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International Trade Policy

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Why would a country impose a trade embargo on another country? What are a trade embargo's typical effects? Discuss an actual instance of a trade embargo on a country.

Name an industry that experiences economies of scale in production and explain why the industry exhibits this characteristic. What actions can a country's government take which promote or hinder an economies of scale industry?

Please use Japan, China, Taiwan, or Mexico in the example used for this question.

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Embargoes are considered a peaceful means to achieve national security or foreign policy goals. Embargoes often result when there is direct conflict between two countries, but may also occur because of different ideological beliefs. During the Napoleonic wars, trade embargoes were used against Great Britain by European nations. The cessation of trade resulted in hardship for the countries imposing the embargo, more than for Great Britain, and points out the need to carefully consider the results of an embargo. They are typically used by large economies ...

Solution Summary

Economies of scale and goverment actions; trade embargo effects

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Financial Policies that Promote International Free Trade

Navigation Systems Inc. is a business that was founded in 1960 and is based in the United States. Its business is to design, manufacture, market, and support electronic systems used in aircraft and pleasure watercraft. At the time the business started out and continuing over the following two decades, the design and manufacturing was hardware based. The electronic navigation equipment consisted of circuit boards, integrated circuits, connectors, wire harnesses, and the mechanical assemblies such as chassis and covers all built in a traditional manufacturing facility. The products were completely hardware based. The company averaged an annual growth rate in sales of 3% per annum through 1980.

Starting in 1981, the designs for the Navigation Systems incorporated a microprocessor and an increasing number of integrated circuits. To support the microprocessor-based designs, Navigation Systems Inc. started to employ software engineers to write the software code that allowed the microprocessor and integrated circuits to function properly. In 1985, the products consist of 85% hardware and 15% software content.

The company's growth slowed in the late 1980s and throughout the 1990s to 1.5% per annum. By the end of the 1990s, the product composition consisted of 25% hardware and 75% software. The hardware and software made up the cost of goods sold, which is 48% of the sales. The management could not discern why the company's growth rate was only 1.5% per annum. In addition, the firm's profitability had been in a slow decline for over a decade. Some leaders felt that it was the increased number of competitors that was slowing the annual growth and decreasing profits. Others felt that the firm had not developed a sufficient core competency in software to be as efficient as it needed to minimize costs. Navigation Systems Inc. desperately needed a major change to increase sales and/or reduce costs to improve the profitability. One plan that is being considered is to move either the hardware or software to one of two candidate countries, China or India. You have been hired as a consultant to analyze the possibilities, make a recommendation on what path to follow, and assist in transition.

Library Research Assignment:

Your supervisor, the vice president of business development, has been asked to deliver a paper at an industry conference on the financial policies that promote trade in today's global economy. He has asked you to research the subject including the underlying assumptions, such as the forecasted/historical foreign direct investment (FDI) rates, economic outlook, trade forecasts for the next 5 years, and any possible alternative views (weaker economy, lower trade, etc.). To assist in his preparation, be sure to describe the drivers of international trade, including technology advancements. Please use the Library to research the financial policies that promote international free trade.

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