1、International Business 7eby Charles W.L.HillMcGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies,Inc.All rights reserved.Chapter 5 International Trade Theory5-3An Overview Of Trade TheoryvFree trade refers to a situation where a government does not attempt to influence through quotas or dut
2、ies what its citizens can buy from another country or what they can produce and sell to another country 5-4The Benefits Of TradevSmith,Ricardo and Heckscher-Ohlin show why it is beneficial for a country to engage in international trade even for products it is able to produce for itselfInternational
3、trade allows a country:vto specialize in the manufacture and export of products that it can produce efficientlyvimport products that can be produced more efficiently in other countries5-5The Patterns Of International TradevSome patterns of trade are fairly easy to explain-it is obvious why Saudi Ara
4、bia exports oil,Ghana exports cocoa,and Brazil exports coffeevBut,why does Switzerland export chemicals,pharmaceuticals,watches,and jewelry?Why does Japan export automobiles,consumer electronics,and machine tools?5-6Trade Theory And Government PolicyvMercantilism makes a crude case for government in
5、volvement in promoting exports and limiting imports vSmith,Ricardo,and Heckscher-Ohlin promote unrestricted free trade vNew trade theory and Porters theory of national competitive advantage justify limited and selective government intervention to support the development of certain export-oriented in
6、dustries5-7MercantilismvMercantilism suggests that it is in a countrys best interest to maintain a trade surplus-to export more than it importsvMercantilism advocates government intervention to achieve a surplus in the balance of trade vIt views trade as a zero-sum game-one in which a gain by one co
7、untry results in a loss by another 5-8Absolute AdvantagevAdam Smith argued that a country has an absolute advantage in the production of a product when it is more efficient than any other country in producing itvAccording to Smith,countries should specialize in the production of goods for which they
8、 have an absolute advantage and then trade these goods for the goods produced by other countries 5-9Absolute AdvantagevAssume that two countries,Ghana and South Korea,both have 200 units of resources that could either be used to produce rice or cocoavIn Ghana,it takes 10 units of resources to produc
9、e one ton of cocoa and 20 units of resources to produce one ton of ricevSo,Ghana could produce 20 tons of cocoa and no rice,10 tons of rice and no cocoa,or some combination of rice and cocoa between the two extremes5-10Absolute AdvantagevIn South Korea it takes 40 units of resources to produce one t
10、on of cocoa and 10 resources to produce one ton of ricevSo,South Korea could produce 5 tons of cocoa and no rice,20 tons of rice and no cocoa,or some combination in betweenvGhana has an absolute advantage in the production of cocoavSouth Korea has an absolute advantage in the production of rice 5-11
11、Absolute AdvantageWithout trade:vGhana would produce 10 tons of cocoa and 5 tons of ricev South Korea would produce 10 tons of rice and 2.5 tons of cocoaIf each country specializes in the product in which it has an absolute advantage and trades for the other product:vGhana would produce 20 tons of c
12、ocoavSouth Korea would produce 20 tons of ricevGhana could trade 6 tons of cocoa to South Korea for 6 tons of rice5-12Absolute AdvantageAfter trade:vGhana would have 14 tons of cocoa left,and 6 tons of ricevSouth Korea would have 14 tons of rice left and 6 tons of cocoavBoth countries gained from tr
13、ade5-13Absolute AdvantageTable 5.1 Absolute Advantage and the Gains from Trade 5-14Comparative AdvantagevDavid Ricardo asked what might happen when one country has an absolute advantage in the production of all goods vRicardos theory of comparative advantage suggests that countries should specialize
14、 in the production of those goods they produce most efficiently and buy goods that they produce less efficiently from other countries,even if this means buying goods from other countries that they could produce more efficiently at home 5-15Comparative AdvantageAssume:vGhana is more efficient in the
15、production of both cocoa and ricevIn Ghana,it takes 10 resources to produce one tone of cocoa,and 13 1/3 resources to produce one ton of ricevSo,Ghana could produce 20 tons of cocoa and no rice,15 tons of rice and no cocoa,or some combination of the twovIn South Korea,it takes 40 resources to produc
16、e one ton of cocoa and 20 resources to produce one ton of ricevSo,South Korea could produce 5 tons of cocoa and no rice,10 tons of rice and no cocoa,or some combination of the two5-16Comparative AdvantageWith trade:vGhana could export 4 tons of cocoa to South Korea in exchange for 4 tons of rice vGh
17、ana will still have 11 tons of cocoa,and 4 additional tons of ricevSouth Korea still has 6 tons of rice and 4 tons of cocoa vIf each country specializes in the production of the good in which it has a comparative advantage and trades for the other,both countries gainvComparative advantage theory pro
18、vides a strong rationale for encouraging free trade 5-17Comparative AdvantageTable 5.2:Comparative Advantage and the Gains from Trade5-18Qualifications And AssumptionsThe simple example of comparative advantage assumes:vonly two countries and two goodsvzero transportation costsvsimilar prices and va
19、luesvresources are mobile between goods within countries,but not across countriesvconstant returns to scalevfixed stocks of resourcesvno effects on income distribution within countries 5-19Extensions Of The Ricardian ModelvResources do not always move freely from one economic activity to another,and
20、 job losses may occurvUnrestricted free trade is beneficial,but because of diminishing returns,the gains may not be as great as the simple model would suggest Opening a country to trade:vmight increase a countrys stock of resources as increased supplies become available from abroadvmight increase th
21、e efficiency of resource utilization,and free up resources for other uses vmight increase economic growth5-20The Samuelson CritiquevPaul Samuelson argues that dynamic gains from trade may not always be beneficialvThe ability to offshore services jobs that were traditionally not internationally mobil
22、e may have the effect of a mass inward migration into the United States,where wages would then fall5-21Heckscher-Ohlin TheoryvRicardos theory suggests that comparative advantage arises from differences in productivity vEli Heckscher and Bertil Ohlin argued that comparative advantage arises from diff
23、erences in national factor endowments the extent to which a country is endowed with resources like land,labor,and capitalvThe Heckscher-Ohlin theory predicts that countries will export goods that make intensive use of those factors that are locally abundant,while importing goods that make intensive
24、use of factors that are locally scarce5-22Classroom Performance SystemAll of the following theories advocated free trade excepta)Mercantilismb)Comparative Advantagec)Absolute Advantaged)Hecksher-Ohlin5-23The Leontief ParadoxvWassily Leontief theorized that since the U.S.was relatively abundant in ca
25、pital compared to other nations,the U.S.would be an exporter of capital intensive goods and an importer of labor-intensive goods.vHowever,he found that U.S.exports were less capital intensive than U.S.importsvSince this result was at variance with the predictions of the theory,it became known as the
26、 Leontief Paradox5-24Classroom Performance SystemWhich theory suggested that comparative advantage arises from differences in national factor endowments?a)mercantilismb)absolute advantagec)Heckscher-ohlind)comparative advantage 5-25The Product Life Cycle TheoryvThe product life-cycle theory,proposed
27、 by Raymond Vernon,suggested that as products mature both the location of sales and the optimal production location will change affecting the flow and direction of tradevVernon argued that the size and wealth of the U.S.market gave U.S.firms a strong incentive to develop new productsvVernon argued t
28、hat initially,the product would be produced and sold in the U.S.,later,as demand grew in other developed countries,U.S.firms would begin to export vOver time,demand for the new product would grow in other advanced countries making it worthwhile for foreign producers to begin producing for their home
29、 markets5-26The Product Life Cycle TheoryvU.S.firms might also set up production facilities in those advanced countries where demand was growing limiting the exports from the U.S.v As the market in the U.S.and other advanced nations matured,the product would become more standardized,and price the ma
30、in competitive weaponvProducers based in advanced countries where labor costs were lower than the United States might now be able to export to the U.S.vIf cost pressures became intense,developing countries would begin to acquire a production advantage over advanced countriesvThe United States switch
31、ed from being an exporter of the product to an importer of the product as production becomes more concentrated in lower-cost foreign locations 5-27The Product Life Cycle TheoryFigure 5.5:The Product Life Cycle Theory5-28The Product Life Cycle TheoryvThe product life cycle theory accurately explains
32、what has happened for products like photocopiers and a number of other high technology products developed in the US in the 1960s and 1970svBut,the increasing globalization and integration of the world economy has made this theory less valid in todays world5-29Classroom Performance SystemWhich theory
33、 suggests that as products mature the optimal production location will change?a)Mercantilism b)Comparative Advantage c)Absolute Advantage d)Product life-cycle5-30New Trade TheoryvNew trade theory suggests that the ability of firms to gain economies of scale(unit cost reductions associated with a lar
34、ge scale of output)can have important implications for international tradeNew trade theory suggests that:vthrough its impact on economies of scale,trade can increase the variety of goods available to consumers and decrease the average cost of those goodsvin those industries when output required to a
35、ttain economies of scale represents a significant proportion of total world demand,the global market may only be able to support a small number of enterprises 5-31Increasing Product Variety And Reducing CostsvWithout trade,nations might not be able to produce those products where economies of scale
36、are importantvWith trade,markets are large enough to support the production necessary to achieve economies of scalevSo,trade is mutually beneficial because it allows for the specialization of production,the realization of scale economies,and the production of a greater variety of products at lower p
37、rices5-32Economies Of Scale,First Mover Advantages,And The Pattern Of TradevThe pattern of trade we observe in the world economy may be the result of first mover advantages(the economic an strategic advantages that accrue to early entrants into an industry)and economies of scale vNew trade theory su
38、ggests that for those products where economies of scale are significant and represent a substantial proportion of world demand,first movers can gain a scale based cost advantage that later entrants find difficult to match 5-33Implications Of New Trade TheoryvNations may benefit from trade even when
39、they do not differ in resource endowments or technologyvA country may dominate in the export of a good simply because it was lucky enough to have one or more firms among the first to produce that good vWhile this is at variance with the Heckscher-Ohlin theory,it does not contradict comparative advan
40、tage theory,but instead identifies a source of comparative advantagev An extension of the theory is the implication that governments should consider strategic trade policies that nurture and protect firms and industries where first mover advantages and economies of scale are important5-34Classroom P
41、erformance SystemEconomies of scale and first mover advantages are important to which trade theory?a)Mercantilismb)Product life cyclec)New trade theoryd)Comparative advantage 5-35National Competitive Advantage:Porters Diamond vMichael Porter tried to explain why a nation achieves international succe
42、ss in a particular industry and identified four attributes that promote or impede the creation of competitive advantage:vFactor endowments vDemand conditionsvRelating and supporting industriesvFirm strategy,structure,and rivalry 5-36National Competitive Advantage:Porters Diamond Figure 5.6:Determina
43、nts of National Competitive Advantage:Porters Diamond5-37Factor EndowmentsvFactor endowments refer to a nations position in factors of production necessary to compete in a given industryvA nations position in factors of production can lead to competitive advantagevThese factors can be either basic(n
44、atural resources,climate,location)or advanced(skilled labor,infrastructure,technological know-how)5-38Demand ConditionsvDemand conditions refer to the nature of home demand for the industrys product or servicevThe nature of home demand for the industrys product or service influences the development
45、of capabilitiesvSophisticated and demanding customers pressure firms to be competitive5-39Relating And Supporting IndustriesvRelating and supporting industries refer to the presence or absence of supplier industries and related industries that are internationally competitivevThe presence supplier in
46、dustries and related industries that are internationally competitive can spill over and contribute to other industriesvSuccessful industries tend to be grouped in clusters in countries-having world class manufacturers of semi-conductor processing equipment can lead to(and be a result of having)a com
47、petitive semi-conductor industry 5-40Firm Strategy,Structure,And RivalryvFirm strategy,structure,and rivalry refers to the conditions governing how companies are created,organized,and managed,and the nature of domestic rivalry vThe conditions in the nation governing how companies are created,organiz
48、ed,and managed,and the nature of domestic rivalry impacts firm competitivenessvDifferent management ideologies affect the development of national competitive advantagevVigorous domestic rivalry creates pressures to innovate,to improve quality,to reduce costs,and to invest in upgrading advanced featu
49、res 5-41Evaluating Porters TheoryGovernment policy can:vaffect demand through product standardsvinfluence rivalry through regulation and antitrust lawsvimpact the availability of highly educated workers and advanced transportation infrastructure.vThe four attributes,government policy,and chance work
50、 as a reinforcing system,complementing each other and in combination creating the conditions appropriate for competitive advantage 5-42Classroom Performance SystemPorters diamond of competitive advantage includes all of the following except a)Factor endowments b)Demand conditions c)First-mover advan
