Trade Theories

1. 16th Century Mercantilism theory

2. Absolute Advantage (Adam Smith)3. Comparative Advantage (David Richardo)

19th Century onwards4. Factor Proportions Theory (Heckscher & Ohlin)5. Country Similarity Theory (Steffan Linder)6. Global Horizons Theory7. Product Life Cycle (Vernon)8. New Trade Theory9. Ownership Advantage Theory (S.Hymer)10. Internationalisation Approach (Buckley and

Casson)11. Global Strategic Rivalry theory12. Porter’s National Competitive Advantage

(diamond) theory13. Internalisation Theory14. Eclectic Theory (John Dunning)

16th Century Mercantilism: Governments ensuring trade surplusby controlling imports

21st Century Free Trade:Countries specialised for strategic advantage & trade freely

Purposes of Trade Theories

What? Who? Where?

Why?

How?

Conditions

Stakeholders

Approaches

More emphasis by recent theories

Assignment 1 Planning

As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples.

Simply putAs seen in the case of the EU, regional economic integration is replete with political, economic & cultural risks & issues

Discuss & Share your assignment response strategies

As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples.

What is EU?

What regional

economic integration?

What’s the link?

1 2

3

What are the Risks & Issues?

4

What 2351

topics’ concepts

& theories

can U use?

Note:•Risks are anticipated problems

that have not occur yet• Issues are eventuated risks

What 2351 topics’ concepts & theories can U use?

Week 2PLE Systems

Week 3Social System -

Culture

Week 4IB Trade Theories

Week 5OB Regulatory

Framework

Week 6MNC & FDI

Week 7Inter NationCooperation

Week 8ForEx & IMS

Week 9IB firms’strategies

& structures

Week 10IB firms’ Entry

Modes Week 11Globalisation

& IB

IBPESTLE Systems

Makeup

IB Evolution,Concepts & Methods

Development

IB organisationRoles & Strategic

Approaches

IB Governance & Market Systems

Writing planning & development

Planning, Literature Search

& Developing working papers

Planning how to do?

Action planned tasks

Plan your report

structure

Write, edit & proof read your report

Are U able to show U followed the

assessment criteria?

Assignment Development Activities

Assignment 2: Group Presentation

Starts next week…………..

Important Instructions to be followed:1. Answer the chosen week’s questions

• Must show application of relevant 2351 concepts, theories, etc• Must elaborate or support answers with real-life examples (ie cases)

2. On day of presentation must hand in hard copies of:• Presentation with group members’ ID and name details and clarifying

who is presenting which question• Each group member’s peer evaluation form (downloaded from Moodle)• Evaluation sheet for tutor, completed with names and topic title

Presentation tips: http://www.youtube.com/watch?v=2-ntLGOyHw4

Important assessment criteria:• Contents & structure• Visual aids & supporting materials• Verbal communications & body language

• Analysis & Critical Thinking Skills• Audience and Q&A interactions• Other

Discussion Qs16th Century Mercantilism: Governments ensuring trade surplusby controlling imports

21st Century Free Trade:Countries specialised for strategic advantage & trade freely

1. Can Mercantilism apply in today’s world?

2. Is Free Trade fair?• Examine its cost-benefits• Examine its winners & losers

The Rise of Bangladesh’s Textile Trade Case Study

Source: The Hindu, Dec 20, 2012

1. Why was the shift to a free trade regime in the textile industry good for Bangladesh?

2. Who benefits when retailers in the US source textiles from low-wage countries suh as Bangladesh?

3. What international trade theory or theories best explain the rise of Bangladesh as a textile exporting powerhouse?

4. How secure is Bangladesh ‘s textile industry from foreign competition? What factors could ultimately lead to a decline?

Bangladesh's textile industry – 1.51 mhttps://www.youtube.com/watch?v=CxKlnkp9SvQ

Ethnical Textiles – 3.31mhttps://www.youtube.com/watch?v=A3xrXC9wcZghttps://www.youtube.com/watch?v=hcYYLmcxavA

Martin Jacques - When China Rules the World – 10.04 mhttps://www.youtube.com/watch?v=Og8zBhDDkEQ

The BenefitsThe POSITIVES:

1. Capital Formation2. Technology Transfer3. Regional & Sectoral Development4. Internal Competition &

Entrepreneurship5. Favourable Effect on Balance of

Payments6. Increased Employment

Bangladesh's textile industry – 1.51 mhttps://www.youtube.com/watch?v=CxKlnkp9SvQ

At What Costs?

At Whose Costs?

Bangladesh has the advantage of not being China

The argument focus is Cost Advantage

China

Martin Jacques - When China Rules the World – 10.04 mhttps://www.youtube.com/watch?v=Og8zBhDDkEQ

The long version – 1.34 hrshttps://www.youtube.com/watch?v=3G1EyvRZmOs

Bangladesh China

Low cost factors Is the largest world’s exporter sunk FDI

But still MNC have concerns of increasing cost factors

The Costs

The NEGATIVES:

1. Industrial dominance

2. Exploitation of raw materials + cheap

labour

3. Bribery and corruption

4. Interference in political matters

5. Technological dependence

6. Disturbance of economic plans

7. Cultural change

8. Interference by home government

through MNC

9. Degree of government control may

be less than intended

10. Technology transfer may be too expensive or inappropriate (eg old)

11. Can move out when country regulates

12. Products are for overseas markets and may not benefit local social needs or value

13. MNC’s home country’s labour /employment interests are undermined

14. Avoid taxes

15. Best jobs given to MNC’s privileged people

Ethnical Textiles – 3.31mhttps://www.youtube.com/watch?v=A3xrXC9wcZg

https://www.youtube.com/watch?v=hcYYLmcxavA