IM No.

INTL 1-1STSEM-2020-2021
Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE

Name: CABADING, DEXTER O. Score:____________

Section: BSBA-FM 2A Date: FEB. 11, 2022

VI. LEARNING ACTIVITIES MODULE 5

Case Study: The Rise of Bangladesh's Textile Trade

Case Discussion Questions

1. Why was the shift to a free trade regime in the textile industry good for Bangladesh?
• A system of tariff and non-tariff obstacles, as well as export incentive programs, is known as a free
trade regime. Textile manufacture and cheap labor costs are advantages of a free trade regime. It is
also assisting industry and diversifying sources of supply. A quota system governed Bangladesh's
possibilities in wealthy countries until 2005. Bangladesh's exports have increased as a result of the
introduction of free trade regulations. Low-cost, productive labor force, and a robust network of
supporting industries are among the textile industry's competitive advantages. In addition, new
importers from the West are eager to broaden their supplier base. As a result, Bangladesh will
benefit from a change to a free trade textile industry.

2. Who benefits when retailers in the United States source textiles from low-wage countries such as
Bangladesh? Who might lose? Do the gains outweigh the losses?
• Bangladesh offers a number of competitive advantages, including cheap cost and low pricing. It
has a greater price and fewer clothing purchased locally in the United States, as well as the
possibility of a loss. When retailers in the United States source textiles from low-wage countries, it
benefits the economy of Bangladesh, Hong Kong, and buyers. High-developing countries, such as
the United States, may suffer. Yes, the benefits exceed the drawbacks. Bangladesh's progress will
be gradual. The economy will improve.

3. What international trade theory, or theories, best explain the rise of Bangladesh as a textile
exporting powerhouse?
• Bangladesh has several advantages: low labor costs result in cheap manufacturing costs; low-
wage workers produce inputs locally; transport and storage costs are very low; and import levies are
falling. Exports and economic growth are boosted by products with reduced trade barriers. Low
salaries and investments in increasing production levels, as well as a network of supporting sectors,
make the country an exporting powerhouse. The growth of Bangladesh as a textile-exporting
powerhouse is best explained by Porter's theory of competitive advantage and Porter's theory of
comparative advantage.

4. How secure is Bangladesh's textile industry from foreign competition? What factors could ultimately
lead to a decline?
• In addition to the low cost of garments, Bangladesh is attractive because it allows importers to
diversify their supply base. Importers don't want to rely solely on China and see Bangladesh as a
good way to diversify their supply base. Their infrastructure, on the other hand, might be a concern
for exporters. Importers may begin to hunt for alternative sources of supply if infrastructure issues
obstruct their supply. To minimize any disruptions in the business, Bangladesh should make the
necessary investments. Recession, increased productivity, raw materials, labour, political unrest,
and infrastructure are all possible causes of decline.

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational
purposes only and not for commercial distribution.”

NVSU-FR-ICD-05-00 (081220) Page 1 of 85

 IM No. INTL 1-1STSEM-2020-2021
Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE

VIII. ASSIGNMENT MODULE 5

1. Discuss briefly the benefits of international trade.

• Countries can use international trade to expand their markets and gain access to commodities and
services that they would not have had access to previously. The market is more competitive as a result
of foreign trade. As a result, prices are more competitive and the consumer receives a product that is
less expensive.

2. What is the difference between Mercantilism and Absolute Advantage?

• The difference between Mercantilism and Absolute Advantage is When a produces goods in greater
quantity with lower cost compared to other countries. Absolute advantage is that a manufacturer can
make a product or service in higher quantities at the same cost or in the same quantities at lower costs
than other producers this may be the basis of major trade gains between producers of various products
with different absolute advantages. While Mercantilism is an economic theory where the government
seeks to regulate the economy and trade in order to promote domestic industry- often at the expense of
other countries.

3. What is the similarity of Comparative Advantage and Heckscher- Ohlin Theory

• Heckscher-Ohlin asserts that differences in comparative advantage come from differences in factor
abundance and in the factor intensity of goods. Specifically, Heckscher-Ohlin predicts that countries will
produce relatively more of the goods that use their relatively abundant factors relatively intensively.

4. Enumerate and discuss the three stages of International Product-Life Cycle Theory.
1. New product introduction- Many innovative items, such as mass-produced autos, televisions,
instant cameras, photocopiers, personal computers, and semiconductor chips, were invented and
initially sold in the United States. Because of the affluence and scale of the US market, companies in
the United States had a tremendous incentive to produce new consumer items (Hill, 2013). While the
demand for photocopiers (a new product) is fast increasing in the United States, it is limited to high-
income populations in other industrialized countries. Because there is a lack of demand in other
advanced countries, it is not possible for a company in that country to begin producing photocopiers.
Photocopiers from the United States can be imported into advanced countries.

2. Maturity stage- In other advanced countries including the United Kingdom, France, Germany, and
Japan, demand for photocopiers begins to rise over time. As a result, it makes sense for foreign
producers to start manufacturing for their own markets. Firms from the United States may also
establish production facilities in advanced countries where demand is increasing.

3. Product standardization and streamlining of manufacturing- The product becomes increasingly

standardized as the market for photocopiers matures in the United States and other advanced
countries, and prices become the key competitive weapon. These countries may make
photocopiers in their own countries, but this cycle continues when developing countries begin to
produce their own copy machines. Because of low labor costs and other reasons, they can create
the photocopier at a lesser cost in this situation. Finally, photocopiers can now be exported to the
United States by companies in either developed or poor countries. Ironically, US companies that
created and exported photocopiers to other countries are now importing the product.

5. Describe New Trade Theory

• Originally created in the late 1970s and early 1980s, New Trade Theory is a set of economic models
in international trade theory that emphasize on the importance of growing returns to scale and network
effects. Larger economies of scale are available to countries that trade.

6. Enumerate and discuss the four determinants of National Competitive Theory

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational
purposes only and not for commercial distribution.”

NVSU-FR-ICD-05-00 (081220) Page 2 of 85

 IM No. INTL 1-1STSEM-2020-2021
Republic of the Philippines
NUEVA VIZCAYA STATE UNIVERSITY
Bayombong, Nueva Vizcaya
INSTRUCTIONAL MODULE

1. Factor Conditions – Most important among the four, because a large pool of skilled labor, technical
advancement, infrastructure, and money should be produced by a specific country.

2. Demand Conditions – it refers to the size and nature of the customer base for products, which it
also drives innovation and production improvement.

3. Related and Supporting Industries – it is upstream and downstream industries that facilitate
innovation through exchanging ideas.

4. Firm Strategy, Structure, and Rivalry – a basic fact that competition leads to firm finding ways to
increase production and development of technological innovations.

“In accordance with Section 185, Fair Use of Copyrighted Work of Republic Act 8293, the copyrighted works included in this material may be reproduced for educational
purposes only and not for commercial distribution.”

NVSU-FR-ICD-05-00 (081220) Page 3 of 85