Univ. of Washington, Geography 349, Final Exam, Winter 1998

University of Washington Geography 349 Winter 1998 FINAL EXAMINATION

Write two good essays. Select one topic from Group A and one from Group B. Be clear; note basic principles where relevant, and give examples where relevant.

GROUP A: Trade theory and policy

1. Write an historical overview of international trade theory, from mercantilism through the new trade theory. How have the dominant trade theories reflected their times? Include a comparison of the principles of absolute and comparative advantage, the factor-proportions explanation of comparative advantage, and the implications of the Leontief paradox for that explanation.

2. Discuss alternative trade policies. I can think of two approaches to this essay: you may think of another. One approach would present perhaps four common arguments for protectionist trade policies, provide an economic argument against (or caveat about) each, and then provide your own assessment of the political and developmental counter-arguments for each. Another approach would be to develop perhaps two alternative models of trade and foreign-investment policies as instruments of national development, with caveats and examples for each.

3. The 12 March 1998 on-line edition of The New York Times ran an article excerpted below.

1997 Trade Deficit 2nd Worst Ever

America’s deficit in the broadest measure of foreign trade jumped to $166.4 billion last year, the second worst showing on record, as the deficit for the final three months of the year climbed to the highest level in history.

The 1997 deficit has been surpassed only once, by a $168.1 billion all-time high set in 1987, a year when American manufacturers were being battered by foreign competitors and the high value of the dollar that made imports cheaper.

Signs of worsening trends were evident in the final three months of the year when the current account deficit jumped to a record $45.6 billion, up 5.8 percent from the third quarter deficit of $43.1 billion.

Write an essay regarding the U.S. balance of payments. What are the likely causes of the near-record deficit in 1997? (Which balance is the article above referring to?) Given the likely causes, what are appropriate policy responses to the news reported here? Make sure you use your recognition of the fundamental identity in international accounts to develop your sense of cause, effect, and policy response. You’ll probably want to make use of the table below. Note that one of the balances changed signs from 1996-1997. What does this indicate?

**U.S. International Transactions (millions of current dollars)**
		1997	1996	Percent Change
1	Exports of goods, services, and income	1,167,610	1,055,233	10.6
2	Goods, adjusted, excl. military	678,348	612,069	10.8
3	Services	253,220	236,764	7.0
11	Income receipts on U.S. assets abroad	236,043	206,400	14.4
15	Imports of goods, services, and income	-1,295,530	-1,163,450	-11.4
16	Goods, adjusted, excl. military	-877,282	-803,239	-9.2
17	Services	-167,929	-156,634	-7.2
25	Income payments on foreign assets in U.S.	-250,320	-203,577	-23.0
29	Unilateral transfers, net	-38,526	-39,968	3.6
33	U.S. assets abroad, net (increase = capital outflow (-))	-426,938	-352,444	-21.1
48	Foreign assets in the U.S., net (increase = capital inflow (+))	690,497	547,555	26.1
63	Statistical discrepancy (sum of the above items with the sign reversed)	-97,113	-46,927
64	Balance on goods (2 + 16)	-198,934	-191,170	-4.1
65	Balance on services (3 + 17)	85,291	80,130	6.4
66	Balance on goods and services (64 +65)	-113,643	-111,040	-2.3
67	Balance on investment income (11 + 25)	-14,277	2,824	n.a.
68	Balance on goods, services, and income (1 + 15 = 66 + 67)	-127,920	-108,216	-18.2
69	Unilateral transfers, net (29)	-38,526	-39,968	3.6
70	Balance on current account (1 + 15 + 29 = 68 + 69)	-166,446	-148,184	-12.3

GROUP B: Conduct of international business

1. We developed a strategic view of corporate decision making in this course (sometimes called “strategic planning” in management, or “monopolistic competition” in economics). Write an essay that uses this view:

to distinguish among the forms of international business (present the entire OLI framework, and focus only on the import/export, licensing, franchising, and direct-investment forms), and
to guide corporate choices in one of the major functional areas of international management (marketing, organization, logistics, finance, staffing). (Country-specific characteristics are also relevant: how?)

2. Introduce the concepts of informationalism, networked technologies, and business networks. What effects have these changes have (and/or might the changes have in the future) on the conduct of international business: choices among forms of IB, choices within the functional areas of international management? You’ll want to make use of Castells’s concepts and empirical overviews as well as the strategic view of international business operations that we’ve developed in class.