NAME-BHAWANA PANCHAL

COURSE -B.Sc PHYSICS HONS.

ROLL NO.-204106
SEM-3rd
GARGI COLLEGE
GE-INTERNATIONAL BUSINESS ASSIGNMENT
1. EXPLAIN THE DIFFERENCE BETWEEN THE ABSOLUTE AND COMPETITIVE
COST ADVANTAGE.

ANS.

ABSOLUTE COMPARATIVE
ADVANTAGE ADVANTAGE

The Absolute The concept of

DEFINITION advantage is the Comparative
inherent ability of a advantage refers to
country to produce countries a capability
specific goods in of producing the
efficient manner at specific goods at
lower marginal cost lower marginal cost
in comparison to and opportunity cost
other countries in comparison to
other country

It deals with lower It deals with the

BASIC marginal cost of
production of
lowest marginal and
opportunity cost of
specific good in production of a

CONCEPT comparison to
competitor country
specific good in
comparison to
competitor country

Concept of absolute Both countries in

TRADE advantage may not
always be mutually
transaction are
mutually benefited
beneficial for both because of

BENEFITS countries involved

in trade transaction
comparative
advantage of each
other

Absolute advantage Comparative

COST OF refers to lowering
the production cost
advantage specifically
refers to lower
of a specific good in opportunity cost of

PRODUCTION comparison to
competitors
production of specific
goods in comparison
to competitors
 Countries having Country with a
PRODUCTION absolute advantage comparative
of producing a good advantage takes into
produces higher account the
OF GOODS volume of that good
with the same
production of
multiple grids in
available resources country while
deciding the
production of a
specific good and
resource allocation
for the same

The absolute  Comparative

RESOURCE advantage may not Advantage takes into
be very effective in account the
deciding the opportunity cost of
ALLOCATION resource allocation
by a country for
production ,it is more
effective and decision
production of a for resource
good as it does not allocation domestic
take into account production and
the opportunity import of specific
cost of production goods
 
Trades in context of Trade decisions based
BENEFITS OF absolute advantage on comparative
are not mutually advantage are
beneficial in nature mutually beneficial in
ECONOMIES nature

Concept of absolute Comparative

EFFECTIVENESS advantage may not advantage is more
be very effective as effective in helping
OF ECONOMIES it focuses on
maximizing
countries taking
decisions related to
production with resource allocation
same available domestic production
resources without and import and
considering the export of goods
opportunity cost of
production
2. A. WHAT DO YOU UNDERSTAND BY THE TERM TARIFF. B. EXPLAIN THE
OTHER FORMS OF TRADE BARRIER.

ANS.

PART -A

A tariff is a tax imposed by a government on goods and services imported

from other countries that serves to increase the price and make imports less
desirable, or at least less competitive, versus domestic goods and services.
Tariffs are generally introduced as a means of restricting trade from
particular countries or reducing the importation of specific types of goods and
services.

For example, to discourage the purchase of Italian leather handbags, the U.S.
government could introduce a tariff of 50% that drives the purchase price of
those bags so high that domestic alternatives are much more affordable. The
government’s hope is that the added cost will make imported goods much less
desirable.

PART-B

OTHER FORMS OF TRADE BARRIER

1. Licenses
. Licenses are one of the most common instruments that countries use to regulate the
importation of goods. A license system allows authorized companies to import specific
commodities that are included in the list of licensed goods

2. Quotas
Quotas are quantitative restrictions that are imposed on imports and exports of a
specific product for a specified period. Countries use quotas as direct forms of
administrative regulation of foreign trade and it narrows down the range of
countries where firms can trade certain commodities. It caps the number of goods
that can be imported or exported at any given time.

3. Embargoes
Embargoes are total bans of trade on specific commodities and may be imposed on
imports or exports of specific goods that are supplied to or from specific countries. They
are considered legal barriers to trade, and governments may implement such measures
to achieve specific economic and political goals.

4. Import deposit
Import deposit is a form of foreign trade regulation that requires importers to pay the
central bank of the country a specified sum of money for a definite period. The amount
paid should be equal to the cost of imported goods.

3. A. EXPLAIN THE LEONTIEF PARADOX.

B. WHICH THEORY WAS IT BASED ON?

ANS.

PART -A

It was an observation made by an American economist .Leontief's paradox in economics

is that the country with the world's highest capital per worker has lower capital labour
ratio in exports and import.

PART-B

It was based on Heckscher-Ohlin Theory

Leontief himself favoured H-O theory. He tried to provide some explanation by

stressing the different efficiency in the US and the other countries. As Leontief
suggested that perhaps U.S workers were three times as effective as foreign workers. He
said in his paper "in any combination with the given quantity of capital one man year of
American labour is equivalent to say 3 man- year of foreign labour ".It means that the
average American worker is three times as effective as he would be in a foreign country.
Given the same K/L ratio Leontief attributed the superior efficiency of American labour
to remarkable entrepreneurship superior economic organisation and environment full
of economic incentives in the US .However Leontief found the very few followers among
economists . Even Leontief himself submitted that he had made up plausible alternative
assumption.

7. EXPLAIN WITH EXAMPLE DIFFERENCE BETWEEN REGIONALISM AND

MULTILATERALISM.

ANS.

MULTILATERALISM.
 In the multilateral trading arrangement, trade is based on the non
discriminatory Most Favoured Nation (MFN) principle, according to which each
contracting party (to GATT) must grant to every other contracting party
treatment as favourable as it grants to any other country.

 Multilateralism is represented by the efforts on worldwide liberalization of

international relations.

 In international business, multilateralism refers to an alliance of multiple

countries pursuing a common goal.

 It started in the field of trade in goods when General Agreement on Tariffs and
Trade (GATT) was signed. Then it developed into broader fields of trade in
services, investment, agricultural products, public procurement, and intellectual
property rights with its more sophisticated successor World Trade Organization
(WTO).

 Multilateralism is when at least three governments participate in a particular

issue or to try to solve a problem. Multilateralism is an example of cooperation
among world governments and used in contrast with unilateralism..

 One example of multilateralism can be seen in attempts to prevent nuclear

proliferation, or the spread of nuclear weapons. The Nuclear Non Proliferation
Treaty is a treaty signed by nearly 200 countries and states that is meant to
encourage states from further developing and using nuclear weapons. On the
one hand, the treaty has been effective overall, given the number of states that
follow it, and thus it is an example of successful multilateralism.

REGIONALISM

 In a regional grouping, member countries enjoy trade preferences over non

member countries
  The first coherent regional initiatives began in the 1950s and 1960s, but they
accomplished little, except in Western Europe with the establishment of the
European Community. Some analysts call these initiatives "old regionalism". In
the late 1980s, a new bout of regional integration (also called "new regionalism")
began and continues still.

 The European Union can be classified as a result of regionalism. The idea that
lies behind this increased regional identity is that as a region becomes more
economically integrated, it will necessarily become politically integrated as well.

Provision on Regionalism
Article XXIV of GATT which deals with customs unions and free trade areas, permits
such preferential trading arrangements subject to the conditions that

 trade barriers are eliminated on substantially all trade among members:

 the trade barriers remaining against non-members are not higher or more
restrictive than those previously in effect (in the case of a customs union, not, on
the whole, higher or more restrictive); and

 interim arrangements leading to the free trade area or customs union are
employed for only a reasonable length of time.

8. EXPLAIN THE DIFFERENT LEVELS OF ECONOMIC INTEGRATION.

ANS.

Economic integration can be classified into five additive levels, each present in the
global landscape:

Free trade
Tariffs (a tax imposed on imported goods) between member countries are significantly
reduced, some abolished altogether. Each member country keeps its own tariffs
regarding third countries. The general goal of free trade agreements is to develop
economies of scale and comparative advantages, promoting economic efficiency.

Custom union
Sets common external tariffs among member countries, implying that the same tariffs
are applied to third countries; a common trade regime is achieved. Custom unions are
particularly useful to level the competitive playing field and address the problem of re-
exports (using preferential tariffs in one country to enter another country).
Common market
Services and capital are free to move within member countries, expanding scale
economies and comparative advantages. However, each national market has its own
regulations, such as product standards.

Economic union (single market)

All tariffs are removed for trade between member countries, creating a uniform
(single) market. There are also free movements of labor, enabling workers in a member
country to move and work in another member country. Monetary and fiscal policies
between member countries are harmonized, which implies a level of political
integration. A further step concerns a monetary union where a common currency is
used, such as with the European Union (Euro).

Political union
Represents the potentially most advanced form of integration with a common
government and where the sovereignty of a member country is significantly reduced.
Only found within nation-states, such as federations where there are a central
government and regions (provinces, states, etc.) having a level of autonomy.