International Business by Assignment Help Experts

by Vikrant G. Assignment help experts

1. Explain the relation between trade and world output.

2. Describe the broad pattern of international trade.

3. If the nations of the world were to suddenly cut off all trade with one another, what products might you no longer be able to obtain in your country? Choose one other country and identify the products it would need to do without.

Relation between Trade & World Output

World output can be defined as the total amount of output produced by the individual countries in the world with reasonable assumptions (Read, 2003). For example, if each country in the world produces equal amount such as 5 machines the world output would be equal to 5 multiply by number of countries. Trade can be defined as the transaction between two countries. The trade between two countries mainly based on their specialization. As if one country is more proficient in manufacturing automobile then it will forgo the manufacturing of other products and will produce automobiles to achieve specialization.

There is a positive relationship between the trade output and world output. The relationship between the trade and world output is similar to the relationship of supply and demand. The increase in trade due to specialization would cause an increase in the total output or in world output. On the other hand, if the world output is lower for a particular year then the trade output for that year would also be lower. The amount of world output always influences to the international trade as it can be seen in the change in the position of economy. The increase in the economic output causes an increase in the international trade. During the economic recession trade can remain slow as consumers are more concern for their financial futures (Pagell & Halperin, 2000). At the same time it also causes a decrease in the world output because of the increase in cost and people will also purchases less in concern to their financial futures.

The volume of trade increases significantly with an increase in world output as more production by the countries causes an increase in their specialization and they trade it from other countries in order to increase their profits and market share. International trade increases with a faster rate in comparison of the world output as traded goods are relatively cheaper than the goods that are not traded.

Broad Pattern of International Trade

Trade pattern can be measured through the evaluation of international trade and world output. The insight on trade pattern and potential growth in future also helps to view trade patterns. The trade pattern can also be defined as the trading between high income and low income nations. About 60% of the world trade is accounted by the Western Europe. On the other hand about 34% international trade are held by the mid level income countries, while remaining are made by low income countries (Pagell & Halperin, 2000).

The classification of the international trade pattern on the national income level shows that wealthy nations account for a larger portion of world merchandise trade in comparison of the poor countries. These numbers helps to determine the broad pattern of international trade or to determine who trades with whom. It also helps to determine that there is existence of the significant trade between the richest and poorer countries of the world. It also shows the poorer nations are also involved in the trade activities, which is essential for their growth (Ricks, 2006). At the same time it exhibits the comparative advantage of poorer and richest country in producing particular goods or services.

This pattern is described by the customs agencies in the nations. The record of export, import and the destination are kept by these agencies, which are helpful to determine the broad pattern of international trade. In the international trade, generally richest countries decide a level of trade with other countries in order to maintain balance of payment or to achieve powerful position in the world. Sometime trade between two countries is also altered by the government for the goods and services, which have significant for the defense of the economy. But regardless all of these, the trade pattern is the best way to analyze trade between two countries or which country is trading with whom.

If Trades are Cutoff

If the nations of world suddenly stop trading with each other then it may create an extreme disorder between two countries. It would create a lack of goods, which are essential for some countries or its people. It would also cause an increase in the cost of domestic products, which will reduce the purchasing power of consumers. Decrease in the consumer spending would cause a decrease in the economic growth and consequently international position of an economy. It may also turn a rich country in poor country but it will be worse for poor country as it will become poorer due to lack of international trade.

The cutoff trade between the USA and other countries would cause the unavailability of various products. The cutoff off trade with Chile and Brazil would cause the unavailability of tea, coffee, fresh fruits, vegetables, several spices, dried fruits etc. as these are imported from Chile and Brazil. In the condition of stop in trade by all the countries would eliminate the availability of German Lagers, foreign luxury cars such as Ferrari, Jaguar etc. The leather, which is imported from Italy, would also not available for the USA citizens as there will not be leather shoes or handbags. The most of the electronic technologies and equipments are purchased from Japan and China. The sudden cut in trade with both the countries would reduce the availability of various electronic brand items and the people of USA have to live without them. Most of the luxury products and services are imported in USA instead of manufacturing and if US stop trade with all the countries then these luxury items will not be available for the people of USA (Rugman, 2002).

If US stop trading with Europe then many cars such as Ford, Cadillac and certain grades of beef would not be available in Europe. Many types of food grains and the equipment for the preparation of food grains would not be available in Europe. US is the largest exporter of electric machinery as export of these machineries generates several billion of dollars every year for US. On the other hand China is the largest supplier of textile and apparel in US. So, if trades are stopped from China ten US has to so without certain types of textiles and silks.

References

Pagell, R. A. & Halperin, M. (2000). International Business Information: How to Find It, How to Use It (2^nd ed.). Lessons Professional Publishing.

Read, T. T. (1933). The world’s output of work. The American Economy Review. Vol. 23, No. 1 (Mar., 1933), pp. 55-60

Ricks, D. A. (2006). Blunders in International Business (4^th edn). Blackwell Publishing.

Rugman, A. M. (2002). International business: critical perspectives on business and management Routledge.