Reference no: EM132833734

An effective understanding of economics forms the foundation of every manager's, entrepreneur's, bureaucrats, and leader's ability to analyze business situations and to develop an appropriate response. The globalization of business is a fact of life for all business professionals. One of the most contentious issues in today's global business world is the issue of closing local manufacturing facilities, laying off those American workers, and re-opening the same manufacturing facility in an Asian, or other third world country.

Look in your own closet at the clothes you have purchased. Pick any 10 items of clothing and look at the labels in those clothes. Where were they manufactured? How many of the 10 items were manufactured here in America? If that same exercise had been done 50 years ago, (approximately the 1970s), all the clothes you owned would have been manufactured in textile mills in the Southeastern United States (Georgia, Alabama, Mississippi, North Carolina, South Carolina, etc.). All those Southeastern textile mills are now closed, and people buy foreign made clothes. If you were able to go further back in time to 150 years ago (1870s), the clothes you owned would have been manufactured in textile mills in the Northeast United States (Maine, New Hampshire, Vermont, Massachusetts, etc.). Yet, by the early to mid-1950s, those Northeastern textile mills were closed and their workers were out of a job. The mills had all relocated to the Southeast during the years following the Civil War.

Many people say that we should ban the import of these foreign made clothes, so that more workers in American clothing textile mills could have jobs. Others say that we should continue to import clothing because imported clothing is relatively less expensive and more people can afford to buy more clothes at these low prices. Still others say that we should put an import tariff (an extra tax that would be paid when we buy these imported clothes), making the price of imported clothing comparable to the price of clothing made in the U.S., and, therefore, encouraging American consumers to buy American-made clothing.

a. How much does international trade affect you personally? Look at any 10 items around your home that you have purchased in the last year. Where were they made? How many were made in America, compared to how many were foreign made? What things does America export to other countries? What things does America import from other countries? How does what you have learned about Comparative Advantage affect this trade?

b. Currently there is a lot of talk among politicians about imposing tariffs on foreign made products imported into the U.S. and retaliatory tariffs imposed by foreign countries on U.S. made goods. What is a tariff? Who ultimately pays the tariff? Who gets the proceeds from the tariffs? What is the money used for? Discuss the advantages and disadvantages to all involved parties (American workers, American consumers, foreign workers, and foreign consumers) of tariffs on imports to the U.S. and retaliatory tariffs imposed by foreign countries on U.S. made goods.

c. In considering the foreign trade issue, discuss how the background, education and cultures of the people in the U.S. and the cultures in each trading country affects their understanding of the importance of foreign trade. Discuss the importance of your ability to understand and accept multiple cultural differences in a global context. What recommendations would you suggest to increase American understanding and acceptance of foreign cultures?