Trade Theories

1. Trade Theories 16th Century Mercantilism: Governments ensuring trade surplusby controlling imports • 16th Century Mercantilism theory • Absolute Advantage (Adam Smith) • Comparative Advantage (David Richardo) • 19th Century onwards • Factor Proportions Theory (Heckscher & Ohlin) • Country Similarity Theory (Steffan Linder) • Global Horizons Theory • Product Life Cycle (Vernon) • New Trade Theory • Ownership Advantage Theory (S.Hymer) • Internationalisation Approach (Buckley and Casson) • Global Strategic Rivalry theory • Porter’s National Competitive Advantage (diamond) theory • Internalisation Theory • Eclectic Theory (John Dunning) 21st Century Free Trade: Countries specialised for strategic advantage & trade freely

2. Purposes of Trade Theories Stakeholders What? Who? Where? Why? How? Conditions Approaches More emphasis by recent theories

3. 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 put As seen in the case of the EU,regional economic integration is replete with political, economic & cultural risks & issues Discuss & Share your assignment response strategies

4. 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 regional economic integration? 2 1 What is EU? What 2351 topics’ concepts & theories can U use? 3 What’s the link? 4 What are the Risks & Issues? • Note: • Risks are anticipated problems that have not occur yet • Issues are eventuated risks

5. What 2351 topics’ concepts & theories can U use? IB organisation Roles & Strategic Approaches Week 2 PLE Systems Week 5 OB Regulatory Framework Week 4 IB Trade Theories Week 3 Social System - Culture Week 7 Inter Nation Cooperation IB Evolution, Concepts & Methods Development Week 6 MNC & FDI IB PESTLE Systems Makeup Week 8 ForEx & IMS Week 9 IB firms’strategies & structures IB Governance & Market Systems Week 10 IB firms’ Entry Modes Week 11 Globalisation & IB

6. Assignment Development Activities Planning, Literature Search & Developing working papers Planning how to do? Action planned tasks • Writing planning • & development Plan your report structure Are U able to show U followed the assessment criteria? Write, edit & proof read your report

7. Assignment 2: Group Presentation • Starts next week………….. • Important Instructions to be followed: • 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) • 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

8. Discussion Qs 16th Century Mercantilism: Governments ensuring trade surplusby controlling imports Can Mercantilism apply in today’s world? • 2. Is Free Trade fair? • Examine its cost-benefits • Examine its winners & losers 21st Century Free Trade: Countries specialised for strategic advantage & trade freely

9. The Rise of Bangladesh’s Textile Trade Case Study Bangladesh's textile industry – 1.51 m https://www.youtube.com/watch?v=CxKlnkp9SvQ Ethnical Textiles – 3.31m https://www.youtube.com/watch?v=A3xrXC9wcZg https://www.youtube.com/watch?v=hcYYLmcxavA Martin Jacques - When China Rules the World – 10.04 m https://www.youtube.com/watch?v=Og8zBhDDkEQ Source: The Hindu, Dec 20, 2012 Why was the shift to a free trade regime in the textile industry good for Bangladesh? Who benefits when retailers in the US source textiles from low-wage countries suh as Bangladesh? What international trade theory or theories best explain the rise of Bangladesh as a textile exporting powerhouse? How secure is Bangladesh ‘s textile industry from foreign competition? What factors could ultimately lead to a decline?

10. The Benefits • The POSITIVES: • Capital Formation • Technology Transfer • Regional & Sectoral Development • Internal Competition & Entrepreneurship • Favourable Effect on Balance of Payments • Increased Employment Bangladesh's textile industry – 1.51 m https://www.youtube.com/watch?v=CxKlnkp9SvQ At What Costs? At Whose Costs?

11. Bangladesh has the advantage of not being China The argument focus is Cost Advantage China Martin Jacques - When China Rules the World – 10.04 m https://www.youtube.com/watch?v=Og8zBhDDkEQ The long version – 1.34 hrs https://www.youtube.com/watch?v=3G1EyvRZmOs

12. The Costs • The NEGATIVES: • Industrial dominance • Exploitation of raw materials + cheap labour • Bribery and corruption • Interference in political matters • Technological dependence • Disturbance of economic plans • Cultural change • Interference by home government through MNC • Degree of government control maybe less than intended Technology transfer may be too expensive or inappropriate (eg old) Can move out when country regulates Products are for overseas markets and may not benefit local social needs or value MNC’s home country’s labour /employment interests are undermined Avoid taxes Best jobs given to MNC’s privileged people Ethnical Textiles – 3.31m https://www.youtube.com/watch?v=A3xrXC9wcZg https://www.youtube.com/watch?v=hcYYLmcxavA