Business and Economics

WEEK 4:

Theories of International Trade and Investment

Objectives

Group 1 Presentation

20 min, 10 min QnA

Quiz

Tutorial Questions

Ground Rules for Presentations Presenters: All the best!

Audience:

– RESPECT– ENGAGE– ASK QUESTIONS

Group Presentation

Group 1: Culture in International Business

How does religion influence the values and norms found within a given country’s culture? What implications are raised by religion for a firm seeking to internationalise?

How does social structure influence the values and norms found within a given country’s culture? What implications are raised by social structure for a firm seeking to internationalise?

How does language influence the values and norms found within a given country’s culture? What implications are raised by language for a firm seeking to internationalise?

Quiz time

TWO TEAMS

10 POINTS FOR RIGHT ANSWER

5 POINTS FOR PASSED ANSWERS

Prizes

QUESTION 1

Mercantilism is a bankrupt theory that has no place in the modern world. Discuss.

Mercantilism - a country should maintain a trade surplus, even if that means that imports are limited by government intervention.

Bankrupt theory because:

– Inconsistent with the general notion of globalization.• Eventually, a country will find it difficult to export if it

imposes oppressive quotas and tariffs on its imports.

– Consumers in the mercantilist country suffer.• Denied access to either “cheaper” or more

“sophisticated” goods from other countries.

QUESTION 3

What are the potential costs of adopting a free trade regime? Do you think governments should do anything to reduce these costs? What?

Job loss

Government should:–provide retraining programs OR–Do nothing, it will all come out in

the wash

THE RISE OF BANGLADESH’S TEXTILE TRADE (PG. 206)

CLOSING CASE:

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

QUESTION 1

Until 2005, Bangladesh’s opportunities in the developed nations were governed by a quota system.

Introduction of free trade policies enabled Bangladesh to increase its exports.

Competitive advantage in the production of textiles.

– low cost, productive labour force. – strong network of supporting industries.

Also, attracted Western importers looking to diversify their supplier base.

Who benefits when retailers in the United States source textiles from low wage countries such as Bangladesh? Who might lose? Do the gains outweigh the losses?

QUESTION 2

BANGLADESH low cost, lower

pricecompetitive

advantage

USHigher price -

fewer garments purchased locally

Possible job loss

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

QUESTION 3

Exporting powerhouse:

– Relatively low wages.– Investments in boosting productivity

levels. – Network of supporting industries.

Theory of comparative advantage

Porter’s theory of competitive advantage

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

QUESTION 4

Bangladesh is attractive due to:

– low cost garments – the opportunity for importers to diversify their supply base

(Importers do not want to solely rely on China and see Bangladesh as an attractive alternative to hedge risks).

However, their infrastructure could prove to be problematic for its exporters.

– If importers find that infrastructure problems disrupt their supplies, they could begin to look for new source countries.

– Bangladesh should make the necessary investments to avoid any disruptions in the industry.

DebateTwo groupsIs free trade fair?Group 1: YESGroup 2: NO

Trade theory suggests that specialization and free trade benefits all countries.

However, a case can be made in some situations for imposing trade barriers. E.g.:

– Infant industry argument– National security– Greece?

Revision Quiz

According to Mercantilism, what should a country try to maintain?

True or False: According to Free trade Theory, Government should control imports.

What is Michael Porters trade theory called?

List two advantages of Free trade theory.

THE REGULATORY FRAMEWORK

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