International Trade: Answer Key

This is true regardless if imports were subsidized in the country of origin. Even though the domestic firms would have to compete, these conditions serve for the betterment of the consumers and outweigh other losses. However, in the short term, as the prices adjust, unemployment is faced, and “market failures” might arise. These negative externalities do not imply that protectionist measures can fix the issue. In long-term, domestic companies may become reluctant, passive, and too reliant of government. In trying to satisfy the domestic market and resist external arbitration, the government may become the victim of its own strategy or success. This policy is appealing and rationalized only if it aims to release the domestic political pressure. In theory, by remedying the competitors from the outside, the US steel industry would have developed the industry while having more “confidence” and the means of acquiring more of the demand side. Proponents of the protectionist actions increase the profits and quantity of steel. Seeing profit, other steel-producing companies would join in domestic competition. This likewise optimizes and expands the steel industry. This kind of protectionism act was quite popular in the EU and the UK in the early industrialization era. This also makes possible to save and expand jobs. In this narrative, it would increase the citizens’ employments rates in steel industry. Moreover, it has significantly helped the US steel industry raise profits, in light of soaring demand worldwide from China and other manufacturing

Thus, the firm should sale 44,461.54 kg at retail price of 6.85 to achieve the same profit impact as selling 30 tons at retail price of 8.20.

5. What complexities do cross-border deals introduce? What are the specific risks of this deal?

14. If 11,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production?

As mentioned in the case the main problem is the excess of steel in the steel market. Right now foreign steel is being dumped in the US. This results that supply exceeds demand which results off course in decreases of profit for many steel companies. This gives a lot of pressure to the companies and most of them are not able to survive the pressure and

2b. The tax policy could have a better effect on the American worker by keeping the products that are being made competitive with the foreign products. If there is a higher tax on the foreign product then some consumers may opt to purchase American made products if the price is comparable. The tariff could impact the Asian worker negatively. It could reduce the amount of jobs in that particular product.

In John.F.Kennedy’s commentary on the prices of steel, he asserts his point with a very invective, serious tone but as the commentary progresses, he then switched to a more neutral, sincere choice of words. He continues on to say that “ increasing steel prices by some 6

Thorborg’s business decision dilemma is to accept the sunk cost of materials (steel) already purchased to produce steel rings as well as the steel ring

i) Given that Dozier industries does nothing to hedge this risk, assuming that spot exchange rate remains the same as on Jan 14,1986 levels,

Although tariffs usually cause domestic prices to increase they can have a positive effect on our economy and specifically our domestic producers of steel and their employees. The US trade policy has historically been protectionist in nature, and congress, the principle body of power for import policy, heavily favored domestic firms over their foreign competitors (Irwin 146). As a result, domestic steel producers have had tariffs and quotas in place for many years. An effective tariff raises revenue for our US government and can help to subsidize domestic production at the expense of foreign producers. This is good because the American government receives money from foreign exporters that it would not have otherwise had access to. This money can then be used in domestic government policies and could

The first factor that I will appoint is a political/legal issue, according to PESTLE analysis, and consists in the fact of some of the steel companies were subsidised by their respective governments, which are not worried about making profits. Besides this, individual nations or groups of nations had set up trade barriers to

• Aluminum smelting is a perfectly competitive industry: 157 smelters worldwide in 1993 • Traded at London Metal Exchange (LME) • Price in 1988 over $2,500 per ton • Price at beginning of 1994 about $1,100 per ton • Mainly due to the collapse of the Soviet Union and the resulting flood of aluminum into the world markets by the Commonwealth of Independent States (CIS)

c. What is the average percent of ductile iron return in the total raw material used in a

From a firm’s perspective, tariffs, subsidies, quotas, VERs and LCRs all have the same effect of raising the firm’s costs above the level that could be achieved without trade barriers. Hill (2011) argues that the higher costs resulting from the trade barriers do not necessarily translate into a competitive disadvantage provided they are applied (by a country imposing them) to all similar products by other foreign firms. He further notes that when trade barriers are targeted at a particular nation’s exports, then this places the firm from that nation at a competitive disadvantage compared to other foreign firms. In this case the firm has two options. The first option is to move production into the country imposing the trade barriers and the second is to move production activities into countries whose exports are not targeted. The choice of which strategic option to take is a management decision requiring a high level of skill.

Supplier power: Once steel became needed again suppliers were able to multiply what they charged consumers and were able to produce large qantities at a time in order to stay up with demand.