Running head: INTERNATIONAL TRADE SIMULATION 1

International Trade Simulation

Sylvester M. Collins Sr.
XECO/ 212
November 13, 2011
Allen Simmonds
INTERNATIONAL TRADE SIMULATION 2


International Trade Simulation
The simulation involved the countries oI Rodamia, Uthania, Suntize and Uthania.
Together each oI these countries economic survival was dependent on the availability and
utilization oI their resources. Rodima`s economic strengths were agriculture, industries and
services. Rodima also produced conIectionary and chocolate products like their neighbors oI
Uthania. Uthania`s other economic contributions were corn, as Rodima, coal and various
minerals. Also a producer oI corn is the country oI AlIazin. AlIazin has an agrarian industry that
is very stable and also produces rice and cotton. Electronic goods that are in demand Irom all the
neighboring countries come Irom the country oI Suntize. These countries make up an economic
world oI import/ export, tariIIs and quotas. Rodamia is a growing country and economic
globalization with the surrounding countries will Iurther prosper them all.
A countries competitive advantage or opportunity cost rises with international trade. It
has become the necessity oI trade because all countries recognize the comparative advantage that
is gained by the production oI similar goods made by other countries. As to how a small country
will try and compete with a larger country in the production oI agricultural products. Land plus
manpower produces larger volumes oI goods. The smaller country will have to make sacriIices
oI other goods being produced iI it wanted to compete at the same volume level as the larger
country. The smaller country doesn`t have the competitive advantage as the larger country and
this will hurt their economic growth. The larger country has the absolute advantage over the
smaller country because it is capable oI producing larger volumes at lower costs. This happens
because labor may be cheaper or the countries technology is more advanced.
When these concept are contrasted with Rodamia and the other countries we Iind that
Rodamia is a major exports are DVD players and cheese. In these two exports they have the
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competitive advantage. Absolute advantage is not a necessity oI requirement. What is required
mostly is the constant trading with neighboring countries that are eIIiciently producing the goods
that can`t be produced eIIiciently in your home country. For Rodamia they should import their
corn Irom Uthania and electronics Irom Suntize. This will be a good strategy to better improve
the country oI Rodamia.
When a country joins the international trading circle it gives that country more leisure to
specialize in producing what goods its best at. International trading helps a country develop and
increase the production oI their major goods and services. It also make the other products and
services more acquirable and readily available. Uthania desires to have cheese with their corn but
cheese is not one oI their major products. II Uthania imports their cheese Irom Rodamia and
export their corn to Rodamia both countries will be able to enjoy larger amounts oI both through
international trading. With the increase oI production through international trading oI Rodamia
and surrounding countries, economic development will Ilourish. Economic growth brings about
better living conditions and prosperity. Economic growth makes a country more attractive to
other countries and brings more industry and service to the country and more jobs will be
created.
Another beneIit oI economic growth Irom international trading is the political side oI it
all. The best and easiest way to be established with many diIIerent countries is through the
political ties it brings with it. Uthania and Rodamia would have a better relationship without any
conIlicts and a better way to resolve any issues.
Taking control oI many advantages in international trading you are bound to have some
disadvantages. Suntize imposed cheap prices on watches that were exported to Rodamia. This is
called dumping and brought about an alarming situation to the watch makers industry. Because
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oI this the companies may lose lots oI money and maybe even their businesses. Only because
now that watches are at a surplus there is too much competition in the trading industry Ior
watches.
So now Rodamia imposes tax rate increases and quotas as a way to control the dumping
in its country. This may not always be the best way to handle the situation Ior it can cause the
retaliation by the other country or countries. The other countries may take this as Rodamia
lashing out and also aIIect the exports oI products Irom Rodamia. Even though the other
countries know that these measures must be taken it still may not be the best move to make. It
could have been a mistake on side or the other. When demand calls Ior supply it must be met.
And the demand oI products and services will also increase the demand oI that countries money
which will increase the value oI that countries money. Then on the back end with the increase oI
the money supply the value oI the money will depreciate. This is why money must be regulated
to keep the value at a steady rate.
A countries currency is regulated by the exchange rate. It`s a powerIul Iorce in
international trading causes it balances out trading with the diIIerent countries. II the value oI
any oI the country`s currency decrease all exported products would be sold at a lower rate oI
exchange. There would be an increase in the demand Ior these countries goods because the prices
would be cheap. GDP and the trading balance will increase but eventually this will make their
export prices more expensive while import prices are less. Demand Ior products and services will
be less and imported goods more. This backward eIIect will result in the country`s GDP
decreasing.
So concerning the international simulation and the countries involved I say this: The giIt
and advantage oI international trading is good and also bad. International trading will be an
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important step Ior Rodamia and their surrounding countries. Competitive advantages will be an
important aspect Ior these countries and they must watch as to what products gives them this
advantage. Keep special attention to the exchange rate and their governments. In keeping a close
eye on their economy and the economy oI the neighboring countries, each will know what steps
to take or what right decisions to make concerning the other countries.
This was a very hard simulation Ior me as I had to do it several time. I wanted to lean on
my own understanding as to how I thought the world works and not the government regulations
and rules that are put into place. Economics is not Ior the squeamish.