Essay on "International Business"

Essay 3 pages (1050 words) Sources: 3

[EXCERPT] . . . .

International Business

In general, these types of trade wars are not beneficial to the people in the countries involved. In each of these cases, trade barriers appear to be erected for political reasons. In Russia with the chickens and in the U.S. with the tires, the barriers appear to have been put in place to protect domestic jobs from competition. The problem with that approach is that the competition keeps prices down for consumers. This relates to the theory of comparative advantage. If China can produce tires at a lower cost than the U.S. can, then the U.S. should import its tires from China. Likewise, if the U.S. can produce chickens at a lower cost than China can, then China should import American chickens (as should Russia).

However, trade wars arise from complex situations that go far beyond was Ricardo described. With respect to chickens, for example, the underlying issue is food security. Most nations take the view that food security is a critical national security issue. Being able to feed itself helped Britain survive World War Two. China's entire economic overhaul since 1979 has been driven in large part by the need to eliminate the famines that were the cause of rural unrest and were therefore a threat to the Communist Party's rule. With an issue like tires, the United States is working to protect domestic employment. While tires might be less a national security issue than food, tires are a product in which the U.S. would want to maintain some production. In addition, domestic jobs are protected in certain sectors at the expense of price.

Despite the alternate considerations, the economic gains from trade wars are spurious at best. Prices tend to rise. Local producers, knowing that the government will protect them, will reduce their level of innovation, resulting in even higher costs of production in the future. In addition, trade barriers can spur innovation by other countries, as they seek to improve efficiency to offset the tariffs that have been erected. An example of this would be the softwood lumber dispute with Canada. U.S. tariffs simple forced Canada's inefficient producers out of the market, and the remaining producers became so efficient that they were able to dramatically undercut the stagnant U.S. industry. Unless there are significant other considerations at play, such as national security, trade wars hurt the people in the countries participating. Even when there are individual winners, such as the tire union, society as a whole loses, and the trade war simply represents a transfer of wealth from the general public to one specific set of manufacturers/laborers.

2. There are a number of key cultural differences between Brazil and the United States. If we analyze Hofstede's cultural dimensions (2009), we can see several characteristics on which Brazilians differ from Americans. They are risk averse and do not readily accept change, while Americans are risk-taking and most do not mind change. Brazil scores relatively low for individuality, something that is not just reflected in business but also in frequent socialist governments at all levels (Sterling, 2010). Brazilians have a high degree of power distance relative to Americans, something that can influence… READ MORE

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