Business Case Analysis On International Trade & Enterprise

Question

Task:

The questions to be answered are;

Question 1: World Trade Overview and Gravity Model
In the 19th Century Britain was trading with countries from distant locations such as North America, Latin America, Africa and Asia. Today, Britain mostly trades with European countries. Examine the causes of the British changing trade pattern with reference to the Gravity Model.

Question 2: Resources and Trade: Heckscher-Ohlin (H-O) Model
How does the Ricardian model differ from the H-O theory in explaining international trade patterns among nations?

Question 3: Economies of Scale, Imperfect Competition and International Trade
Trade need not be the result of comparative advantage but it can be a result of economies of scale. Discuss.

Question 4: International Factor Movements
Explain the effects of migration of labour between two nations. Use the figure below and the marginal product of labour concept to explain your answer.

Question 5: Trade Policy in Newly Industrialized/Developing Countries
Infant Industry protection is a key solution for the growth of industrialization of developing countries. Discuss your answer by using the graph below and any other graph(s) that you can deem appropriate.

Question 6: Controversies in Trade Policy
After the Seattle 1999 World Trade Organization Ministerial Conference fiasco, in the next 2 years, large anti-globalization demonstrations rocked the International Monetary Fund and Work Bank in Washington. What was the anti-globalization movement goal- and was it right? Explain you answer and where appropriate use figures.

Answer

Answers to the Tutorial Question of Week 2-11

Answer to Question 1 of 2nd Week

Evidently, Britain generally forms the most effective significance of times by keeping international trade activities under consideration. In the previous time of the 19th century, Britain was operating its industrial business with other countries from remote locations like Latin America, Africa, Asia, North America, etc. Nowadays, Britain has started to operate its trading practices with all of the European countries (Yotov et al., 2016). Throughout its potential trading practices, Britain has been able to form effective bonding with foreign countries. The imports and exports of sugar, coffee, cotton, tea, and other necessary products, which help to accomplish the regular needs of people, enhance the market value of Britain. Thus, it has been able to develop its financial stability by enhancing the profit margin through international trading practices. In this way, the Gross Domestic Price (GDP) of Britain has enhanced due to its efficient global trading (Rahman, Shahriar & Kea, 2019). This helps to enhance the value of the country's internal market by producing effective products for exporting in international boundaries. However, during the entry in the cross-cultural border, in the initial stage, Britain has faced numerous challenges during the adaptation of international culture. Therefore, the country has fetched a massive transformation within its international trading practices, which potentially helps to easily adapt to the culture of the international market. Through this way, the industries of Britain have started to use the Gravity Model within its international trading practices. 

During the fetching of transformation in international bonding, the gravity model thus, accepted, which tends to accomplished the requirements that are necessary to form effective bonding. Generally, the framework of gravity model in international trading practice is formed to portray Newton's law of gravity that fundamentally attract the potent attention of the determinant to define a relationship (Nasrullah et al., 2020). In addition, the implementation of the gravity model in the global trade of Britain helps to make more dependent the other countries on their exportation of products. Thus, most of the countries in Africa, Asia, North America are prominently depends on the importation of products from Britain. Hence, the GDP (Gross Domestic Price) of Britain aggressively increases during their international trade by implementing the gravity model within their industrial business (Baier, Kerr & Yotov, 2018). In this way, the country now is able to build an efficient relationship with the foreign countries, which efficiently helps them to build a more potent financial base within a year through trading in the international boundaries.

Answer to Question 2 of 4th Week 

It is known that when the trade and assets tendo t be the areas for huge and stronger external relations, different business companies generally adopts diversified operational methods. The effect of various theoretical models is generally concentrated. Therefore, particular goods or services are developed in an effective way only when business or nations tend to compromise the demand of the market by productivity. However, the Ricardian Model Theory is usually consistent with the maintenance and production of an optimised value for effective goods. It is effectively believed that theory proposed by Ricardo usually considers in an expansion of identity of the product all around the market so that the product uniqueness does not match any of the international counterparts (Crespo, Dvoskin & Ianni, 2019). Therefore, to import and transport the foreign counterparts it is generally evident that extra expense is added that in turn reduces the value of the product. Hence, the Ricardian Model usually explains the theoretical influence of the strategic model usually portrayed on competitive benefits that are intensified in the framework of enhancement of the quality of the commodity that tends to reap the advantage of the concerned market condition. Moreover, this will generally generate a reduced monetary quality and cost precursor. In addition, this will in turn enable to accomplish autonomy and monopoly in the international market, where usually profits tend to be increased (Crespo, Dvoskin & Ianni, 2019). Moreover, the uniqueness of the commodity is hugely emphasized that the level of labour knowledge, skill discretion, the reasonability of the price at the top and the edge characteristics of the commodity tends to dominate the entire foreign market.

In addition, the competitive advantage of the product strategy or theory is entirely countered and differentiated by the Heckscher Ohlin Model (Etro, 2017). However, the T is clearly based on the primary mathematical correlation that Ohlin usually tries to develop the international trading advantage, where generally the pattern of the production is forecasted across the foreign markets that usually becomes the most important premise of assessment. Likewise, Ohlin tends to follow the theory of Ricardo of the comparative advantage in products and services across the foreign market. In addition, through the performed national exports it is evident that Ohlin recognizes the relation with the product travel cost (Rios, 2016). However, through the additional cost bearing the scarcities in the resources across the nation usually against the richness exchanged throughout the barter system is generally evidenced to be established by reasonable pricing as well as comparative advantage developed by technologically labour resource skilled potentials.

Answer to Question 3 of 6th Week 

It is generally evident that the objective strategies of the growing profit business are generally secured by the economies of scale as these tend to be the aspects of the international trading ventures. It is generally against the economies of scales, where the entities of the business tend to be the entities with great ability for developing heightened saving with the accomplishment of the stability of economy usually in the foreign countries approached are motivated and carried out (Bartelme et al., 2018). The nations tend to involve themselves in the international conducts for achieving maximisation of productivity and generally are required to approach the diversifications that are hugely nation-based. Moreover, each country tends to be better equipped and enriched by particular aspects such as labour or by-product resource. The economies of scale enable the business to generate demand-based supplies usually be maintain the output channel of productivity activities across the foreign affairs corresponding to foreign trading. In addition, the economically saved precursor is generally maintained by keeping the reduced cost implementation into the product dimension. Thus, the international trades are usually established with comfort by this specific determinant set into the trading strategy with lost cost and quality of product elevation.

Therefore, the 'New Trade Theory' is usually justified. Through the intention of the establishment of the commodity features, the competitive edge tends to be developed by profitable returns against sales (Ranja & Raychaudhuri, 2016). However, it is clear that with the quantitative strategy of the organisation undertaken, it is clear that the economies of scale are generally established so that the alignment along the negative scales is manifested. Therefore, for the international determined scales to be determined, the economies are usually needed to be mechanised. This in turn allows organisations to determine activities and competitive performance. However, usually from the sales, the returns tend to be generated and the no economy scalability is developed by maintaining alignment with the competitive model. The production increment is generally ascertained by maintaining the impact of performance under consideration usually. This usually makes the foreign trading practice proactive to be yielded by perfection in trades as well as by strategic behavioural advantages (Ranja & Raychaudhuri, 2016). In order for the results to be established, the economies of scale tend to result in attaining perfection. Likewise, the competitive advantage situation is usually helped some country-specific organisations for international treading performance to be attained.

Answer to Question 4 of 7th Week 

The labour forces are generally migrated from one nation to the other by generally maintaining the marginal product of labour under consideration (Anghelache Anghel & Solomon, 2017). However, owing to the globalised service need satisfaction with usually with foreign trading practices, the skilled set of knowledgeable workers usually executes the business activities. However, it is generally the talents and skilled intervention into the operations of the business, which tends to provide a touch of efficiency and effectiveness across the system of wage as well as the performance of the labour usually by skill directives. The dimension of the business generally entails the huge labour demand with the effect of the lower-wage consideration. It is through the system of wage and the lucrative pay structure, the labour demand and supply is usually executed efficiently. With the manifestation of labour-power and unity taken into consideration, the foreign trading facilities generally care with great benefits. Moreover, there are usually international facilities by the labour conducted actions through technologies, economies, human resource skilled intervention that usually requires innovation to be implemented. Therefore, the payment oriented skill is generally developed by keeping MPL to the operative strategy of labour service manifestation (McCombie & Spreafico, 2016). It illustrates that the foreign nations tend to give a huge scale of payment compared to the domestic countries. Moreover, the possibilities of trading are generally provided through the local markets and this in turn helps in enhancing the efficiency.

Figure 1: Wage vs Labour Quantity Graph

(Source: McCombie & Spreafico, 2016)

As per the above figure, it is usually evident that the We are usually the free market wage through which the labour demand Le is generally equivalent to the labour supply. On the other hand the MPL Country, the wage tends to be above the We and as shown as Wy, it generally means the nation will usually hire more labour than its capacity and therefore, it has to provide low pay to the labours. In addition, the WM is generally denoted as the lowered value usually than the We. It usually means that the MPL Countryusually has a lack of labour and therefore, the labours are hugely paid. 

The resource potential is generally made stronger through the country-specific intervention into practices. However, it is evident that marinating the structure of the wage generally needs the conceptualisation through the labour resource mechanism usually for attaining competitive profit in the organisation. Therefore, it is further evidence that when the graphical representation is usually considered, the labour skill is generally held at the high precursor of considering the effectiveness of business (Jain et al., 2016). Moreover, labour efficiency and effectiveness are generally generated by efficient and proper solutions of business as the wage rates are generally higher throughout the international borders. 

Answer to Question 5 of 10th Week

The appropriate persuasion of global trade policies is the significant factor through which, the industries that are an infant in the domestic and international market gains its operation within a blooming and extensive manner. Thus, the financial stability or the vast amount of financial support is the prominent thing that must consider the need of proper following of the protected trade rules and regulations that is fundamental for the industrial growth (Hoekman, 2016). In this aspect, the necessary protection for international trade is most effective for the infant industry to make potent economic stability in the market. Moreover, financial stability is general to calculate the economic growth scale of profits through protecting the price and extending the impact of the product quality. Furthermore, for the presence of rivalries in the global market, it is significantly harmful to the growth of the infant industry (te Velde, 2016). Therefore, the industry has to properly follow its rules and regulation in order to make better its trading practices to sustain it industrial operation in the international market by mitigating the effectiveness of product price and increase the quality of the product to encourage the consumers to engage them with the business.

Figure 2: Cost Elasticity Graph

(Source: Mendez-Parra, 2016)

The illustrated graph of cost elasticity shows two curves of demand of Switzerland industry and Nepal Industry. If CP-LC Switzerland's infant industry curve of measuring the demand has been discovered that a small amount of transformation in cost has primarily enhanced the needs. In this way, the quantity of product for producing within a low cost has been enhanced within the industry of Switzerland. The P1 is the approximate point of the cost that shows equal ration with the quantity of the product (Mendez-Parra, 2016). On the other hand, point 1 described that Switzerland experiences the elasticity of cost. Besides, in the case of Nepal’s industry, these factors are also similar, where the reduction of cost makes an increment in demand. However, this industry does not go with the elasticity of cost.

Additionally, in the international market, the existing industry operates its business with following a dominating manner, due to which, the infant industries could get in troubled during their business in the potential competitive international market. Also, behind the development of an under developing country, potent industrial growth plays a significant role. In this aspect, for the infant industry, it becomes little harder to fluently operate their business (Santos-Paulino, 2017). Therefore, in this case, the international trade policy and practices efficiently help the organisation to sustain its industrial growth in the international market.

Answer to Question 6 of 11th Week

It is discernible that internationalisation by potential trading practices is generally the most appropriate for any kind of firm and industry. Henceforth, it is more discernible than deriving the anti-internationalised mechanism throughout the service of business through Seattle in 1999 generally carries extra-ordinary significance to fall out from the course of action that is generalised. Moreover, with the consideration of the Ministerial Conference of World Trade Organisation, the anti-internationalised practices were appropriately observed like an essential business decision and movement during the year of 1999 (Busch & Pelc, 2019). Fundamentally, the international trade policy efficiently helps industry in its business sustainability both in the domestic market and in the international market. Mostly, the policies of anti-globalisation of business demonstrate rocked on the International Monetary Fund and the World Bank in Washington. Evidently, the Ministerial Conference of World Trade Organisation in 1999, provides the legal statement about forming the trade policies for globalised and anti-globalised business. Thus, the anti-internationalised standpoint is generally cleared through considering the dissolution into the account.

It is more evidence that the World Trade Organisation generally adapted the essential and prominent movement of the anti-internationalisation as the movement of demand in the year of 1999 at Seattle for the personalisation of the key point of finance. The meeting effectively connected with the embodiment of the saving of political agendas of the World Trade Organisation. This applied the consequences for pursuing in favour of World Trade Organisation at Seattle through guiding and helping from the engagement of the labour or the employees (Hopewell, 2019). Actually, the employees are the most significant part of an industry that efficiently helps the industrial growth in both the domestic and the international market. Therefore, the World Trade Organisation has formed a modern regulation that efficiently helps the industrial workers through protecting their rights in the business. This significantly helps to develop the rules and regulations of international trade policies, which help in industrial growth.

References

Anghelache, C., Anghel, M. G., & Solomon, A. G. (2017). The Effect of Migration on Labor Resources. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(3), 6-13.

Baier, S. L., Kerr, A., & Yotov, Y. V. (2018). Gravity, distance, and international trade. In Handbook of international trade and transportation. Edward Elgar Publishing.

Bartelme, D., Costinot, A., Donaldson, D., & Rodriguez-Clare, A. (2018). External economies of scale and industrial policy: A view from trade. Working Paper.

Busch, M. L., & Pelc, K. J. (2019). Words Matter: How WTO Rulings Handle Controversy. International Studies Quarterly, 63(3), 464-476.

Crespo, E., Dvoskin, A., & Ianni, G. (2019). Exclusion in “Ricardian” Trade Models (No. CSWP39). Centro di Ricerche e Documentazione" Piero Sraffa".

Etro, F. (2017). The Heckscher–Ohlin model with monopolistic competition and general preferences. Economics Letters, 158, 26-29.

Hoekman, B. M. (2016). 12 Developing Countries and the Multilateral Trading System after the Uruguay. Global Development Fifty Years after Bretton Woods, 252.

Hopewell, K. (2019). US-China conflict in global trade governance: the new politics of agricultural subsidies at the WTO. Review of international political economy, 26(2), 207-231.

Jain, R., Gupta, S., Meena, M. L., &Dangayach, G. S. (2016). Optimisation of labour productivity using work measurement techniques. International Journal of Productivity and Quality Management, 19(4), 485-510.

McCombie, J. S., &Spreafico, M. R. (2016). The Share of the Top One Percent: Is It Due to the Marginal Product of Labour or Financialisation?.

Mendez-Parra, M. (2016). Principles, constraints and elements of a UK trade policy for developing countries. ODI Briefing Paper. London: Overseas Development Institute.

Nasrullah, M., Chang, L., Khan, K., Rizwanullah, M., Zulfiqar, F., & Ishfaq, M. (2020). Determinants of forest product group trade by gravity model approach: A case study of China. Forest Policy and Economics, 113, 102117.

Rahman, R., Shahriar, S., & Kea, S. (2019). Determinants of exports: A gravity model analysis of the Bangladeshi textile and clothing industries. FIIB Business Review, 8(3), 229-244.

Ranjan, P., & Raychaudhuri, J. (2016). The “new-new” trade theory: a review of the literature. In International Trade and International Finance (pp. 3-21). Springer, New Delhi.

Rios, H. M. T. (2016). Trade policy in a dynamic Heckscher-Ohlin model (Doctoral dissertation).

Santos-Paulino, A. U. (2017). Estimating the impact of trade specialization and trade policy on poverty in developing countries. The Journal of International Trade & Economic Development, 26(6), 693-711.

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Yotov, Y. V., Piermartini, R., Monteiro, J. A., & Larch, M. (2016). An advanced guide to trade policy analysis: The structural gravity model. Geneva: World Trade Organization.