global marketing chapter 2 session 4 moghimi university of georgia
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Global Marketing Chapter 2 Session 4 MOGHIMI University of GeorgiaTRANSCRIPT
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Chapter 2
Trade Theories and Economic Development
Bahman Moghimi (MA, DBA)Bahman Moghimi (MA, DBA)
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Chapter Outline
Basis for International Trade- Production Possibility Curve- Principle of Absolute Advantage- Principle of Comparative/Relative Advantage Exchange Ratios, Trade, and Gain Factor Endowment Theory
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Chapter Outline
The Competitive Advantage of Nations A Critical Evaluation of Trade Theories- The Validity of Trade Theories- Limitations and Suggested Refinements Economic Cooperation- Levels of Economic Integration Economic and Marketing Implications
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Basis for International Trade
Principle of Absolute Advantage- a country should export a commodity that
can be produced at a lower cost than can other nations
- or import a commodity that can only be produced at a higher cost than can other nations
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Basis for International Trade
Principle of Comparative/Relative Advantage
- a country should export either a product with the greatest comparative advantage (or with the least comparative disadvantage)
- or import either a product for which it has the greatest comparative disadvantage (or the least comparative advantage)
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Factor Endowment Theory
Factors of Production- labor- land - capital- others (technology, education, etc.)
inequality of relative prices is a function of regional factor endowments
comparative advantage is determined by relative abundance of such endowments [email protected]
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Michael PorterThe Competitive Advantage of Nations
Determinants of International Competitiveness
- factor conditions- demand conditions- related and supporting industries- firm strategy, structure, and rivalry- chance- government
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Validity of Trade Theories
Leontief Paradox– Tendency for countries with similar endowments
to trade among themselves Offshoring Factor Mobility and Substitution Demand Marketing Trade Barriers
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Levels of Economic Cooperation
Free Trade Area Customs Union Common Market Economic and Political Union Political Union
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Economic Cooperation
Free Trade Area- elimination of internal duties Customs Union- free trade area + establishment of common
barriers Common Market- customs union + removal of restrictions on
movement of production factors
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Economic Cooperation
Economic and Monetary Union- common market - + harmonization of national economic
policies- + one money Political Union- harmonization of national political policies
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