International Trade and Enterprise Final Project - HI5016

This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit. The questions cover topics such as absolute advantage, comparative advantage, gravity model, MNEs, and more. The assessment also includes instructions and weightage. The output is in JSON format.

Student Number: (enter on the line below)
Student Name: (enter on the line below)
HI5016
INTERNATIONAL TRADE AND ENTERPRISE
FINAL ASSESSMENT
TRIMESTER 3, 2021
Assessment Weight: 50 total marks
Instructions:
 All questions must be answered by using the answer boxes provided in this paper.
 Completed answers must be submitted to Blackboard by the published due date
and time.
Please ensure you follow the submission instructions at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your level of
knowledge of the key topics covered in this unit.
HI5016 Final Assessment T3 2021

Question 1 (7 marks)
a. Define absolute advantage and comparative advantage. (3 marks)
ANSWER a): ** Answer box will enlarge as you type
The term absolute advantage refers to the ability of an individual, region, company or nation for
producing a greater quality of services and goods with respect to the same quality of inputs per
unit of time. In a relative sense when an individual producer of goods or services is able to
lower the processing cost than another. For the given term absolute advantage can be
accomplished by creating services or goods at a lower absolute cost per unit by ensuring the use
of a small number of inputs or sometimes adopting to a more efficient process. The term
comparative advantage refers to producing a particular service or good at a lower opportunity
cost in comparison to its trading partners. The provided term describes the reality of the
economy with respect to work gains of trade for individual firms, nations that could be the
result of factor endorsements or significant progress made in technologies (Ferliana, 2020).
b. Explain why Japan exports automobiles, while the U.S. exports aircraft? Use the prior
definitions of absolute and comparative advantage to assist with your answer. (4 marks)
ANSWER b):
According to D. Gorka, (2022), Japan exported approximately 3.74 million motor vehicles for
which most exports were passenger cars. One of the reasons that Japan have come to dominate
used-car exports is because of the expensive and strict vehicle inspection in Japan that
discourages people of the region from holding cars as they age (Number of new motor vehicle
exports from Japan from 2011 to 2020, 2022). This can be related to producing comparative
advantage in an economy to gain better terms of working within society.
According to Trading Economics, (2022), US exports of aircraft, spacecraft was US$80.94 Billion
during 2020. The foremost reason for the export is set on the standards of fueling economic
growth and advancing further in the contemporary business environment (United States
Exports of aircraft, spacecraft, 2022). For the provided instance key considerations to absolute
advantage can be obtained by the region. With its inclusion better basis of operations are
produced that correlates to producing the quality of input per unit of time.
Question 2 (7
marks)
a. After the Seattle 1999 World Trade Organisation Ministerial Conference there were many
demonstrations against the idea of globalisation. Why were these demonstrations mostly
directed at the IMF? (4 marks)
ANSWER a):
The WTO Ministerial Conferences of 1999 was a meeting of the World Trade Organisation that
was conducted at Washington State Convention and Trade Center in Seattle, Washington, USA.
In the meeting, there were several discussions that were made with respect to the policy of
globalisation which had a large number of supporting institutions accompanied with some
discouraging no fewer than 40,000 protests. For the discussions, there were several elements
HI5016 Final Assessment T3 2021

that were presented that coincided with making a free trade between associated regions.
However, looking at a large number of protests being done in the region the various
demonstrations were being directed to IMF i.e., International Monetary Fund (Koul, 2018). The
potential reason could be due to the high end of authority marked by the institution which was
beyond any legislation of the region. This helps in managing the controversy spread in the
region and guided with strict implementation of policies that were designed with regards to
globalisation.
b. Why do some marginalised groups in the USA and Canada reject the idea of
globalisation? In answering consider NAFTA (North American Free Trade Agreement). (3
marks)
ANSWER b):
The idea of globalisation was promoted and discouraged by various individuals at the same
period of time. Marginalised groups in USA and Canada rejected the idea of globalisation for
which high-end competition was set as the basis of the reason. The thinking was set which was
dedicated to increasing the competition in domestic regions due to the adoption of the policy of
globalisation. In addition to this, NAFT also supported globalisation for which elimination of
trade barriers between the US, Canada and Mexico was being facilitated. The cause of rejection
also was related to the presence of the given agreement for which additional policies of
globalisation was not needed (Ciuriak, 2018).
Question 3 (7 marks)
a. Explain how an export subsidy is theoretically meant to work. Think of the application
to “infant industry”. (3 marks)
ANSWER a):
The term export subsidy refers to a government policy that encourages the export of goods and
discourages sales of goods in the domestic market by taking an instance of low-cost loans, relief
in tax for exporters and direct payments. The working of export subsidy is dedicated with
respect to reducing prices paid by foreign importers that comprehend to domestic consumers
pay more than foreign consumers.
The provided concept with respect to the infant industry is an effective concept that would help
the new economy to gain quick development. For the reason being better transit of incoming of
foreign currency will increase in the economy .
b. Why is it that most of these industries do not generate the overseas revenue and
domestic profits and employment that were promised? (4 marks)
ANSWER b):
Various industries operating in an economy are bounded by several aims and objectives which
are to be taken care of by managers of such industries. With its inclusion generation of overseas
revenue and domestic profits as well as employment are being promised within the region.
These industries are sometimes unable to deliver promises. This could be due to frequent
HI5016 Final Assessment T3 2021

market changes, changes in consumer behaviour and due to innovative technologies (Pick,
2019).
Question 4 (7
marks)
a. Define the gravity model. Specify the variables utilised. (2 marks)
ANSWER a):
Gravity Model is described as a model which facilitates in determination of volume of trade
among two countries. For instance, it states that volume of bilateral trade among different
countries is directly proportional to their economic size. In addition to that, it includes two
different variables including population size and distance among countries engaged in
international trade (Leng, and et. al., 2020).
b. Apply the gravity model to India and China. Why has it taken so long for India and China
to become serious trading partners? Think of 18th century trade patterns, importation of
raw materials back to the UK from their colonies. (2 marks)
ANSWER b):
Trade barriers in India were officially removed or prevented in the year 1991. For instance,
government authorities were ready to prevent trade barriers as they believed that producers or
manufacturers within geographical boundaries of respective nation were ready to compete with
manufacturers operating in global market. Furthermore, Lumber, cotton, rice, indigo, etc. were
some of the major raw materials needed by England.
c. Apply the gravity model to the UK in the year 2021. What countries are most important
to the UK’s trade relationships? (3 marks)
ANSWER c):
The primary and major trade partners to UK are United states, Germany, the Netherlands, and
France. For instance, these economic nations are comprised of 46% of the total trade in United
Kingdom. In addition to that, US has been resulted in being the primary trade partner with
largest amount of imports as well as exports to respective country with a percentage of 21%.
Furthermore, UKUSFTA (United Kingdom United States Free Trade Agreement) has been
established as a trade agreement among these respective countries (Yülek, 2018).
Question 5 (11 marks)
HI5016 Final Assessment T3 2021

a. What are the pressures that encourage MNEs to establish in newly industrialising
countries? (4 marks)
ANSWER a):
MNEs often look after establishment in developing or newly industrialising economic nations
with consideration of various pressures or forces. For instance, it includes availability of labour
at low cost, accessibility to economic markets, favourable government policies, etc. Moreover,
all these forces or pressures results in being beneficial for a business organisation which further
facilitates in carrying out operations and activities in an efficient manner with lower cost of
production. Furthermore, government is quite in favour of these MNEs as they contribute
towards overall development of economic nation. Therefore, it results in being a huge
opportunity for an MNE to serve a higher amount of people residing in developing economic
nations.
b. What are the pressures that encourage politicians in newly industrialising countries to
allow MNEs to establish in their countries? (4 marks)
ANSWER b):
The primary and major positive impact of MNE in an newly industrialising countries lies in
facilitating host country to increase their investment as well as employment with establishment
of additional business unit of respective MNE in their economic nation. In addition to that, it
further facilitates in finance and technology as well as skilled workforce across countries.
Establishment of a MNE contribute towards acceleration of rapid industrialisation as well as
overall development. Being a large scale business organisation with huge network, an MNE also
supports host country in enhancing and improvising trade relations with other countries(What
is the Role of MNCs in Developing Countries?, 2022).
c. How can MNEs act ethically in host countries? (3 marks)
ANSWER c):
In order to act ethically in host countries, newly established MNEs need to cope up with ethical
rules and regulations introduced in that particular economic nation. For instance, it also
includes fulfilment of essential CSR in order to contribute values towards society. In addition to
that, it includes prevention of discrimination, harassment, nepotism or favouritism, and other
unethical practices. Furthermore, providing a safe and secure working environment to
employees in order to ensure health and safety of workforce.
Question 6 (11 marks)
a. What does the expression “marginal product of labour” mean? (3 marks)
ANSWER a):
HI5016 Final Assessment T3 2021

This particular expression is meant by increase in production of output in a workplace with one
standard additional unit of workforce. For instance, marginal product of labour could be
determined by dividing total change in total production by total change in workforce.
Furthermore, increase in workforce results in being variable whereas other factors remain
constant in determining total marginal product of labour (Learn About Marginal Product of
Labor in Economics: Definition, Examples, and Impact on Economy, 2021).
b. Why do workers (skilled and unskilled) migrate from labour abundant countries to
countries with a scarcity of labour? (4 marks)
ANSWER b):
The primary reason behind migration of workforce from abundant countries towards countries
with scarcity of labour lies in opportunity of higher pay allotted to workforce. For instance, due
to scarcity of labour, workforce is generally paid a higher salary or wages as compared to
economic nations with abundant labour. Furthermore, it further facilitates in reduced
competition as well as availability of higher amount of employment opportunities. Moreover, It
also provides labour with opportunities to enhance and improvise their skills and abilities as
well as information and knowledge. Therefore, migration of labour from labour abundant
workforce towards economic nation with scarcity of labour results in being beneficial for both
labour as well as economic nation (International Labour Organization (ILO), 2022).
c. How has that migration of labour been of advantage to other countries? (4 marks)
ANSWER c):
When workforce of an economic nation migrates, it results in being beneficial to other countries
as it facilitates in movement of skilled labour to other economic nations. For instance, it
provides other countries with skilled workforce which further facilitates in improvising and
enhancing human capital development of other countries. In addition to that, migration of
skilled workforce contribute towards overall economic development of migrated economic
nation with skilled and efficient workforce. Therefore, it further contributes in transfer of
efficient technology among different countries (International Labour Organization (ILO), 2022).
HI5016 Final Assessment T3 2021

References
Books and Journals
Ferliana, N., 2020. International Trade of Rattan Industry in Indonesia: Global Value Chain,
Absolute and Comparative Advantage.
Koul, A.K., 2018. World Trade Organisation: Its Birth and Background. In Guide to the WTO and
GATT (pp. 1-37). Springer, Singapore.
Ciuriak, D., 2018. Canada's Progressive Trade Agenda and the NAFTA Renegotiation. Available
at SSRN 3055948.
Pick, D., 2019. Global markets for processed foods: Theoretical and practical issues. Routledge.
LeBaron, G., 2020. Combatting modern slavery: Why labour governance is failing and what we
can do about it. John Wiley & Sons.
Zhang, Y., Li, X. and Wu, T., 2019. The impacts of cultural values on bilateral international tourist
flows: A panel data gravity model. Current Issues in Tourism, 22(8), pp.967-981.
Leng, Z., Shuai, J., Sun, H., Shi, Z. and Wang, Z., 2020. Do China's wind energy products have
potentials for trade with the “Belt and Road” countries?--A gravity model approach.
Energy Policy, 137, p.111172.
Yülek, M.A., 2018. How nations succeed. Palgrave Macmillan US.
Online
International Labour Organization (ILO), 2022. [Online] Available At:
<https://www.ilo.org/global/topics/dw4sd/themes/migration/lang--en/index.htm>
Learn About Marginal Product of Labor in Economics: Definition, Examples, and Impact on
Economy, 2021. [Online]. Available At: <https://www.masterclass.com/articles/learn-about-
marginal-product-of-labor-in-economics#what-is-the-definition-of-marginal-product-of-labor>
What is the Role of MNCs in Developing Countries?, 2022. [Online] Available At:
<https://www.preservearticles.com/business/what-is-the-role-of-mncs-in-developing-
countries/20063>
Number of new motor vehicle exports from Japan from 2011 to 2020, 2022. [Online]. Available
at: <https://www.statista.com/statistics/676513/japan-motor-vehicle-exports/#:~:text=In
%202020%2C%20Japan%20exported%20approximately,shipped%20to%20the%20United
%20States.>
United States Exports of aircraft, spacecraft, 2022. [Online]. Available at:
<https://tradingeconomics.com/united-states/exports/aircraft-spacecraft>
HI5016 Final Assessment T3 2021

END OF FINAL ASSESSMENT
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HI5016
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HI5016 Final Assessment T3 2021