Assignment 3 Chapter 10

Published: 2021-07-17 09:05:06
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Q5. Explain in your own words why a bilateral agreement with another country that opens a nation’s borders to both imports from and exports to that country might not necessarily reduce the domestic nation’s employment of labor.A bilateral agreement between two countries mean that there is an agreement of trade (import and export) which minimized the tax quota and trade tariffs. When a bilateral agreement occurs between two countries, it means that there are no boundries of trade on the border. However, the labor of the domestic country remains stable. It is due to the reason that the infrastructure of the domestic country is governed by the same rules as it was before the agreement. Sometimes, it occurs that labor wants to move to the other country for better employment, but a bilateral agreement only regulates the trade boundries and the employement of labor is not affected by it.Q12. Explain why the short-term effects of outsourcing on US wages and employment tend to be more ambiguous than the long-term effects.The long term effects of outsourcing means that a company is operating more effectively, with a chance of competitive advantage in the industry. The results gained by international trade in labor, enables the resources to generate revenue from other resources, that ultimately gives a boost to the wages and employment worldwide. The short term effects of outsourcing in US remains unclear because every country tends to hire the domestic labor from the domestic market, which creates unemployment in the parent country. For example, if US is working on a project in Mexico, the country will hire Mexican labor instead of using US labor. It directly effects the employement balance in the US, which is not clear in many terms.Chapter 12Q4. In your own words, distinguish horizontal foreign direct investment from verticalforeign direct investment.Foreign Direct Investment (FDI) is classified in to two forms; horizontal FDI and vertical FDI. Horizontal foriegn direct investment means where a company invests in the same business working abroad, as the domestic company. While, vertical FDI means where a company becomes another entity and invests in it. These entities can be suppliers or distributors in the foreign company.Q8. A domestic industry has been able to prove that a foreign produce reengaged in dumping. The foreign producer’s counterargument is that it has charged higher prices in its home market simply because this is its profit-maximizing strategy in its home market where barriers to entry have given it monopoly pricing power, whereas it faces considerable competition in the domestic market and hence charges a lower price for its product in that market. Explain why this might be a reasonable economic argument yet do little to fend off the imposition of antidumping penalties under current international antidumping rules.Dumping rule is applied to a company which is doing international business. It regulates the company to charge less prices in the foreign market, than the price in the home market. The situation here clearly describes that the producer is violating the rules of dumping, by charging higher prices than the home market. So, according to the anti dumping duties, in such situation the company will be charged double duty because of violating the dumping terms.Q. What is Inter-industry and Intra-industry trade? How do economies of scale and product variety provide an explanation for Intra-industry trade?Inter-industry trade is a form where the trade of products belongs to different industries. For example, production of automobiles in one country, and electronic equipment in another country. Companies acquire inter-trade according to their competitive advantage. While, intra-industry trade, is termed as a trade of products/services in the same industry. Being in the same industry between different countries, make more opportunity costs and enables the company to enter or leave the industry at any time. In such a situation, company is playing monopoly and if there is more competition, it can also lower the prices to observe economies of scale.Chapter 13Q1. Discuss the key rationales for governmental regulation reviewed in this chapter. Why do you suppose that national governments may disagree about the appropriate scope of consumer-protection regulations?The government regulators protects the consumers rights to an exchange by providing minimal standards of service and quality. From the consumer exchange perspective, there should be best possible quality and producer wants it at minimum standards. Government might disagree with the standards because there is appropriate right of a customer to be give best quality product, and disagreeing with the regulators, government can set agencies to ensure those standards.Q2. A source of conflict in international trade is a potential trade-off between free trade and a desire to protect domestic residents from potentially harmful products, such as substandard drugs. Briefly outline one way that nations might cooperatively deal with this problem within the context of online trade in pharmaceuticals.Protecting residents from harmful products through international trade is the primary concern and issue for countries. However, the most suitable way of protecting the residents from this issue might be of incorporating taxes on the pharmaceutical products or increasing taxes on such products. So, if any drug is being traded into the country under the name of medicine, it will be equally charged with tax, which migh prevent future trading of drugs.Q5. If a national government chose to limit itself to issuing only patents, copyrights, or trademarks in the electronic marketplace, which form of intellectual-property-right protection do you believe it should choose to enforce?If a government choose to limit the patents, copyrights, and trademard in online market only, the best stance to consider is protection of the trademarks. Online market has a huge threat of replicability, and it serves the fraudulents to copy almost everything. Protecting the IP addresses and the trademarks through it, will be the best protection strategy for the government to implement.Chapter 14Q2. List three benefits of portfolio capital and three benefits of foreign direct investment. Give one negative aspect of each. Explain why it is undesirable to rely on portfolio capital only. Explain why it is undesirable to rely on FDI only.Benefits of portfolio capital:Portfolio diversification (opportunity for international investors to invest in more assets)International credit (access to more foreign credit base)Access to bigger markets (more opportunities for business)Benefits of FDI:Ease in international trade.Increase in employment and economy.Transfer of resources.Relying only on portfolio capital might destabilize the economy of the country, as it is based on a short term maturity of capital. While, relying only on FDI might have a stabilized influence on the country’s economy but, it can result in bad domestic economy.Q. Write a brief note on IMF.International Monetary Fund (IMF) is an international economic organization, which is owned and governed by almost 180 different nations. IMF serves to promote economic growth (globally), by establishing monetary cooperation and exchange agreements. It also provides long term financial assistance to the nations which cannot balance the payments due to any external reason. IMF does not reveal complete information about the requirements of the loans and placing of finances. But, this is benefical for the loan borrowers to use the IMF funds for their projects, which ultimately increase the space of moral problem in international financing markets.ReferencesDaniels, Joseph P., and David D. VanHoose. Global economic issues and policies. Routledge, 2017. 

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