GlobalBusinessTodayNinthEditionChapter6InternationalTradeTheoryChapterOutlineOPENINGCASE:CreatingtheWorld’sBiggestFreeTradeZoneINTRODUCTIONANOVERVIEWOFTRADETHEORYTheBenefitsofTradeThePatternofInternationalTradeTradeTheoryandGovernmentPolicyMERCANTILISMCountryFocus:IsChinaaNeo-MercantilistNation?ABSOLUTEADVANTAGECOMPARATIVEADVANTAGETheGainsfromTradeQualificationsandAssumptionsExtensionsoftheRicardianModelCountryFocus:MovingU.S.WhiteCollarJobsOffshoreHECKSCHER-OHLINTHEORYTheLeontiefParadoxTHEPRODUCTLIFECYCLETHEORYEvaluatingtheProductLifeCycleTheoryProductLife-CycleTheoryintheTwenty-FirstCenturyNEWTRADETHEORYIncreasingProductVarietyandReducingCostsEconomiesofScale,FirstMoverAdvantagesandthePatternofTradeImplicationsofNewTradeTheoryNATIONALCOMPETITIVEADVANTAGE:PORTER’SDIAMOND©2016byMcGraw-HillEducation.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocumentmaynotbecopied,scanned,duplicated,forwarded,distributed,orpostedonawebsite,inwholeorpart.102GlobalBusinessTodayNinthEditionChapter6FactorEndowmentsDemandConditionsRelatedandSupportingIndustriesFirmStrategy,Structure,RivalryEvaluatingPorter’sTheoryFOCUSONMANAGERIALIMPLICATIONSLocationFirst-MoverAdvantagesGovernmentPolicySUMMARYCRITICALTHINKINGANDDISCUSSIONQUESTIONSCLOSINGCASE:TheRiseofBangladesh’sTextileTradeLearningObjectives1.Understandwhynationstradewitheachother.2.Summarizethedifferenttheoriesexplainingtradeflowsbetweennations.3.Recognizewhymanyeconomistsbelievethatunrestrictedfreetradebetweennationswillraisetheeconomicwelfareofallcountriesthatparticipateinafreetradesystem.4.Explaintheargumentsofthosewhomaintainthatgovernmentcanplayaproactiveroleinpromotingnationalcompetitiveadvantageincertainindustries.5.Understandtheimportantimplicationsthatinternationaltradetheoryholdsforbusinesspractice.ChapterSummaryThischapterfocusesonthebenefitsofinternationaltradeandintroducesseveraltheoriesthathelpexplainthepatternsofinternationaltradethatareobservedinpractice.Thediscussionbeginswithanexplanationofthetheoryofmercantilism,andthenproceedstodiscussthetheoriesofabsoluteadvantageandcomparativeadvantage.Fouradditionaltheoriesarediscussed,includingtheHeckscher-Ohlintheory,theproductlifecycletheory,thenewtradetheory,andthetheoryofnationalcompetitiveadvantage.Eachofthesetheorieshelpsexplainwhycertaingoodsare(orshouldbe)madeincertaincountries.Thechapterendsbydiscussingthelinkbetweenthetheoriesofinternationaltradeand(1)afirm’sdecisionaboutwhere(intheworld)tolocateitsvariousproductiveactivities,(2)theimportanceofestablishingfirst-moveradvantages,and(3)governmenttradepolicies.©2016byMcGraw-HillEducation.Thisisproprietarymaterialsolelyforauthorizedinstructoruse.Notauthorizedforsaleordistributioninanymanner.Thisdocumentmaynotbecopied,scanned,duplicated,forwarded,distributed,orpostedonawebsite,inwholeorpart.103GlobalBusinessTodayNinthEditionChapter6OpeningCase:CreatingtheWorld’sBiggestFreeTradeZoneSummaryTheopeningcasedescribesthebenefitsofanewfreetradedealbetweentheUnitedStatesandtheEuropeanUnion.Theagreement,whichisexpectedtobefinalizedin2014,shouldreduceoreliminatethealreadylowtariffsbetweentheUnitedStatesandtheEuropeanUnioneffectivelyleavingbothinabetterposition.Manyarehailingtheproposedagreementasactingasacost-freestimuluspackagethatwillhelptocreatenewjobsandeconomicgro...