QUESTIONS
6.1 Using the framework in Table 6.1, explain which of the theories relate to Taiwan’s trade
policy during each of the eras described in the case.
6-2. Map 6.1 shows that 61.4 percent of Taiwan’s exports go to only five
countries/territories. Which trade theories may help to explain this concentration and
why?
TEACHING TIPS: Carefully review the PowerPoint slides for Chapter Six, as well as the
opening case regarding Taiwan’s International Trade, which is cited throughout the
chapter.
CLOSING CASE: Ecuador: A Rosy Export Future?
Ecuador has been successful in developing markets for the export of roses. In fact, the product
is one of the most important exports, behind only petroleum and bananas. This success is
partially the result of a competitive labor force, as well as unique geographical advantages,
including less climatic risks when compared to neighboring competitors. Producers have also
cooperated with competitors and purchasers to meet consumer needs. As the global market for
these products expand, Ecuador will have to deal with many additional challenges and
opportunities in the future.
Questions
6-3. Look back in Chapter 1 to the factors in increased globalization and explain which have
influenced the growth of world trade in cut roses and why.
6-4. Think back to the external institutional conditions (cultural, legal-political, and economic)
discussed in Chapters 2 through 4 and discuss how these have affected and might affect future
demands for Ecuadoran cut roses.
6-5. There are a number of ways Ecuadoran growers might increase demand for their cut roses.
Among these are (a) to try to get more consumers to move up-market by buying premium
roses, (b) to promote more rose demand for a different special day (e.g., roses account for a
small percentage of U.S. flower sales for Christmas/Hanukkah, Thanksgiving, and
Easter/Passover), and (c) to promote sales in relatively untapped markets, such as the Middle
East. Compare these and any other alternatives you can think of.
6.6. Some counties have found success by promoting the nationality of their products, such as
the Juan Valdez campaign for Colombian coffee. Discuss the viability of a national campaign to
promote Ecuadorian roses abroad.
ADDITIONAL EXERCISES: International Trade and Factor Mobility
Exercise 6.1. The theories of absolute and comparative advantage and the product life
cycle all contribute to the explanation of the international trade process. Select two to three
different types of products and ask students to discuss the likelihood that (a) an innovating
country, (b) a rapidly developing country, and (c) an emerging country would enjoy an
absolute advantage, a comparative advantage, or no particular advantage as each of the
products moves through the four stages of the product life cycle. Be sure they cite
examples and explain their reasoning. (LO: 1, Learning Outcome: To understand theories of
international trade, AACSB: Dynamics of the Global Economy.)
Exercise 6.2. The factor-proportions theory and the country-similarity theory both address
patterns of trade, i.e., partner nations. Ask students to compare and contrast the two
theories. In what ways are they complementary and in what ways do they differ? Then
select two to five home countries of students in your class and ask the class to identify the
natural and acquired advantages of those countries and to compare their various economic,
cultural, and political similarities. (LO: 1, Learning Outcome: To understand theories of
international trade, AACSB: Analytical Skills.)
Exercise 6.3. Porter’s diamond theory deals with the competitive advantages of nations.
Select two to five countries and lead the class in a comparative analysis of the four points of
the diamond, as well as the recent roles of government and chance, in those nations.
Conclude the discussion by exploring the associated competitive advantages that may
accrue to foreign firms that choose to operate in each of those countries. (LO: 4, Learning
Outcome: To explain why a country’s export capabilities are dynamic, AACSB: Dynamics of
the Global Economy.)
Exercise 6.4. Select two large multinational enterprises that are known to the students,
one consumer-oriented (e.g., McDonald’s) and one industrial (e.g., Newmont Mining). Then
ask students to discuss the concept of complementarity within the context of the operations
of those two firms. What equipment, components, and/or complementary products are
needed in host countries as a result of their foreign operations that may stimulate foreign
trade in both the short and the long run? (LO: 5, Learning Outcome: To understand why
production factors, especially labor and capital, move internationally, AACSB: Reflective
Thinking.)