IB_Chapter 6 - International Business Chapter 6...

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1 International Business Chapter 6 International Trade and Factor Mobility Theory
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2 Chapter Objectives To understand theories of why countries should trade To comprehend how global efficiency can be increased through free trade To realize why countries’ export capabilities are dynamic To discern why the production factors of labor and capital move internationally To grasp the relationship between foreign trade and international factor mobility
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3 Trade and Investment Policies import substitution: a policy of developing domestic industries to manufacture goods and provide services that would otherwise be imported strategic trade policy: the identification and development of targeted domestic industries in order to improve their competitiveness at home and abroad Although exports of coffee and bananas are still important, high-tech manufactured products (electronics, software, and medical devices) are now the backbone of Costa Rica’s economy and export earnings. The country also established a private organization (CINDE) to aid economic development and attract foreign direct investment.
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4 Fig. 6.1: Companies’ International Operations Link Countries Economically To meet their international objectives, companies’ strategies require them to trade and transfer means of production internationally, such as between countries A and B in the figure. This trading and transferring links countries economically. This lecture focuses on the linkages.
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5 Trade Theories
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