International Trade Navigating the Seas Research Proposal

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Mercantilism as a philosophy may be dead, but special interests that lead to trade controls are alive and well (Mercantilism today: how a dead philosophy comes back to life, 2003). Trade controls that affect price and indirectly quantity include tariffs, subsidies, arbitrary customs-valuation and special fees (Daniels, Radebaugh, and Sullivan, 2007). Trade controls that directly affect quantity and indirectly affect price include quotas, voluntary export restrictions, "buy local" legislation, arbitrary standards, licensing arrangements, foreign-exchange controls, administrative delays and requirements to take goods in exchange for selling (Daniels, Radebaugh, and Sullivan, 2007).

Finally, businesses must also consider trade organizations and regional economic integration when deciding where to conduct business. The World Trade Organization promotes trade liberalization and mediates trade disputes and enforcing agreements (Daniels, Radebaugh, and Sullivan, 2007). Major regional trading groups include the European Union, the North American Free Trade Agreement, the Central American Common Market, the Caribbean Community and Common Market, the Andean Group, Mercosur, a regional trade agreement among Argentina, Brazil, Paraguay, and Uraguay, the South American Community of Nations, the Associations of South East Asian Nations, the Southern African Development Community, the Common Market for Eastern and Southern Africa, the Economic and Monetary Community of Central Africa and the West African Economic and Monetary Union (Daniels, Radebaugh, and Sullivan, 2007).

Obviously, regional trading groups have a world-wide presence and cannot be ignored. However, should businesses be concerned if their country is not a member of a particular group? The answer is complex.

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One of the goals of the groups is to eliminate protection among member countries to allow specialization and trade based on comparative advantage (Daniels, Radebaugh, and Sullivan, 2007). but, trade diversion also occurs as a side effect. In other words, the supply of products shifts from countries that are not members of an economic block to those that are (Daniels, Radebaugh, and Sullivan, 2007). However, after exploring the impacts of European integration, researchers found that there were signs of trade diversion for the earliest of European integration from 1962 to 1972 when intra-regional trade increased in industries with weak comparative advantages (Kokko, Matha, and Gustavsson, 2006). However, these researchers found that this ended for later time periods because regional integration coincided with reductions in external trade barriers which also improved market access for outsiders. In addition, the regional integration benefited outside produces by promoting economic growth and import demand. Based on their analysis of the above situation, the researches concluded that "the static concept of trade diversion is not well suited for analyzing modern integration" (Kokko, Matha, and Gustavsson, 2006).

In summary, businesses must use international business frameworks to look inward at their trading advantages in deciding what to trade in an increasingly liberalized world that shuns mercantilism in general. In addition, government regulations and to a lesser extent trade diversion in the early stages of regional trading group implementations will have a huge influence on how much to trade.....

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