International Trade Theory Report: Economic Welfare and Management

This report examines international trade theory, addressing the economic benefits of unrestricted free trade, the role of government in promoting national competitive advantage, and the implications of trade theory for management practices within international firms. The report highlights how free trade can boost economic welfare by increasing job opportunities, wages, and living standards, while also fostering specialization and increased consumption levels. It further explores the government's role in achieving national competitive advantage, emphasizing the importance of stable political conditions, youth employment, and strategic trade policies. Finally, the report delves into the application of international trade theories, such as mercantilism, in guiding managerial decisions, particularly in areas like production, exporting, and global market expansion. The report uses real-world examples like the General Agreement on Tariffs and Trade (GATT) and companies like Woolworths, Coles, and Nike to illustrate these concepts.

Running head: SOCIOLOGY
Sociology
Name of the Student
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Author Note

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Question One
According to many economists, it has been said that the unrestricted free trade has many
benefits for the countries that participate in the free trade. In the countries with a good
infrastructure, free trade often creates some resources for more jobs. This has been one of the
best advantages for the unrestricted free trade (Anderson & Yotov, 2016). The wages of the
employees will be boosted and their living standards will be developed as well.
The inefficient firms in all over the world do not feel the good impacts of the restricted
trade. The efficiency of the firms will surely increase since they will have to increase their
effectiveness while competing with the international firms (Dai, Yotov & Zylkin, 2014).
Through this way of free trade, the specialization level of the countries will go up since they will
trade the goods in which they are most efficient. This aspect of specialization will result in
higher outputs for the country.
The countries that are engaged in the free trade will be able to increase the levels of
consumption. The eminent economists have predicted if the trade barriers are lifted, the chances
of market monopolies will cease to exist (Anderson & Yotov, 2016). It is because the companies
will operate at a global level. Through this method, it will also work as a barrier for the domestic
organizations to charge high prices for their services and products (Dai, Yotov & Zylkin, 2014).
Another benefit of this unrestricted trade is latest technologies can very easily cross from one
country to another. The companies will have to cut down the prices of their services and it will
be helpful for the customers.
The General Agreement on Tariffs and Trade (GATT) is a very good example of the
multilateral free trade agreements between countries like United States, United Kingdom,

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Canada, India, China and other countries. Due to this agreement, all the participating countries
will be able to take part in import and export of goods between themselves and it could result in
the economic welfare.
Question Two
The competitive advantage of the nations is a very critical matter in the contemporary
times. The government of the nations indeed has a huge role to play in gaining the competitive
advantage (Makin & Ratnasiri, 2015). The government officials should work to keep aside their
political interests and work for the economic welfare of the entire country. The General
Agreement on Trade and Tariffs should be implemented properly so the different multinational
organizations can opt to invest in these countries.
The government officials should make sure that the political condition of the country is
quite stable. One of the major things the Government should look after the employment of youth.
When the young people are unemployed in the country, the GDP of the country is sure to be
affected (Makin & Ratnasiri, 2015). When the Government is able to maintain a proper rate of
employment, this will cater to the economic growth of the country. The Government should also
care for the growth of the manufactured products within the country.
Quality controlling tools must be controlled by the Government to ensure best quality
products. The strategic trade policies should be implemented by the Government and they also
must ensure the fact that these policies should cater to the import and export of goods (Lazzarini,
2015). The governments should support the investment plans of these international
organizations. The customs excise duties will improve the economic improvement of the country

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as well. These are the probable ways how a Government cab help in achieving a country its
competitive advantage on their rival countries.
Several critics have argued that countries like Japan, China and others have worked very
hard to promote their technology industry through their governments. Their governments have
played a proactive role by supporting companies with aids to work harder in the betterment of
technology.
Question Three
The managers in the international firms should conduct their works by following the
international trade theories. The implications of the international trade theories will be very large
on the management practices of the different firms. There are certain international trade theories
that exist in the world (Vernon, 2017). The managers are always advised to carry out their
services as per the rules of the international trade theories. There are some basic trade theories
that can be attributed to the international sphere.
Once this theory is implemented by the managers, this will be highly helpful as well.
Many new techniques of production could be implemented by the managers for the firms
(Helpman & Razin, 2014). Due to the expansion of this theory all over the world, the
international organizations and their managers will be able to increase their part of the profits.
The mangers will also be benefitted highly as well. Another theory i.e. very important for the
practice of the managers is the mercantilism theory. This theory had been invented after the
globalization of business. The managers would like to implement this theory so they can take the
advantages of the free tarde all around the world. According to this theory, exporting is a good
practice and this should be encouraged. Large manufacturing companies and retail companies

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tend to export their goods all across the world with the global free trade in mind. Companies like
Woolworrhs, Coles, BHP Billiton, sports goods manufacturers like Adidas, Nike and others
always export their goods so they can expand their business in the foreign countries.

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Reference List
Anderson, J. E., & Yotov, Y. V. (2016). Terms of trade and global efficiency effects of free trade
agreements, 1990–2002. Journal of International Economics, 99, 279-298.
Dai, M., Yotov, Y. V., & Zylkin, T. (2014). On the trade-diversion effects of free trade
agreements. Economics Letters, 122(2), 321-325.
Helpman, E., & Razin, A. (2014). A theory of international trade under uncertainty. Academic
Press.
Lazzarini, S. G. (2015). Strategizing by the government: Can industrial policy create firm‐level
competitive advantage?. Strategic Management Journal, 36(1), 97-112.
Makin, A. J., & Ratnasiri, S. (2015). Competitiveness and government expenditure: The
Australian example. Economic Modelling, 49, 154-161.
Vernon, R. (2017). International investment and international trade in the product cycle.
In International Business (pp. 99-116). Routledge.