or some combination of
the two
in South Korea, it takes 40 resources to produce one ton
of cocoa and 20 resources to produce one ton of rice
so, South Korea could produce 5 tons of cocoa and no
rice, 10 tons of rice and no cocoa, or some combination
of the two
12. 5-12
How Does The Theory Of
Comparative Advantage Work?
With trade
Ghana could export 4 tons of cocoa to South Korea in
exchange for 4 tons of rice
Ghana will still have 11 tons of cocoa, and 4 additional
tons of rice
South Korea still has 6 tons of rice and 4 tons of cocoa
if each country specializes in the production of the good
in which it has a comparative advantage and trades for
the other, both countries gain
Comparative advantage theory provides a strong
rationale for encouraging free trade
13. 5-13
How Does The Theory Of
Comparative Advantage Work?
Comparative Advantage and the Gains from Trade
14. 5-14
Is Unrestricted Free Trade
Always Beneficial?
Unrestricted free trade is beneficial, but the gains
may not be as great as the simple model of
comparative advantage would suggest
immobile resources
diminishing returns
dynamic effects and economic growth
Opening a country to trade could increase
a country's stock of resources as increased supplies
become available from abroad
the efficiency of resource utilization and so free up
resources for other uses
economic growth
15. 5-15
Could A Rich Country Be
Worse Off With Free Trade?
Paul Samuelson - the dynamic gains from trade
may not always be beneficial
free trade may ultimately result in lower wages in the
rich country
The ability to offshore services jobs that were
traditionally not internationally mobile may have
the effect of a mass inward migration into the
United States, where wages would then fall
But, protectionist measures could create a more
harmful situation than free trade
16. 5-16
What Is The
Heckscher-Ohlin Theory?
Eli Heckscher and Bertil Ohlin -
comparative advantage arises from
differences in national factor endowments
– the extent to which a country is endowed
with resources like land, labor, and capital
predict that countries will export goods that
make intensive use of those factors that are
locally abundant, and import goods that make
intensive use of factors that are locally scarce
17. 5-17
Does The Heckscher-Ohlin
Theory Hold?
Wassily Leontief theorized that since the U.S. was
relatively abundant in capital compared to other
nations, the U.S. would be an exporter of capital
intensive goods and an importer of labor-intensive
goods.
However, he found that U.S. exports were less
capital intensive than U.S. imports
Since this result was at variance with the
predictions of trade theory, it became known as
the Leontief Paradox
18. 5-18
What Is The
Product Life Cycle Theory?
The product life-cycle theory - (Raymond Vernon) - as
products mature both the location of sales and the optimal
production location will change affecting the flow and
direction of trade
the size and wealth of the U.S. market gave U.S. firms a strong
incentive to develop new products
initially, the product would be produced and sold in the U.S.
as demand grew in other developed countries, U.S. firms would
begin to export
demand for the new product would grow in other advanced
countries over time making it worthwhile for foreign producers to
begin producing for their home markets
19. 5-19
What Is The
Product Life Cycle Theory?
U.S. firms might set up production facilities in advanced
countries with growing demand, limiting exports from the
U.S.
As the market in the U.S. and other advanced nations
matured, the product would become more standardized,
and price the main competitive weapon
Producers based in advanced countries where labor costs
were lower than the United States might now be able to
export to the United States
If cost pressures were intense, developing countries would
acquire a production advantage over advanced countries
Production became concentrated in lower-cost foreign
locations, and the United States became an importer of the
product
21. 5-21
Does The Product Life Cycle
Theory Hold?
The product life cycle theory accurately explains
what has happened for products like photocopiers
and a number of other high technology products
developed in the United States in the 1960s and
1970s
But, the globalization and integration of the world
economy has made this theory less valid today
the theory is ethnocentric
production today is dispersed globally
products today are introduced in multiple markets
simultaneously
22. 5-22
What Is New Trade Theory?
New trade theory suggests that the ability of firms to
gain economies of scale (unit cost reductions associated
with a large scale of output) can have important
implications for international trade
1. Through its impact on economies of scale, trade can
increase the variety of goods available to consumers and
decrease the average cost of those goods
without trade, nations might not be able to produce those
products where economies of scale are important
with trade, markets are large enough to support the production
necessary to achieve economies of scale
so, trade is mutually beneficial because it allows for the
specialization of production, the realization of scale economies,
and the production of a greater variety of products at lower prices
23. 5-23
What Is New Trade Theory?
2. In those industries when output required to
attain economies of scale represents a significant
proportion of total world demand, the global
market may only be able to support a small
number of enterprises
first mover advantages - the economic and strategic
advantages that accrue to early entrants into an
industry
economies of scale
first movers can gain a scale based cost advantage
that later entrants find difficult to match
24. 5-24
What Are The Implications Of
New Trade Theory For Nations?
Nations may benefit from trade even when they do
not differ in resource endowments or technology
a country may dominate in the export of a good simply
because it was lucky enough to have one or more firms
among the first to produce that good
Governments should consider strategic trade
policies that nurture and protect firms and
industries where first mover advantages and
economies of scale are important
25. 5-25
What Is Porter’s Diamond Of
Competitive Advantage?
Michael Porter tried to explain why a nation achieves
international success in a particular industry and
identified four attributes that promote or impede the
creation of competitive advantage
1. Factor endowments - a nation’s position in factors of
production necessary to compete in a given industry
can lead to competitive advantage
can be either basic (natural resources, climate, location) or
advanced (skilled labor, infrastructure, technological know-how)
2. Demand conditions - the nature of home demand for
the industry’s product or service
influences the development of capabilities
sophisticated and demanding customers pressure firms to be
competitive
26. 5-26
What Is Porter’s Diamond Of
Competitive Advantage?
3. Relating and supporting industries - the presence or
absence of supplier industries and related industries that
are internationally competitive
can spill over and contribute to other industries
successful industries tend to be grouped in clusters in countries
4. Firm strategy, structure, and rivalry - the conditions
governing how companies are created, organized, and
managed, and the nature of domestic rivalry
different management ideologies affect the development of
national competitive advantage
vigorous domestic rivalry creates pressures to innovate, to
improve quality, to reduce costs, and to invest in upgrading
advanced features
27. 5-27
What Is Porter’s Diamond Of
Competitive Advantage?
Determinants of National Competitive Advantage: Porter’s Diamond
28. 5-28
Does Porter’s Theory Hold?
Government policy can
affect demand through product standards
influence rivalry through regulation and antitrust laws
impact the availability of highly educated workers and
advanced transportation infrastructure.
The four attributes, government policy, and
chance work as a reinforcing system,
complementing each other and in combination
creating the conditions appropriate for
competitive advantage
So far, Porter’s theory has not been sufficiently
tested to know how well it holds up
29. 5-29
What Are The Implications Of
Trade Theory For Managers?
1. Location implications - a firm should disperse its
various productive activities to those countries where
they can be performed most efficiently
firms that do not, may be at a competitive disadvantage
2. First-mover implications - a first-mover advantage can
help a firm dominate global trade in that product
3. Policy implications - firms should work to encourage
governmental policies that support free trade
firms should lobby the government to adopt policies that have a
favorable impact on each component of the diamond
30. 5-30
What Is The
Balance Of Payments?
A country’s balance of payments accounts keep track of the
payments to and receipts from other countries for a particular time
period
Balance of payments accounting uses double entry bookkeeping
so, the sum of the current account balance, the capital account and the
financial account should always add up to zero
There are three main accounts
1. The current account records transactions that pertain to goods,
services, and income, receipts and payments
current account deficit - a country imports more than it exports
current account surplus – a country exports more than it imports
2. The capital account records one time changes in the stock of assets
3. The financial account records transactions that involve the
purchase or sale of assets
net change in U.S. assets owned abroad
foreign owned assets in the United States
32. 5-32
Is A Current
Account Deficit Bad?
Does current account deficit in the United States
matter?
a current account deficit implies a net debtor
so, a persistent deficit could limit future economic
growth
But, even though capital is flowing out of the
United States as payments to foreigners, much of it
flows back in as investments in assets
Yet, suppose foreigners stop buying U.S. assets and
sell their dollars for another currency
A dollar crisis could occur