EECS 1530 Lecture 2: EECS 1530 Lecture 2 Notes
21 Jun 2018
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EECS 1530 Lecture 2 Notes
Introduction
Trade policy conflicts
The managers of each MNC cannot be responsible for resolving these international
trade policy conflicts.
However, they should at least recognize how a particular international trade policy
affects their competitive position in the industry and how policy changes could affect
their future position.
Every government implements some policies that may give its local firms an advantage
in the battle for global market share, so the playing field is probably not level across all
countries.
However, no formula can ensure a completely fair contest for market share.
Notwithstanding the progress of international trade treaties, most governments will be
pressured by their constituents and companies to implement policies that give their
local firms an exporting advantage.
Such actions are typically initiated without considering the ultimate consequences when
other countries are adversely affected and then implement their own trade policy in
retaliation.
The following example describes a common sequence of events that illustrates the
formation and effects of international trade policies.
EXAMPLE
Assume that a large group of local agriculture firms in the United States have lost
business recently because local consumers have begun buying vegetables imported
from the country of Vegambia at much lower prices.
Having laid off many employees as a result, these firms decide to lobby their political
representatives.
Vegetables from Vegambia are unfairly priced because Vegambia’s government gives
some tax breaks on land to the firms that grow the vegetables
Document Summary
The managers of each mnc cannot be responsible for resolving these international trade policy conflicts. However, they should at least recognize how a particular international trade policy affects their competitive position in the industry and how policy changes could affect their future position. Such actions are typically initiated without considering the ultimate consequences when other countries are adversely affected and then implement their own trade policy in retaliation. Having laid off many employees as a result, these firms decide to lobby their political representatives. Vegetables from vegambia are unfairly priced because vegambia"s government gives some tax breaks on land to the firms that grow the vegetables. There is speculation that the vegetables imported from vegambia have caused illness among some consumers. Vegambia has failed to intervene in a bordering country"s war in which that country"s government is mistreating its local citizens.
