International Business Assignment: New Trade Theory Analysis

This assignment report delves into the realm of international business, particularly examining the application of the new trade theory. It explores how the United States' dominance in the commercial aircraft market is influenced by this theory, highlighting factors such as economies of scale and global business networks. The report further analyzes the implications of consumer demand for customized products on international trade, emphasizing the role of globalization and government policies. Finally, it discusses the effects of import limitations on domestic consumers and producers, providing a comprehensive overview of the interplay between trade theories and real-world business practices. The report references Ranjan & Raychaudhuri (2016) to support its analysis.

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International Business
How does the new trade theory help us to understand why the United States is dominant
in the world market for commercial aircraft exports? (2 marks)
The new trade theory has helped the US to predict the international trade patterns which has
actively boosted their exportation of commercial aircraft. United States of America have
managed to for partnership with other states despite their engagement in the trade of similar
goods and services (Ranjan & Raychaudhuri, 2016). Subsequently, it has helped them in the
aircraft business together with other trades like electronics and food. Aircrafts business is a huge
investment across the globe, subsequently, the US manufactures them and also imports them.
According to the new trade theory, USA gets a lot of money when it exports the aircrafts because
of a substantial scale of economy and good business network globally (Ranjan & Raychaudhuri,
2016).
With more innovations coming to the market, consumers want more and more
customized products. How does that affect international trade according to the new theory
of international trade? (2 marks)
The demand for customized products by the consumers will affect the international trade due
to globalization. For example, manufactures will have to produce goods by observing the
consumer behavior and the existing cultures in various countries across the globe. It will increase
the competition in the international scene because every producer would want to manufacture a
product that meets the requirements of the customer (Ranjan & Raychaudhuri, 2016). The new

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trade theory also highlights that the government policies along the borders will be a key factor to
determine the kind of customized products being shipped to the consumers.
According to international trade theory, limits on imports are often in the interest of
domestic producers but not domestic consumers.
International trade theory has a significant effect on domestic consumers because there are
always reduced wages in certain some sectors hence affecting the population. The limits on
imports also act as barrier for the consumers to get what they want because the approach looks
like the country is practicing monopoly. Nevertheless, if there are cheap imports, it reduces the
cost of acquiring some products and services by the public (Ranjan & Raychaudhuri, 2016).

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Reference
Ranjan, P., & Raychaudhuri, J. (2016). The “new-new” trade theory: a review of the literature. In
International Trade and International Finance (pp. 3-21). Springer, New Delhi.