International Business Management (MS34B) International Trade & Competitiveness Facilitator: Densil A. Williams MS34B, UWI Mona, Department of Management Studies

MS34B, UWI Mona, Department of Management Studies Contents Theories of International Trade International Trade in a Globalized World Developing Countries Response Competitiveness of Small Economies Concluding Remarks MS34B, UWI Mona, Department of Management Studies

MS34B, UWI Mona, Department of Management Studies Absolute Advantage MS34B, UWI Mona, Department of Management Studies

Comparative Advantage MS34B, UWI Mona, Department of Management Studies

The Logic of Comparative Advantage US gives up one unit of shoe production – its area of comparative disadvantage – releasing ten units of productive resources that can be used to produce 2.5 extra units of computer software. US trades these extra 2.5 units to Bolivia, which allows Bolivia to give up 2.5 units of computer software production, releasing thirty units of resources. Bolivia transfers these thirty units of productive resources into the production of shoes, producing 2 additional units of shoes. Globally, an extra unit of shoes has been produced, with no loss in computer software production, through re-allocation of resources according to relative productive efficiency (i.e. comparative advantage).

Assumptions of behind Comparative Advantage- (Ricardian Model) Mobility of Factors of Production Within Countries Immobility of Factors of Production Internationally Homogeneity of Tastes Demand sufficient to absorb supply Constant Returns to Scale No Learning/Experience Curve MS34B, UWI Mona, Department of Management Studies

Globalization and Trade The integration of markets i.e. capital, labour goods. Leads to the formation of a single world economy, society and culture driven by technology and the transnationalization of capital. Based on critical rules of engagement- the neo-liberal model MS34B, UWI Mona, Department of Management Studies

Globalization and Trade Characteristics of Trade under Globalization Central role of WTO in trade relations Construction of regional trade blocs Policies of economic liberalization MS34B, UWI Mona, Department of Management Studies

Globalization and Trade Impact of Globalization Alleged loss of national sovereignty. Attainment of global competitiveness by all Consolidation of private capital MS34B, UWI Mona, Department of Management Studies

Strategies for dealing with Trade in a Globalized World Defensive Negotiation Capability: COTED, WTO; CARIBCAN, EPA Proactive Building Internationally Competitive Industries, Firms and an Enabling Environment - Introducing new export activities and the importance of innovation and upgrading in existing ones. MS34B, UWI Mona, Department of Management Studies

Competitiveness of Small Economies Small Developing Economies need; Macro-stability (Economic, Social, Political, Regulatory) to be competitive. Variation in per capita income among small economies export orientation service orientation country risk macroeconomic policy choice infrastructure education Variation best explained by differences in country risk and infrastructure. MS34B, UWI Mona, Department of Management Studies

Competitiveness of Small Economies Role of the State The state has a strong role to play in small developing economies that are aiming to be internationally competitive. Why? Risk are higher for small state Competitiveness brings greater benefits to all MS34B, UWI Mona, Department of Management Studies

Competitiveness of Small Economies The need for a Developmental State similar to what is used in East Asia. There is the need for “strategic global repositioning”. MS34B, UWI Mona, Department of Management Studies

Competitiveness of Small Economies This must be based on the framework of Competitiveness, Governance and Diplomacy. These constitute the most pressing issues facing the developmental problems of the Caribbean. MS34B, UWI Mona, Department of Management Studies

MS34B, UWI Mona, Department of Management Studies Concluding Remarks The nature of international trade has changed due to the increasingly globalized nature of the world economy. Small, developing countries like those in the Caribbean region have to find creative ways to deal with this new reality, especially in light of the erosion of preferential market access and the increasing need to become internationally competitive. MS34B, UWI Mona, Department of Management Studies

MS34B, UWI Mona, Department of Management Studies Concluding Remarks In this discourse, we proposed the need for a stronger role of the state in driving competitiveness in these economies. Also, there is the need for proactive strategies to improve export offerings and build internationally competitive industries and firms. MS34B, UWI Mona, Department of Management Studies