Business: International Trade and Comparative Advantage

2. Why do companies tend to thrive in global markets when their country of origin enjoys a comparative advantage in their industry?

Others view trade in a negative terms, arguing that is creates incentive for the united states companies to move jobs overseas at the price of American workers. Free trade lowers the price of goods at the shopping mall; opens foreign nations to american businesses, products, services and admits the united states to the global supply chain that brings new product, new jobs, and added economic growth to our shores.

Just like other manufacturing, the company I worked had moved to China following the flow of manufacturing business. After researching the trend of future jobs in

“Although the national welfare effect will be positive, in a country composed of many individuals, a redistribution of income generating winners and losers from trade is very likely.” (Internationalecon.com, 2011)

In conclusion, the topic of free trade is difficult to debate and often controversial as it has advantages but also disadvantages. Nonetheless, the drawbacks outweigh the benefits as it one, contravenes basic moral ideologies, two, makes the rich, richer, and the poor, poorer, and three, jeopardizes our declining environment. All in all, free trade will neither support nor sustain our country to be ethical, prosperous or

The pro free-trade camp in this country has tried to sell free trade generally, and the WTO in particular, on the grounds that free trade in other countries is a good idea. When other countries drop their trade barriers, American companies export more, and consequently create more export-related jobs. All true enough, but what free-traders fail to talk about, and their silence is deafening, is that free trade in the United States is a good idea.

The people of those countries will be mad if that company moves out. Since companies have gone global, their officers are also from different parts of the world. Their headquarters are in one place and factories in another. It starts to get hard to tell where the company belongs.

I will first talk about the purpose of having operations done in another country. American companies can decide to move their companies overseas for a few reasons. One reason is that they can hire workers at low wages, for example, in China they can pay as little as 30 cents and hour whereas here they would have to pay employees minimum wage.1 Another reason is because the company would not have to pay employee benefits, such as vacation time sick days, and health insurance.1 A third reason would be that they would not have to follow safety and environmental regulations.1 The last reason would be that they would not have to pay foreign taxes

9e) False. Trade makes optimum allocation of resources based on opportunity cost and comparative advantage. Through trade customers will receive goods or services at a lower price. The inefficient producer will have to exit the market so trade cannot be good for

Michael Porter investigated why nations have a competitive advantage in specific industries his findings saw two basic types of competitive advantage that firms could pose low cost or differentiation. If you combine the two types of competitive advantage and allow room for a way in which firm wish to achieve them this will lead to three generic strategies which will achieve higher average performances in industries: cost leadership, differentiation and focus.

I actually used this article for last week's paper, but I think it's fitting since free trade is such a hot-button issue during this year's presidential election. "Shattering the Myths About U.S. Trade Policy" discusses 3 major myths about free trade. Over the past decade or so, free trade has been drawing a lot of criticism. Many people argue that free trade is responsible for so many job losses in the manufacturing industry, competing with developing countries lowers our standard of living and increases wage inequality, and that rapid economic growth in countries like China and India led to high oil prices.

One problem that trade barriers have caused is that they increase the cost of enterprises, affecting the international competitiveness of enterprises. For a long time, due to the low technological content of Chinese export products, mainly to win international markets at low prices, the developed countries have adopted some ways, such as the green subsidy system, the green packaging system, the green fortress and so on. By imposing import surcharges, increasing the cost of

Matsushita did this by closing its fax machine factory in Germany, and closing its microwave oven subsidiary and air-compressor factory in the U.S. Matsushita also asked for more than 10,000 Japanese employees in its manufacturing sector to retire early and all of these closed businesses and cancelled job positions were moved to China. Matsushita’s establishing of the new “brain” in China, or Matsushita Electric R&D Center in Beijing, China, was the company’s second largest of 16 R&D centers around the world. Matsushita’s chairman, Yoichi Morishita said “it was too difficult to explain everything about China to Japanese designers; to really make use of China’s special competitive advantages and to really meet Chinese customers’ demands, Matsushita decided to hand over its China-related development and research issues to local researchers and engineers.” Matsushita decided to localize material supplies and use as many Chinese suppliers as possible for its operations in China because there are several material distribution and trade centers in China that provide steel, paint, hardware, etc. all functioning with a mechanism similar to that of the polystyrene distribution and trade centers. The fourth fundamental change in Matsushita’s new supply chain, Stretch the distribution link, Matsushita selected TCL, the largest TV producer in China, as its strategic partner to stretch its supply chain to Chinese rural and inland markets. With

The theory of comparative advantage explains the benefit of free trade. According to this theory by David Ricardo in the early 19th century, “Both countries will be better off if each specializes in the industry where it has a comparative advantage, and if the two trade with one another.” (Citation) International trade opens up markets to foreign supplier, and domestic companies need to improve their efficiency, boost productivity, and lower cost to increase competitiveness instead of enjoying monopolies or oligopolies that enabled them to keep prices well above marginal costs. On the other hand, international trade also offers domestic companies bigger demands and broader markets; therefore more jobs relevant to export have been created. Furthermore, jobs in the US supported by goods exports pay 13-18 percent more than the US national average (ustr.gov).

In the article “The Competitive Advantage of Nations” Michael Porter describes a diamond shaped relationship of forces that define a country’s potential for being competitive in a specified industry. The four points on the diamond representing the different forces are: factor conditions; demand conditions; firm strategy, structure and rivalry; and related and supporting industries. According to Porter, the four points apply pressure to each other resulting in a national