Using thenew trade theory andPorter's theory of national competitive advantage, outline the case for government policies designed to builda national competitive advantage in aparticular industry. Whatkind of policies would you recommend the government implement under both theories? Do these policies go against the notion of free trade?

One of the important notions of new trade theory suggest that first movers in an industry will often dominate those industries making it hard for other nations and enterprises to have an efficient amount of production. The first-mover advantage allows for those countries to capture economies of scale faster than those who join after leading to lower production costs and allowing them to dominate their sector of the economy and creates a barrier to entry into those industries. The new trade theory and government policies can help build a national competitive advantage if a country has the means to specialize in those industries with the help of government policies this can lead to greater economies of scale, This notion could interfere with Porter's theory of national competitive advantage because more developed nations may be able to produce a good at a more efficient rate given the proper technology and advanced education. Porter also suggests that domestic rivalry plays a large role in improving efficiency and that sharing these advancements within a nation creates more efficient industry overall, but this objective can be hard to achieve if there are different oligopolies that's attitude is leaning more towards profit than efficiency. The new trade theory would suggest that the government funds research and development to help grow the sector, imposing tariffs to aid the local market against further advanced international competitors and offering other forms of financial assistance.

Example for new trade theory: Computers being assembled in Thailand, as they can produce computers at a lower cost than in the U.S but the Software being developed in the U.S by its engineers. Both countries benefit from shifting their specification of production of a good and working together to produce and provide that good at a lower cost.

Poter's theory goes more in-depth with his 4 factors or "diamond" of creating a national competitive advantage. First is factor endowments and how much of that good the country is able to produce. The second is the demand conditions locally and globally for that good. The third part is to have related and supporting industries that allow for easier production or transportation of goods. The final part is to have the proper conditions to how companies are governed, created, and managed. Porter's theory also places a big importance on domestic rivalry and how that creates pressures to innovate, improve quality, reduce cost and invest in upgrading advanced factors (142) Under Porter's policies he would still suggest contributions to research and development but would also push for investments in training and education. He would make the barriers to entry easier and make for a more conductive business environment. He urges that investment in Advantaced factors of production are more important than the basic factors. An important role would be for the government to make sure that the goods are easily accessible in their local markets. Porter s theory aims to explain why countries gain a comparative advantage beyond the idea that the country uses their resources in the most productive way to produce goods. Porter focuses on the advanced factors such as infrastructure, skilled labor, research facilities and technology. (page 187)

Example of Porters trade theory: Japans large and successful manufacturing industry in a country that lacks land and mineral deposits. Because Japan has invested heavely in these advanced factors they have been able to overcome their disadvantage in the basic factors of production. (187)

Neither of these policies are fully for or fully against free trade. They stand more in the middle ground understanding that some countries will have comparative disadvantages and some will have complete advantage and to even the scale some government intervention is needed. Both new trade theory and Porter theory of National competitive advantage suggest that some government intervention is needed in the exportation of certain goods and industries (page 129)

Question 2:Globalization tends to provide net benefits to those nations that become active participants in the global economy. Why have several nations, such asKenya, Brazil, India, andZimbabwe,experienced economic weakness andhardship in this new era?

Globalization of trade through advancements in technology has made it much easier for countries to trade goods and allows economies to grow by allowing countries to be able to focus on their specialized industries. Many countries have found successful economic growth because of this but there are also many countries who have not had the same success. These countries have suffered due to globalization due to a number of different factors. Corruption can play a significant role in why some of these economies have not done well in the global economy. Most of these countries are not allocating their resources in a way that presents a successful economy. The uncertainty of a government's actions and obedience to laws can turn investors away from developing firms in those countries. Often in these countries there is war and widespread poverty that only discourages investors even more. There is also an issue with intellectual property that leads to a low rate of development. If people do not have the production of the law from others and the government to develop goods they will not be motivated to do so. Dictatorships and totalitarian governments has played a significant role in the mismanagement of these countries economic wellbeing. This mismanagement lead to these countries to have high debt, high inflation and low economic growth(page 21)

Question 3:Discuss the following statement:"Free market economies stimulate greater economic growth, whereasstate-directed economies stifle growth."

Free market economies encourage growth by allowing goods and services to be exchanged at the rate they are demanded on the global economy. This allows for rivalry between firms to produce better products and for more goods and services to be exported. Free market economies can have private corporation reach economics of scale thus producing those goods and services at a lower price. Privatisation does come with its issues when it comes to oversight and regulation of those goods and services and could allow for different types of oligopolies or monopolies to have control of the market. Free market economies while having some potential for instability are overall better for the global and domestic economies. While state-directed economies stifle growth by having too much government control on sectors and not allowing the same type of rivalries and adding a strong barrier to entry. These economies do not experience the same amount of growth that free market economies do because of the allocation of resources is set by the government not the buyers and sellers. State-directed economies are highly political which means that there is significantly more risk of corruption.

Question 4: Discuss the following statement: "Falling barriers to international trade destroy manufacturing jobs in wealthy advanced economies." Do you agree? Why?

This statement has had a strong presence in the minds of economists. At first this was presumed to be true and did in fact happen. The cost of producing goods in less developed countries for a lot less than doing so domestically was an easy decision for firms to do so. This did not come without negative repercussions. Firms found that it became tougher to have the proper oversight and the quality of production fell because of this. Many firms saw that the distances and transportation of these goods are becoming more and more difficult. These falling barriers have pushed down wages in developed countries and allowed for firms to take advantage of less developed countries to produce their goods at a lower cost. Firms have found many problems with this process of producing goods.

The transfer of these manufacturing jobs in developing countries opens the door for my high skilled and higher paying jobs in developing countries. This is difficult to achieve because as this transition is made workers need to be better educated and trained to fill those positions. The outsourcing of these jobs has led to higher unemployment and lower standard of living in the developed countries. This is a double edged sword as the outsourcing also allows for lower cost of goods in the developed nations.

Question 5:Re-read theCountry Focus on moving white-collar jobs offshore, and answer the following questions:

1. Who benefits from theoutsourcing of skilled white-collar jobs to developing nations? Who are the losers?

Developing nations benefit from the higher employment rate which will bring a higher GDP and this is a problem for developed nations. The economist states that the majority of jobs in developed countries are indeed white-collar jobs. Overall it is the firms that are the winners being able to cut significant costs by outsourcing jobs to India, Thailand, and other developing nations.

1. Will developed nations like Canada suffer from theloss of high-skilled andhigh-paying jobs?

The main people who will suffer from the loss of high-skilled and high-paying jobs are the middle class Canadians who could fill those jobs here. There has to be a very strong justification for moving these types of jobs to developing nations but the bigger issue for job loss in developed nations is due to recessions not outsourcing. Another issue of these loss of jobs is that the outsourcing of low-skilled manufacturing jobs has already played an impact on the employment rate in developed countries and the goal of doing so was to create and provide these jobs to developed nations like Canada. By now outsourcing the high-skilled and high-paying jobs we can expect for the unemployment rate to rise.

1. Is there a difference between thetransference ofhigh-paying white-collar jobs, such as computer programming and accounting, to developing nations and the transference of low-paying blue-collar jobs? If so, what is thedifference, and should government do anything tostop the flow of white-collar jobs out of the country to developing countries?

I believe there is a difference, although it may not be right to the underpaid industrial and factory workers but outsourcing a country's intellectual properties does pose a risk. there is not only the risk of taking the jobs and salary out of the developed nations economy but also the risk for the theft of their intellectual property. Other issues arise in the transfer of these jobs like lower employment rates, lower standard of living, and less available job options in those developed countries. Governments have a duty to protect and provide proper jobs options for their population and should implement ways to keep these jobs within their borders.