Quiz 5: Trading Internationally

Business

The US Exports has declined sharply over the past decade.Appro.12% of the value of the goods traded globally in US; by 2010, the share has dropped to only 8.5%. The main social and ethical implication of such decline of US exports competitiveness is listed below: • The first is the composition of World trade in which US lost ground to its competitors in the export of certain products that were expanding rapidly as a share of World trade like Machinery and transportation products. • The second implication that explains the declining of US export share is relatively slower growth rate of US economy relative to that of its competitors. • Overvaluation of the currency resulted in the fall in quantity of exports. • Due to higher inflation, exports become less competitive and imports more competitive. • Decline in the competitiveness mainly due to the decline in the export manufacturing sectors led to persistent deficit in the balance of trade. • Negative economic growth experienced by main trade partners of US results in the decline of US exports competitiveness. • Due to weak global economy and a strong dollar made American supplied goods and services more expensive resulting in decline of US exports. Yes, this case changes the mind as in this case, it was recorded that in 2013, US exported a record US$1.58 Trillion with an amiable 8.4% annual increase. Also, US accomplished enviable exports success even after facing difficult aftermath of the Great Recession and started exporting Refined Petroleum, Civilian aircraft, semi-conductors, passenger cars and telecom equipment.

Government protectionism is the formulation of policies by the government to regulate international trade and protection of local businesses and jobs from foreign competition. The following points support the protectionist government: • Import tariffs are imposed by the government to protect the domestic industries. • Subsidies and tax benefits are given to domestic firms. • Export incentives are given to domestic firms to boost up trade surplus.

Dimensions that should be considered while choosing a location to base company's operations are as follows: • Countries having absolute advantage for particular goods and services essential for the firm should be considered. • Country should have adequate suppliers for raw materials. • Sufficient manpower should be available in the country to support the operation within the facility. • Countries should have markets for products and services of the firm.