Module3-TheoriesofInternationalBusiness(1).ppt

Module3TheoriesofInternationalBusiness I TradeTheories Attempttoaddressthequestionofwhatnationstrade Predictthedirection compositionandvolumeofgoodstraded Focusingon what whom howmuc Mercantilism 重商主义 1500 1800 Atheoryholdingthatitwasessentialforanationtoaccumulateastockofpreciousmetals1 MaincontributorThomasMun 1571 1641 thebibleofmercantilism2 Aperiodofcapitalaccumulation Goldandsilver themainstaysofwealth Goldandsilver themeansofexchange 3 Keyfeatures Acountry swealthwasmeasuredbyitsholdingsoftreasures goldandsilver Governmentcontrolledinternationaltrade Acountryshouldtrytoachieveatradesurplus Itintendedtobenefitthecolonialpowers4 Meanstokeepafavorablebalanceoftrade Monopolizingtrade thecolonies Restrictingimportswhilesubsidizingexports Controllingprices 2 AbsoluteAdvantage Atheoryholdingthatitismarketforces notgovernments thatshoulddeterminethedirection compositionandvolumeofinternationaltrade Andeachnationshouldspecializeinproducingthosegoodsthatitcouldproducemostefficiently hadanabsoluteadvantage 1 Contributor AdamSmith 亚当斯密 1723 1790 国富论 1776 thebibleoffreetrademovement2 Keyfeatures Challengingmercantilism Marketforces wealth SpecializationHigherefficiency Labor productionruns Benefitsfromspecializationandtrade 3 Example Assume perfectcompetition notransportationcost Suppose theUSandJapanareinvolved Eachnationhastwoinput land labor capital etc unitsavailable Eachnationusesoneunitofinputtoproduceeachofthefollowingproducts Table1 ProductionbeforeSpecialization Table2 Productionafterspecialization Table3 Productionwithinternationaltrade Table4 Benefitsfromspecializationandtrade 3 ComparativeAdvantage Atheorythatfurtherexpandedontheabsoluteadvantage Itholdsthateventhoughanationhasanabsolutedisadvantageintheproductionoftwoormoreproducts itstillhasacomparativeadvantageinproducingtheproduct s inwhichitsabsolutedisadvantageisless 1 Contributor DavidRichardo 李嘉图 1772 1817 PrinciplesofPoliticalEconomyandTaxation 2 Keyfeatures Developmentfromtheabsoluteadvantage Whathappenswhenacountrycanproducebothorallproductsatanabsoluteadvantage Specializinginproducingthosethatacountryhasmoreabsoluteadvantageordisadvantage Stillbenefitsfromsuchspecializationandtrade 3 Example Assume perfectcompetition notransportationcost Suppose TheUSAhasanabsoluteadvantageinproducingbothriceandautos Japanhasanabsolutedisadvantageinproducingbothriceandautos Thesamesuppositionsinthefirstexamplealsoapplyhere Table1 Productionbeforespecialization Table2 Productionafterspecializatio Table3 Productionwithtrade 2ndcountry Table4 Productionwithtrade 3rdcountry Table5 Benefitsfromspecializationandtrade 4 Furtherassumptions Fullemploymentofresources Freemobilityofresources NoinsurancecostAlloftheaboveareimpossibleinreality 5 Advantages natural acquiredApplicationsofthetheoriesofabsoluteadvantageandcomparativeadvantageinChina fordiscussioninclass 4 FactorEndowment ProportionTheory 生产要素禀赋 比例 理论 Internationalandinterregionaldifferencesinproductioncostsoccurbecauseofthedifferencesinthesupplyofproductionfactors Socountriesshouldexportproductsrequiringlargeamountoftheirabundantproductionfactorsandimportproductsrequiringlargeamountoftheirscarceproductionfactors 1 ContributorsSwedisheconomistsEliHeckscher 赫克歇尔 1879 1952 BertilOhlin 俄林 1899 1979 Teacher student Hechscher OhlinTheory2 Keyfeatures Analysisofproductionfactors Labor land Labor capitalrelationship Abundanceorscarcityinproductionfactorsdeterminesfactorcosts Abundanceorscarcityorproductionfactorsalsodeterminesproductionandtrade 3 Examples India relativelywellendowedwithlaborcomparedtotheUK abundanceincapital Indiashouldconcentrateonproducinglabor intensiveproductswhiletheUKshouldspecializeincapital intensiveproducts Singapore Canadaproducingwheatortextiles 4 Ohlin sassumptions limitations Factorpricesonlydependonthefactorendowment Whatotherfactorsmaybeinvolved Agiventechnologyisuniversallyavailable Trueinreality Ignoredtransportationandinsurancecosts CountrieslikeUSAcanbecost effectivebothcapital intensiveandlabor intensiveproducts 5 Linder sOverlappingProductRangeTheory 产品系列交叉理论 1 byStaffanBurenstamLinder2 Thetheoryfocusesnotontheproductionorsupplysidebutonthedemandside consumerpreferences toexplainthedeterminantsoftradebetweencountries 3 inthenaturalresource basedindustries tradewasdeterminedbyfactorendowment buttradeinmanufacturedgoodswasnot ratherdeterminedbythesimilarityinproductdemandsacrosscountries 4 Histheoreticalbase Asincomepercapitarises thecomplexityandqualityleveloftheproductsdemandedbyconsumersalsorise Producersknowtheirowndomesticmarketmorethanforeignarkets thusunabletoserviceaforeignmarketeffectively Therefore homemarketfirst expansiontoforeignmarketnext Theproductionlocationformanyproductsmovesfromonecountrytoanotherdependingonthestageintheproducts lifecycle Questionsfordiscussion 1 AccordingtoRichardo whyistradealwayspossibleevenwhenacountryisabsolutelyinefficientinproduction 2 Policiesdesignedtolimitcompetitionfromlow costforeigncompetitorsdonothelpacountrytoachievegreatereconomicgrowth Doyouagree 3 YouaretheCEOofatextilefirmthatdesignsandmanufacturesmass marketclothingproductsintheUnitedS