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Global Business Today Eleventh Edition Chapter 6
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Class Discussion
Discuss new trade theory and the role of government in helping an industry, like the aircraft
industry, be successful. How has government policy shaped other industries?
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CONNECT
Click and Drag
Applying Porter’s Model
Summary
This activity focuses on Michael Porter’s Diamond of Competitive Advantage. Using his
Diamond, Porter tries to explain why some countries succeed in trade and others do not.
Activity
Students are asked to match various descriptions with the correct component of Porter’s model.
Class Discussion
Understanding Porter’s model can provide insight into why countries succeed in trade and can
influence trade policy decisions. Discuss the different parts of the model and what they mean.
Then using the model, identify industries that have been successful and why. How could this
shape future trade policy?
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firm to disperse its various productive activities to those countries where, according to the theory
of international trade, they can be performed most efficiently.
First-Mover Advantages
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1. Mercantilism is a bankrupt theory that has no place in the modern world. Discuss.
2. Is free trade fair? Discuss.
3. Unions in developed nations often oppose imports from low-wage countries and advocate
trade barriers to protect jobs from what they often characterize as “unfair” import competition. Is
such competition “unfair?” Do you think that this argument is in the best interests of (a) the
unions, (b) the people they represent, and/or (c) the country as a whole?
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4. What are the potential costs of adopting a free trade regime? Do you think governments
should do anything to reduce these costs? What?
5. Reread the Country Focus “Is China Manipulating Its Currency in Pursuit of a Neo-
Mercantilist Policy?”
a. Do you think China is pursuing an economic policy that can be characterized as neo-
mercantilist?
b. What should the United States, and other countries, do about this?
6. Reread the Country Focus “Moving U.S. White-Collar Jobs Offshore.”
a. Who benefits from the outsourcing of skilled white-collar jobs to developing nations?
Who are the losers?
b. Will developed nations like the United States suffer from the loss of high-skilled and
high-paying jobs?
c. Is there a difference between the transference of high paying white-collar jobs such as
computer programming and accounting, to developing nations, and low paying blue
collar jobs? If so, what is the difference, and should government do anything to stop the
flow of white-collar jobs out of the country to countries like India?
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7. Drawing upon the new trade theory and Porter’s theory of national competitive advantage,
outline the case for government policies that would build national competitive advantage in
biotechnology. What kind of policies would you recommend that the government adopt? Are
these policies at variance with the basic free trade philosophy?
8. The world’s poorest countries are at a competitive disadvantage in every sector of their
economies. They have little to export. They have no capital; their land is of poor quality; they
often have too many people given available work opportunities; and they are poorly educated.
Free trade cannot possibly be in the interests of such nations. Discuss.
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Exercise 1
Search phrase: World Trade Organization International Trade Statistics
Resource Name: World Trade Organization (WTO): International Trade Statistics
Exercise 2
Search phrase: Australian suppliers
Resource Name: Australian Suppliers Directory
Website: https://www.austrade.gov.au/suppliersearch.aspx
globalEDGE™ Category: Company Directories
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1. What were the proposed benefits of the TPP?
2. What were the potential drawbacks of the U.S. entering the TPP? What would be the
drawbacks to other nations?
3. Why do you think that Donald Trump was so adamantly opposed to the TPP?
4. Why do you think the 11 remaining signatories went ahead with a revised deal after the United
States withdrew?
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Activity
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Continuous Case Concept
In the last few decades, the auto industry has shifted from one in which a few, large companies
primarily manufactured in their domestic markets and sold in their domestic markets, to one in
which a few large companies serve the world market, manufacturing around the globe to capture
competitive advantages wherever they can.
• Ask students to reflect on the changes in the industry. Why do companies like Toyota and
Nissan have large operations in the U.S. market? Why don’t American companies have a
large presence in Japan?
• Next, consider why BMW and Mercedes have established manufacturing operations in
the U.S. market, while American companies are shifting their production to places like
Mexico. Similarly, reflect on the new agreement between Toyota and Mazda whereby
Mazda will produce cars at its plant in Mexico for Toyota to sell in the United States.
• Finally, ask students to use the theories presented in the chapter to explain the changes in
the industry, and to predict what may occur in the next decade. How will the Chennai
region of India, referred to as the Detroit of India because so many automakers and
suppliers have established operations there, change the industry? What will be the impact
of the new trade agreement between Mexico, Canada, and the United States have on
production? What are the implications of the move toward more electric vehicles by
companies like Volkswagen?
Global Business Today Eleventh Edition Chapter 6
Additional Readings and Sources of Information
How A Trans-Pacific Trade Deal Got Made Without Trump
https://www.forbes.com/sites/stratfor/2018/03/08/how-a-trans-pacific-trade-deal-got-made-
without-trump/#1d84f01a75d7
TPP: What is it and why does it matter?
https://www.bbc.com/news/business-32498715
Everything you need to know about the Trans Pacific Partnership
https://www.washingtonpost.com/news/wonk/wp/2013/12/11/everything-you-need-to-know-
about-the-trans-pacific-partnership/?utm_term=.6b09c6eb1d76
Why Economists Are Worried About International Trade
https://www.nytimes.com/2018/02/16/business/trump-economists-trade-tariffs.html
Trade wars, Trump tariffs and protectionism explained
https://www.bbc.com/news/world-43512098
What Game Theory Says About Trump’s Trade Strategy
https://www.bloomberg.com/view/articles/2018-07-16/what-game-theory-says-about-trump-s-
trade-strategy
The last American “trade war” didn’t work out so great
https://www.cnn.com/2018/03/02/politics/donald-trump-steel-tariffs-q-and-a/index.html
Is free trade always the answer?
