Summary Chap06 International Business Charles Hill

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CHAP 6
* Introduction

* The indian pharmaceutical companies, before 2005, were not allowed to trade with developed countries because, India did not respected drug patents.

* In 2005 India signed up a agreement that stated that India would agree with global patent rules. * This oppened a path for the rising of business opportunities. * This pharmaceutical firms produce now, low-cost generical and patented medicines that are sold worldwide, usually in partnership with western companies. * The western companies perform the R&D and marketing, and contract some indian firms to produce the medicines * This way of working togethere lowered the costs for western firms e for western consumers, at the same time it generated Jobs in índia increasing the wealth of the country, so now indians can buy more western products. * There are always winners and loosers. It can be win-win in long term as the winners will be more wealthier and spend more buying losser’s stuff * The earnings of the winners are bigger then the losses of loosers, so globally it is better to trade.

* An Overview of Trade Theory:

* Free Trade: situtation in wich the government does not influence in what consumers can buy or sell to other countries. * The Benefits of Trade:

* No one suggests that Iceland can grown its own oranges, so they can benefit of trading what they are good producers(fish) for oranges, and then have a mixed diet. * It is hard to people to understand why it is benefical to buy something for other country if your country is capable to produce. Some americans arguee that whenever possible people should buy american goods in order to help US industries and employment. * The gains arise of the fact countries can specialize in some product that can be more efficiently produced at home, while importing products that are efficiently produced abroad.

* The Pattern of International Trade:

* Trade Theory And Government Policy
* Smith, Ricardo and Heck-Ohlin unrestricted free trade. Government interventions are self-defeating and result in wasted resources. * New Trade and Porter’s Diamond limited govmt. Intervention to support the development of certain export-oriented industry.

* MERCANTILISM
* This theory emerged in England in the 16h cent.
* Gold+Silver were the trade coin in that time
* According to this theory gold and silver were the indicators of a nations wealth, so in that time nations wanted to accumulate as much gol/silver as they could. * A country could gain Gold and silver from exports, and loose them with imports. * So countries tried always to EX>IM

* By doing so the country would increase its wealth and Power. * The gorvernment had a important role in this doctrine as they should make some policies in order to achieve a comercial surplus. Imports were limited and highly taxed while exports had subsides. * David Hume pointed that a country was not able to sustain a surplus on balence of trades for ever. His point was the following: A country with a inflow of metals would face internal inflation, while the country with outflow would face falling prices. This chance in relative prices would make people from the surplus country to import more, while people from the other country tent to import less. In result this would happend until the surplus country face equilibrium in its balance of trades. * Mercantilism is a Zero-Sum game

* Mercantilism doctrine is not dead, there are still some people that believe in it, and there are the “new-mercantilists”, such as China.

* Absolute Advantage:
* For Adam Smith trade is not a Zero-Sum game.
* Countries differ in ther abillity to produce goods efficiently. * A country has na absolute advantage in the production of a good when it is more efficient...
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