International Business - Chapter 6: International Trade and Investment Theory

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"Chapter 6: International Trade and Investment Theory" understand the motivation for international trade, summarize and discuss the differences among the classical country-based theories of international trade, use the modern firm-based theories of international trade to describe global strategies adopted by businesses.

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Nội dung Text: International Business - Chapter 6: International Trade and Investment Theory

Chapter 6: International Trade and Investment Theory International Business, 4th Edition Griffin & Pustay 6-1 ©2004 Prentice Hall
Chapter Objectives_1  Understand the motivation for international trade  Summarize and discuss the differences among the classical country-based theories of international trade  Use the modern firm-based theories of international trade to describe global strategies adopted by businesses 6-2 ©2004 Prentice Hall
Chapter Objectives_2  Describe and categorize the different forms of international investment  Explain the reasons for foreign direct investment  Summarize how supply, demand, and political factors influence foreign direct investment 6-3 ©2004 Prentice Hall
International Trade  Trade: voluntary exchange of goods, services, assets, or money between one person or organization and another  International trade: trade between residents of two countries 6-4 ©2004 Prentice Hall
Figure 6.2 Sources of the World’s Merchandise Exports, 2001 37% 40% European Union United States Japan Canada Other countries 4% 12% 7% 6-5 ©2004 Prentice Hall
The largest component of the annual $1.5 trillion trade in international services is travel and tourism 6-6 ©2004 Prentice Hall
Classical Country-Based Trade Theories  Mercantilism  Absolute Advantage  Comparative Advantage  Comparative Advantage with Money  Relative Factor Endowments 6-7 ©2004 Prentice Hall
Mercantilism  A country’s wealth is measured by its holdings of gold and silver  A country’s goal should be to enlarge holdings of gold and silver by – Promoting exports – Discouraging imports 6-8 ©2004 Prentice Hall
Modern Mercantilism  Neomercantilists or protectionists – American Federation of Labor-Congress of Industrial Organizations – Textile manufacturers – Steel companies – Sugar growers – Peanut farmers 6-9 ©2004 Prentice Hall
Disadvantages of Mercantilism  Confuses the acquisition of treasure with the acquisition of wealth  Weakens the country because it robs individuals of the ability – To trade freely – To benefit from voluntary exchanges  Forces countries to produce products it would otherwise not in order to minimize imports 6-10 ©2004 Prentice Hall
Absolute Advantage  Export those goods and services for which a country is more productive than other countries  Import those goods and services for which other countries are more productive than it is 6-11 ©2004 Prentice Hall
Table 6.1 The Theory of Absolute Advantage: An Example OUTPUT PER HOUR OF LABOR France Japan Wine 2 1 Clock 3 5 radios 6-12 ©2004 Prentice Hall
Absolute Advantage’s Flaw  What happens to trade if one country has an absolute advantage in both products?  No trade would occur 6-13 ©2004 Prentice Hall
Comparative Advantage  Produce and export those goods and services for which it is relatively more productive than other countries  Import those goods and services for which other countries are relatively more productive than it is 6-14 ©2004 Prentice Hall
Differences between Comparative and Absolute Advantage  Absolute versus relative productivity differences  Comparative advantage incorporates the concept of opportunity cost – Value of what is given up to get the good 6-15 ©2004 Prentice Hall
Table 6.2 The Theory of Comparative Advantage: An Example OUTPUT PER HOUR OF LABOR France Japan Wine 4 1 Clock 6 5 radios 6-16 ©2004 Prentice Hall
Comparative Advantage with Money  One is better off specializing in what one does relatively best  Produce and export those goods and services one is relatively best able to produce  Buy other goods and services from people who are better at producing them 6-17 ©2004 Prentice Hall
Table 6.3 The Theory of Comparative Advantage with Money: An Example Cost of Goods in France Cost of Goods in Japan French Japanese French Japanese Made Made Made Made Wine €3 €8 ¥375 ¥1,000 Clock €3 €1.6 ¥250 ¥200 Radios 6-18 ©2004 Prentice Hall
Relative Factor Endowments  Heckscher-Ohlin Theory  What determines the products for which a country will have a comparative advantage? – Factor endowments vary among countries – Goods differ according to the types of factors that are used to produce them 6-19 ©2004 Prentice Hall
Relative Factor Endowments_2  A country will have a comparative advantage in producing products that intensively use resources (factors of production) it has in abundance – China: labor – Saudi Arabia: oil – Argentina: wheat 6-20 ©2004 Prentice Hall