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    Theories of International Trade and Investment

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    Sapna Kumari
    This document outlines several theories of international trade and investment. It discusses theories such as mercantilism, absolute advantage, Heckscher-Ohlin theory of factor endowments, new theories for the direction of trade including economies of scale and Linder's theory of overlapping demand. It also covers international product life cycles, Porter's competitive advantage of nations, arguments for and against trade restrictions, different types of trade barriers, characteristics of developing nations, and theories of international investment including monopolistic advantage theory and Dunning's eclectic theory.

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    Theories of International Trade and Investment

    Uploaded by

    Sapna Kumari
    186 views16 pages
    This document outlines several theories of international trade and investment. It discusses theories such as mercantilism, absolute advantage, Heckscher-Ohlin theory of factor endowments, new theories for the direction of trade including economies of scale and Linder's theory of overlapping demand. It also covers international product life cycles, Porter's competitive advantage of nations, arguments for and against trade restrictions, different types of trade barriers, characteristics of developing nations, and theories of international investment including monopolistic advantage theory and Dunning's eclectic theory.

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    This document outlines several theories of international trade and investment. It discusses theories such as mercantilism, absolute advantage, Heckscher-Ohlin theory of factor endowments, new theories for the direction of trade including economies of scale and Linder's theory of overlapping demand. It also covers international product life cycles, Porter's competitive advantage of nations, arguments for and against trade restrictions, different types of trade barriers, characteristics of developing nations, and theories of international investment including monopolistic advantage theory and Dunning's eclectic theory.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    186 views16 pages

    Theories of International Trade and Investment

    Uploaded by

    Sapna Kumari
    This document outlines several theories of international trade and investment. It discusses theories such as mercantilism, absolute advantage, Heckscher-Ohlin theory of factor endowments, new theories for the direction of trade including economies of scale and Linder's theory of overlapping demand. It also covers international product life cycles, Porter's competitive advantage of nations, arguments for and against trade restrictions, different types of trade barriers, characteristics of developing nations, and theories of international investment including monopolistic advantage theory and Dunning's eclectic theory.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 16

    Theories of International Trade and Investment

    Chapter 3

    International Trade Theory

    Mercantilism

    Goals Effects on today Economic nationalism Adam Smith Specialize

    Theory of Absolute Advantage


    International Trade Theory

    Heckscher- Ohlin Theory of Factor Endowment


    Countries export Countries import Assumptions


    Leontief Paradox

    Perfect market Technology U.s. is capital-intensive Why? Outcome

    Money can change flow of trade


    Differences in Taste

    Exchange rates Currency devaluation

    International Trade Theory

    New Explanations for Direction of Trade

    Economies of scale and experience curve

    Why?

    First-mover theory
    Manufacturing goods Income levels

    Linder Theory of Overlapping Demand


    International Product Life Cycle

    What is it?

    Exports imports U.S. exports Foreign production begins Foreign competition in export markets Import competition in U.S. U.S develops Other developed Developing

    Process

    Technology Life Cycle


    Porters Competitive Advantage of Nations

    What is it? Factors


    Demand conditions Factor conditions Related and supporting industries Firm strategy, structure, and rivalry

    Summary

    Differences in endowments of factors of production Differences in level of technology Differences in efficiencies with which factor intensities are utilized Foreign exchange rates

    Trade Restrictions

    Arguments for Restriction


    National Defense Sanctions to Punish Offending Nations Protect Infant Industries Protect Declining Industries Protect Domestic Jobs Scientific Tariff or Fair Competition Retaliation

    Dumping

    Five types Countervailing duties

    Subsidies

    Trade Barriers

    Tariffs

    Ad valorem Specific duty Compound duty Official prices Variable levy Lower duty for more local input

    Trade Barriers

    Nontariff Barriers

    Quantitative

    Quotas

    Absolute Tariff-rate Global

    Voluntary export restraints Orderly marketing arrangements

    Multifiber Arrangement

    Trade Barriers

    Nontariff Barriers

    Nonquantitative

    Direct government participation in trade


    Agriculture procurement policies Government procurement policies 1920 Jones Act

    Customs and other administrative procedures Standards

    Managers must be aware of barriers!!!!!!

    Trade Barriers

    Multinational Global Manufacturing Systems

    Two options

    Costs of Barriers

    Consumer costs

    Economic Development

    Categories

    Developed Developing New Industrialized Countries

    Newly Industrialized Economies IMF Classifications World Bank


    Three characteristics

    GNP/capita Problems with that

    Atlas conversion factors

    Purchasing power parity

    Underground market Exchange rates

    Characteristics of Developing Nations


    GNP/ capita of less than $9,075 Unequal distribution of income, small middle class Technological dualism Regionalism dualism 80-85% of population in unproductive agricultural sector Disguised unemployment or underemployment- two people doing what one can do High population growth (2.5-4%) High rate of illiteracy Widespread malnutrition Political instability High dependence on few exports (agriculture and minerals) Inhospitable topography Low savings rates and inadequate banks

    Human-Needs Approach

    Goals Human Development Index Investment in Human Capital

    Return

    International Investment Theories

    Monopolistic Advantage Theory Product and Factor Market Imperfections International Product Life Cycle Other Theories

    Follow-the-leader theory Cross investment Internationalism theory Dunnings Eclectic Theory of International Production

    Ownership-specific Internalization Location-specific

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