Question

1) How, if at all, is the geographic distance between countries related to the volume of trade between them? Is there a sense in which the world is becoming increasingly “flat,” as Thomas Friedman claims? Is there a sense in which it isn’t?

2) Why are some sectors more efficient when they operate on a large scale? In what sense might this phenomenon have made things for more difficult for sub-Saharan African countries that wish to reap the gains from trade?

3) Suppose workers within a country are identical. Is it possible that some will benefit from globalization while others are made worse off? Explain.

4) How, if at all, might technological catch-up in the emerging markets be a bad thing for the United States?Use the Ricardian model to argue your position.

Please answer the questions in as much detail as possible!

Answer 1

1) The geographic distance between countries related to the volume of trade between them. Distance affects transportation costs for products with low value-to-weight ratio, fragile and perishable products. Services are also affected. Cross-border trade flows between two countries reduce, as geographic distance between them increases. Companies that find geography a barrier to trade are often expected to switch to direct investment in local plants and equipment’s as an alternative way to access target markets. But geographic distance has a dampening effect on both trade flows and investment flows.

Friedman is correct, for example when he points out the importance of changes like the rise of India or China, the spatial fragmentation of the production process through offshoring or the lowering of transaction costs that makes more and more services tradable. exchange increase the freeness of trade and promote the production and transmission of information and knowledge. It increases economic integration.

But, not all socio-economic groups or local communities have equal access to or control resources. Globalization increases inequality within advanced economies and undermines the ability of the world’s poorer countries to improve social welfare or protect their natural environment. Opportunities are overwhelmingly focussed on and dominated by major ‘global’ cities.

2) When more units of a good or a service can be produced on a larger scale, yet with fewer input costs, economies of scale are said to be achieved. This means that as a company grows and production units increase, a company will have a better chance to decrease its costs. This happens due to bulk buying, division of labor and specialization.
The subSaharan African countries’ own trade and transport policies incorporate a substantial anti-export bias, which lessens their ability to be competitive in international markets, The different types of barriers such as tariffs, quotas, and other government-imposed restrictions increase the cost and make export less attractive.

3) Skilled workers often get to work with managers from rich countries, or might have to meet the deadlines of an efficient rich-world company. That may boost their productivity. Higher productivity means they can demand even higher wages. By contrast, unskilled workers, or poor ones in rural areas, tend not to have such opportunities. Their productivity does not rise. For these reasons globalisation can boost the wages of skilled workers, while crimping those of the unskilled. The result is that inequality rises. But if workers in a country are identical. this problem dont arrise.

4) Technological catch-up in the emerging markets be a bad thing for the United States as it can create a comparative advantage in these emerging markets which USA is enjoying currentlt. In the past resources were relatively fixed and did not flow easily between countries, 21st century national policies could guide the development of new comparative strengths based on investment, research and development, and education. It may pose challenges by increasing current account deficit.