New Trade Theory The new trade theory began to emerge in the 1970s when a number of economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade (Wickramasekera, Cronk & Hill 2013). This theory is based on two major concepts that are economies of scale and first-mover advantage. To elaborate: “Economies of scale are unit cost reductions associated with a large scale of output” as it is able to spread over the fixed costs over a large volume of quantity (Wickramasekera, Cronk & Hill 2013 p90). “First-mover advantages are the economic and strategic advantages that accrue to early entrants into an industry and the ability to capture scale economies ahead of later entrants” (Wickramasekera, Cronk & Hill 2013 p91). The new trade theory however, is not free from criticism. Although the theory has achieved great success academically, there is little to no effect in altering the trade policies. Unlike theories like the ‘rational expectations’ in macroeconomics, who not only found success academically, but also in policies. Kuttner (1991) suggested that the failure of the new trade theory in recommending any significant changes in the trade policies might be due to timidity of the theorists themselves, being afraid they might be branded as protectionists (Krugman 2007). Economies of Scale Australia’s pharmaceutical is a knowledge-based, technology-intensive industry that its aim is to develop and commercialise the outcomes of Australia’s long-term investment in medical research (AGDI 2014). It undertakes the development, production and supply of pharmaceutical products domestically and internationally (ALRC 2014). According to Australian Government Depar... ... middle of paper ... ... Australian Law Reform Commission (ALRC) 2014, Overview of the Biotechnology Sector Pharmaceutical Industry, viewed 15 May 2014, http://www.alrc.gov.au/publications/16-overview-biotechnology-sector/pharmaceutical-industry Australian Government National Commission of Audit (NCOA) 2014, The Pharmaceutical Benefits Scheme, viewed 20 May 2014, http://www.ncoa.gov.au/report/appendix-vol-1/9-4-pharmaceutical-benefits-scheme.html Hartung, A 2012, Top 20 R&D Spenders-Not Good Investments, Forbes, viewed 22 May 2014, http://www.forbes.com/sites/adamhartung/2012/11/05/top-20-rd-spenders-not-good-investments/ Hill, C, Cronk, T & Wickramasekera, R 2013, Global Business Today, McGraw-Hill Education, NSW, Australia Krugman, P 2007, Does the New Trade Theory Require a New Trade Policy? The World Economy, vol. 15, pp. 423-442. Kuttner, R 1991, The End of Laissez Faire, Kno
During the postclassical period, the expansion of trade had different interpretations around the world. Varying societies all reacted to trade in different ways due to how they viewed the situation. It had caused conflict in few areas around the world and also created peace as well as harm. Some communities had pros and cons to trade, like everything else. Some reasons for the positive or negative feedback on trade was due to religion, and or the philosophical system. Religion and the philosophical system was both pros or cons for trade in different civilizations. Religion helped with the spread of different ideas and religions across a mass area. Yet it had a negative input because then people fought, thinking their religion was more
Federal Trade Commission, 1979. Braithwalte, John. The. Corporate Crime in the Pharmaceutical Industry? Boston, MS: Routledge & Kegan Paul, 1984.
Lehman, Bruce. 2003. “The Pharmaceutical Industry and the Patent System”. International Intellectual Property Institute. Pages 1-14.
Krugman defines comparative advantage as “the view that countries trade to take advantage of their differences” (1987, p. 132). Comparative advantage theories assume constant returns to scale and perfect competition. Krugman writes that trade exists when countries differ from one another in goods they have to offer, technology, or factor endowments. Although there are multiple models explaining the cause of trade, each differs as to what factors are included to explain why trade takes place. Economist Ohlin and authors Burenstam-Linder and Vernon began introducing counter-points to comparative advantage as early as the late 1950’s, saying that formal models of comparative advantage did not take into account all factors affecting international trade. International specialization and trade caused by increasing returns, as well as economies of scale and techn...
The Indian Pharmaceutical Industry today is considered highly progressive industry among India's science-based industries with wide ranging capabilities in the field of drug manufacture and technology. India is considered to be global powerhouse of generic drugs. However, it is now witnessing regulatory challenges like delays in clinical trial approvals, uncertainties over the FDI policy, a uniform code for sales and marketing practices and compulsory licensing (M. Janodia, 2007).
The two economic theories that will mainly be looked at and examined are the “Classical Keynesian Theory” and the Import Substitution Industrialization Theory”. It will argue that these theories do not work well independently of one another. For instance, Malaysia (a country that has its own unique way of using import tariffs to help their economy grow) will serve as a case study to help discuss how import tariffs can help the welfare of a county.
Free trade allows individuals to specialise in one thing they can do best, known as comparative advantage theory defined by the British political economist David Ricardo. Specialisation generates efficiencies. When they specialise in one task, people spend their time to do one thing and they learn how to do their task better. It allows people to learn how to produce more efficiently, and it creates even greater productivity. In terms of efficiency, free trade thus means that every state should play to maximise their specialisation of production and to minimise doing less efficient tasks (Kindleberger, 1995). Liberals believe that specialisation will improve the welfare of an individual country and that of the world as a whole if countries specialise in one task according to their comparative advantage (O’Brien and Williams, 2013). Moreover, nation states can expand their businesses with foreign direct investments, and this leads to more dynamic business style. Free trade opens up a door to the world for every single state, and domestic companies can export and import their commodities without paying extra tariffs or tax. Eliminating trade barriers creates a field which people can play a role internationally to compete one another in order to improve national as well as international economy (Balaam, and Dillman, 2011b). Liberal trade theorists argue that foreign investment accompanies increased trade and that
Russel Y., Topper S., Akerman L., Oliveira J., Strydom Z.; 2013; Studying Business NSC Business Studies Grade 12; 2013 Edition; Paardekraal; Excom Publishers; 26/05/2014
It is worthwhile to review some theoretical backgrounds supporting that trade openness can led to growth, as Marshal said in 1890 (as cited in Thirlwall p. 504) ‘the cause which determines the economic progress of nations belong to the study of international trade”. Robbins (2003) summarize some ( This part also mentions criticisms against those theories.
Economies of Scale: The expense structure of market industry is one of the critical perspectives that
The theory of absolute advantage, suggests that a country should export those goods and services for which it is more productive than other countries, and import those goods and services for which other countries are more productive than it is (Mahoney, Trigg, Griffin, & Pustay, 1998).
First of all, International trade boosts development and generates growth by allowing exchanging knowledge, standards, and best practices of skills and techniques globally and using the best that fits well.
In my essay, I have given a detailed definition of trade policy and its different aspects; discussed inward and outward oriented trade policy and how these are executed by governments around the world; stated how I believe outward orientation is the most efficient role that government can play in trade policy. In the future, I recommend that governments around the world legislate extremely open policy. Specifically, I believe the New Zealand Government should continue to negotiate as many free trade agreements as possible, as well as continuing to work actively with the World Trade Organization, to help provide a world of open and free
...stinguish that a qualitatively new type of worldwide trade was developing. The illustration in United stated since the late of 1980 showed that “has less productive portions moved offshore which lead to a decrease in employment while maintaining higher value-added parts. Consequently, all the productivity has risen, while the tradable sector has increased employment” (Spence and Hlatshwayo,2011).
Nowadays international trade is growing fast because of two main factors. Those factors include trade liberalization and technological progress. There are many and different arguments about the effects of trade liberalization and outsourcing. But the net effect of international trade is of cause differs from place to place.