Topic 6 Trade Theory, Practices and Financing in Crises for MNCs

Complete iphones arrive to american consumers after

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Unformatted text preview: these countries, all components are then shipped and assembled in Shenzhen, China, •  Then the iPhones are delivered to final consumers in various countries. •  Complete iPhones arrive to American consumers -- after the phones components have crossed at least four borders, including the U.S. border twice. –  The world GDP growth (3.3%) vs. the world trade growth (5.0%) 1 International Trade Theory: New order of international trade •  Main issues at recent WTO trade negotiations: "  "  "  "  Labor standard, environmental issues Market excess of manufacturing and service Dynamic comparative advantages New protectionism –  Absolute advantage: natural vs. acquired –  Comparative advantage ! Win-win game •  Specialize in producing a commodity with relative greater advantage •  Specialize in producing a commodity with relatively lesser disadvantage •  Direction of trade? •  Trade imbalances: –  "  US trade (goods) deficits -- $745 bil during 2012 "  US current a/c deficits -- $487 bil during 2012 "  China What economists say? •  Why trade? s current a/c surplus - $214 bil in 2012 •  Free/fair trade and protectionism, mixed "  REI and FTAs (US-Korea, Colombia, Panama, Austrailia, India…), The incomplete Doha round "  Protectionism during the global recession since 2007 Trade theories: Time line, 1500 - present Trade Theory Timeline Countries tend to export products using their abundant and cheaper factors of product # Heckscher-Ohlin Theorem –  Empirical evidence: Leontief Paradox •  Evolution of comparative advantage –  Comparative advantage may shift over time. # Product Life Cycle Theory •  New trade theory –  Global job outsourcing –  National competitiveness, the role of the government, strategic trade Comparative Advantage Inability of a nation to produce a good more efficiently than other nations, but an ability to produce that good more efficiently than it does any other good. The U.S. 1 resource unit = 1 ton rice or 1/2 ton tea Mexico 1 resource unit = 1/6 ton rice or 1/3 ton tea Specialization and trade allow each to produce and consume more 5-9 New Trade Theory Fundamentals "  Gains from specialization and economies of scale...
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