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Trade Theories
16th Century Mercantilism:
Governments
ensuring trade surplus
by controlling imports
21st Century Free Trade:
Countries specialised
for strategic advantage
& trade freely
1. 16th Century Mercantilism theory
2. Absolute Advantage (Adam Smith)
3. Comparative Advantage (David Richardo)
19th Century onwards
4. Factor Proportions Theory (Heckscher & Ohlin)
5. Country Similarity Theory (Steffan Linder)
6. Global Horizons Theory
7. Product Life Cycle (Vernon)
8. New Trade Theory
9. Ownership Advantage Theory (S.Hymer)
10. Internationalisation Approach (Buckley and
Casson)
11. Global Strategic Rivalry theory
12. Porter’s National Competitive Advantage
(diamond) theory
13. Internalisation Theory
14. Eclectic Theory (John Dunning)
Purposes of Trade Theories
What? Who? Where?
Stakeholders
Why?
Conditions
How?
More emphasis by recent theories
Approaches
Assignment 1 Planning
As exemplified by the European Union (EU), regional economic
integration is replete with political, economic & cultural danger.
Discuss through the use of valid, real-life examples.
Simply put
As seen in the case of the EU, regional economic integration
is replete with political, economic & cultural risks & issues
As exemplified by the European Union (EU), regional economic
integration is replete with political, economic & cultural danger.
Discuss through the use of valid, real-life examples.
What
is EU?
2
1
3
What’s
the link?
What
regional
economic
integration?
4
What
are the
Risks &
Issues?
Note:
• Risks are anticipated problems
that have not occur yet
• Issues are eventuated risks
What
2351
topics’
concepts
&
theories
can U
use?
What 2351 topics’ concepts & theories can U use?
IB organisation
Roles & Strategic
Approaches
Week 2
PLE Systems
Week 3
Social System Culture
IB
PESTLE Systems
Makeup
Week 4
IB Trade
Theories
IB Evolution,
Concepts & Methods
Development
Week 5
OB Regulatory
Framework
Week 7
Inter Nation
Cooperation
Week 6
MNC & FDI
Week 8
ForEx & IMS
Week 9
IB firms’strategies
& structures
Week 10
IB firms’ Entry
Modes
IB Governance &
Market Systems
Week 11
Globalisation
& IB
Assignment Development Activities
Planning how
to do?
Planning,
Literature Search
& Developing working papers
Action
planned tasks
Writing planning
& development
Are U able to show U
followed the
assessment criteria?
Plan your
report
structure
Write, edit &
proof read
your report
Assignment 2: Group Presentation
Starts next week…………..
Important Instructions to be followed:
1. Answer the chosen week’s questions
• Must show application of relevant 2351 concepts, theories, etc
• Must elaborate or support answers with real-life examples (ie cases)
2. On day of presentation must hand in hard copies of:
• Presentation with group members’ ID and name details and clarifying
who is presenting which question
• Each group member’s peer evaluation form (downloaded from
Moodle)
• Evaluation sheet for tutor, completed with names and topic title
Presentation tips: http://www.youtube.com/watch?v=2-ntLGOyHw4
Important assessment criteria:
• Contents & structure
• Visual aids & supporting materials
• Verbal communications & body language
•
•
•
Analysis & Critical Thinking Skills
Audience and Q&A interactions
Other
Discussion Qs
16th Century Mercantilism:
Governments
ensuring trade surplus
by controlling imports
21st Century Free Trade:
Countries specialised
for strategic advantage
& trade freely
1. Can Mercantilism apply in today’s world?
2. Is Free Trade fair?
• Examine its cost-benefits
• Examine its winners & losers
The Rise of Bangladesh’s Textile Trade Case Study
Bangladesh's textile industry – 1.51 m
https://www.youtube.com/watch?v=CxKlnkp9SvQ
Ethnical Textiles – 3.31m
https://www.youtube.com/watch?v=A3xrXC9wcZg
https://www.youtube.com/watch?v=hcYYLmcxavA
Source: The Hindu, Dec 20, 2012
Martin Jacques - When China Rules the World – 10.04 m
https://www.youtube.com/watch?v=Og8zBhDDkEQ
1. Why was the shift to a free trade regime in the textile industry good for
Bangladesh?
2. Who benefits when retailers in the US source textiles from low-wage
countries suh as Bangladesh?
3. What international trade theory or theories best explain the rise of
Bangladesh as a textile exporting powerhouse?
4. How secure is Bangladesh ‘s textile industry from foreign competition?
What factors could ultimately lead to a decline?
The Benefits
The POSITIVES:
1.
2.
3.
4.
Capital Formation
Technology Transfer
Regional & Sectoral Development
Internal Competition &
Entrepreneurship
5. Favourable Effect on Balance of
Payments
6. Increased Employment
Bangladesh's textile industry – 1.51 m
https://www.youtube.com/watch?v=CxKlnkp9SvQ
At What
Costs?
At Whose
Costs?
Bangladesh has the advantage of not being China
The argument focus is Cost Advantage
Bangladesh
Low cost factors
China
China
Is the largest world’s exporter
 sunk FDI
But still MNC have concerns of
increasing cost factors
Martin Jacques - When China Rules the World – 10.04 m
https://www.youtube.com/watch?v=Og8zBhDDkEQ
The long version – 1.34 hrs
https://www.youtube.com/watch?v=3G1EyvRZmOs
The Costs
The NEGATIVES:
1. Industrial dominance
2. Exploitation of raw materials + cheap
labour
10. Technology transfer may be too
expensive or inappropriate (eg old)
11. Can move out when country regulates
3. Bribery and corruption
4. Interference in political matters
5. Technological dependence
6. Disturbance of economic plans
12. Products are for overseas markets and
may not benefit local social needs or
value
7. Cultural change
13. MNC’s home country’s labour
/employment interests are undermined
8. Interference by home government
14. Avoid taxes
through MNC
9. Degree of government control may
15. Best jobs given to MNC’s privileged
people
be less than intended
Ethnical Textiles – 3.31m
https://www.youtube.com/watch?v=A3xrXC9wcZg
https://www.youtube.com/watch?v=hcYYLmcxavA