Problem: The process of globalization has seen its supporters and critics engaged in a number of heated debates. In this context, discuss critically the contrasting views promoted by the supporters and critics of globalization in relation to a) the impact of globalization upon the environment and b) the impact of globalization on national sovereignty. Make use of examples to illustrate your answer.

2. Answer ALL of the following:

1. With reference to table below, indicate the pattern of specialization and explain what happens if
   1. 6 bushels of wheat (or 6W) are exchanged for 9 yards of cloth (or 9C);
      
   2. 6W are exchanged for 3C;
      
   3. 6W are exchanged for 12C.

      	US	UK
      Wheat (bushels/labour-hour)	6	1
      Cloth (yards/labour-hour)	3	2

2. Using the same data answer the following questions:
   1. Would the US be willing to exchange 6W for less than 3C with the UK and why?
   2. Would the UK be willing to exchange more than 12C for 6W and why?
   3. What quantities of C for 6W represent the limits within which mutually advantageous trade between the US and the UK can take place?
3. Ricardo’s concept of comparative advantage shows that trade occurs when the relative productivity of labour differs across countries. Yet, differences in relative productivity of labour are not explained by the Ricardian model. With reference to other trade models discuss why labour productivity might differ from one country to another.

3. The production possibility frontiers (PPF) of two countries, Brazil and Ireland, are shown below. We assume that both countries produce bicycles and sugar cane. We also assume that the only two factors of production are labour and land, and that Brazil is land abundant.

Answer ALL of the following:

1. Which product is land-intensive and why?
2. If demand is identical in the two countries, which country will have the comparative advantage in sugar cane?
3. Is your answer to b) consistent with the explanation of trade provided by the factor endowments model?
4. In both economies, income is earned by landlords when renting land and by labour when hiring out their labour. How will the landlords in Brazil feel about trade with Ireland?
5. After trade, what will the rental rate of land in Brazil be relative to the rental rate of land in Ireland?
6. Considering the effects on both landlords and labour, what will happen to national income in Brazil and Ireland?

Answer BOTH parts:

Host governments are often concerned with estimating the potential impact of inward foreign direct investment (FDI) upon their country’s balance of payments.

1. Explain why such concerns may arise.
2. Are there any other aspects (apart from the balance of payments effects) that host governments might consider in relation to inward FDI?

Explain and provide examples to support your answer

1. The global business environment today is very different from what we had thirty years ago, mainly as a result of important changes in the world’s output, trade and foreign direct investment (FDI) as well as changes in the nature of multinational enterprises (MNEs) and world order. Discuss critically these global changes and explain how they impact upon today’s international business managers and policy makers.
2. China, the second largest economy in the world, has recently become the largest exporter of manufactured products. In this context, should developed countries be concerned by rising imports from China? Answer this question with reference to the following theoretical perspectives:
   1. The comparative advantage theory of David Ricardo and
   2. The Heckscher-Ohlin model and the propositions deriving from it.
      What are the key implications for policy makers under each theoretical framework?
3. During the current decade China has become the largest single recipient of inward foreign direct investment (FDI) among emerging economies. From a theoretical standpoint, discuss the benefits of such FDI inflows to China as well as the policy measures its government could adopt to maximize these benefits. Whenever possible, offer examples to illustrate your answer.
   1. Discuss critically the following paragraph and offer examples in support of your answer: "In today’s world national governments can no longer influence international business activities due to the process of globalization that was made possible by advances in telecommunications, information technology and lower trade barriers. As a result, in the global marketplace, international business managers are today free to operate across different national markets without being concerned about government interference in international trade or international investment."
   2. The figure below illustrates the Production Possibility Frontier (PPF) of Baccalia, where only two products are produced: clothing and wine. In fact, Baccalia is producing on its PPF at point (A). By and large, people of Baccalia are content, as both their internal and external needs for warmth are satisfied in the most economically efficient manner possible, given their available resources (and known technology).
   Answer ALL SEVEN parts:
   1. How much wine and cloth is produced? If a person in this country wanted to purchase a litre of wine, what would be the price he or she would have to pay?

• B) What can we say about the Community Indifference Curve at point A (on the graph)? Explain your reasoning.
• C) One day Baccalia joins WTO and discovers that on the London Wine Exchange one litre of wine is worth 1 square yard of cloth. What is the optimal production point Baccalia should strive for?
• D) The country wishes to maximize the gains from trade but people are not willing to reduce the level of wine consumption from their original autarky state. If the new consumption is at point b, describe where this point should be and indicate it on the graph.
• E) How can you prove that Baccalia has in fact gained from trade and their new situation is superior to the pre-trade consumption (with which they were quite content)?
• F) Explain the assumptions under which the trade benefits of Baccalia arise as described above.
• G) Under the above assumptions, can there be circumstances when not everyone in the country is made better off despite what the theory generally claims?
• 3. Answer ALL THREE parts:

A) Consider the following scenario: Poland is land-abundant country and the UK is capital-abundant. In autarky, both countries produce two homogenous goods: livestock (land-intensive) and automobiles (capital-intensive). By way of theory, explain the pattern of trade between Poland and the UK and the income distribution effects of trade. Use graphs to illustrate your answer.

B)  Assume now that automobiles are differentiated products. Using a relevant theory, explain the new patterns of trade. Are there any differences in income distribution effects when compared to the situation under point (3A)?

C)  In 2007, two new member states joined the European Union: Romania and Bulgaria. In terms of factor endowments these countries are similar to Poland but differ from other EU countries such as the UK. As trade expands between Poland, Romania, Bulgaria and the UK, in which of the following cases will opposition to free trade be stronger: the UK- Romania and Bulgaria; Poland – Romania and Bulgaria? Explain your answer.

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