Essay about Chapter 6 International Business

7102 Words Oct 21st, 2012 29 Pages
CGGGG
The Political Economy of International Trade

Chapter Outline

OPENING CASE: Why Are Global Food Prices Soaring?

INTRODUCTION

INSTRUMENTS OF TRADE POLICY

Tariffs Subsides Country Focus: Subsidized Wheat Production in Japan Import Quotas and Voluntary Export Restraints Local Content Requirements Administrative Polices Antidumping Policies Management Focus: U.S. Magnesium Seeks Protection

THE CASE FOR GOVERNMENT INTERVENTION

Political Arguments for Intervention Country Focus: Trade in Hormone-Treated Beef Economic Arguments for Intervention

THE REVISED CASE FOR FREE TRADE

Retaliation and Trade War Domestic Politics
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This section is followed by a discussion of the merits of government intervention into international trade. The author provides a balanced view of this difficult issue.
The second half of the chapter focuses on the development of the global trading system. A historical context is provided, along with a view of the global trading system as it exists today. The author acquaints the reader with the General Agreement on Trade and Tariffs (GATT) and the World Trade Organization.

Opening Case: Why Are Global Food Prices Soaring?

Summary

The opening case examines why global food prices are rising significantly. For more than two decades, improvements in agricultural productivity and output have contributed to lower food prices, but in 2007, the price of wheat was double its price of just a few months earlier, and the price of corn had risen some 60 percent. Two explanations for the phenomenon are increased demand, and the effects of tariffs and subsidies for bio-fuels. Discussion of the case can revolve around the following questions:

QUESTION 1: Food prices have risen dramatically since 2007. Reflect on the reasons for the price increase, and discuss the implications of higher prices for consumers in developed and developing countries.

ANSWER 1: For decades, consumers have enjoyed the benefits of increased productivity and output in the global food industry. In 2007, however, everything changed. The price of wheat

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