International Trade and Investment Theories

Questions: 1.Can you think of any recent new/media stories that illustrate a mercantilist viewpoint still flourishes in Australia/your home country? 2.What factor endowments does Australia have? What about our neighbouring Asian nations including China, India, Singapore, Vietnam and Indonesia? 3. Can you think of any infant industries in Australia that might become strategically and/or financially important in future years that would benefit from government protection now? Answers: International trade and investment theories International trade refers to the trade or exchange of products and services across the borders and territories that represents substantial share of gross domestic product (GDP). Trading across the international borders creates opportunities for organisations, consumers as well as countries to be exposed in to the new markets together with the new products. There are several mode of entry considered by business organisations that is import- export, mergers and acquisitions, joint ventures or strategic alliance incorporating exchange of products and other resources as per the requirement. Further, investment theories provide knowledge to support the process of investment decision that involves portfolio theory, arbitrage process rational pricing or capital asset pricing model. Different investment theories provide analysis on the investment viability by considering market returns, inflation rates and organisational performance (Handley Limao, 2015). 1.Illustration on mercantilist viewpoint flourishment in Australia In the recent years, Australia has been an international competitive country for mercantilism that incorporates economic reforms and policies. In recent media, Ken Henry stated the concept of competitiveness at international level in Australia through mercantilism as the major economic regulation and policy. It has been stated that Australia has been in a good economic reforms in terms of trading and employment opportunities as well as the financial economy of the country has also been strong. Availability of resources and capital to operate the business activities are prime requirement along with the skilled human resources influence the business operations. As Australian region involves the advantages of resources availability as well as the advantage of location, mercantilism still flourishes in the country (Henry, 2016). 2.Factor endowments Factor endowment refers to the value of land, capital, entrepreneurship and labour in a countrys possession that can be exploited for manufacturing process. Types and amount of resources differs in each country which determines the ability of the country to produce a particular product or service. The elements that govern the factor endowment are geographical features, historical and political influence and socio- economic issues. It has been observed that Australia has been a large source of natural resources for coal, bauxite or grazing land while skilled workforce to operate the advanced technology has been available in Japan. For the purpose of large production, cheap labour is required that can be availed in China since the country has large population for manufacturing textile or clothing products as well as footwear products. As a consequence, the availability of resources reflects the trade patterns in terms of demand and supply and respective product pricing (Sheng, Ball No ssal, 2015). 3.Strategic and financial importance for Australian infant industry Australian economy is considered to be stable and well flourished in recent years due to the availability of natural resources. Manufacturing industry in Australia has been a stable industry while the pharmaceutical industry in the present scenario still experience less strategic importance. As the Pharmaceutical industry involves unusual strategic characteristics, many organisations do not possess clear knowledge about the same. Accordingly, the Australian government incorporated regulations to provide resources and expertise to help the industry become strategically important in future years (Jayaram, Oke Prajogo, 2014). References Handley, K., Limao, N. (2015). Trade and investment under policy uncertainty: theory and firm evidence.American Economic Journal: Economic Policy,7(4), 189-222. Henry, K. (2016). Australia in the Asian century.Asia the Pacific Policy Studies,3(2), 132-139. Jayaram, J., Oke, A., Prajogo, D. (2014). The antecedents and consequences of product and process innovation strategy implementation in Australian manufacturing firms.International Journal of Production Research,52(15), 4424-4439. Sheng, Y., Ball, E., Nossal, K. (2015). Comparing Agricultural Total Factor Productivity between Australia, Canada, and the United States, 1961-2006.International Productivity Monitor, (29), 38.