Question

In: Economics

ANSWER IN DEPTH WITH SPECIFIC EXAMPLES! 1. Is the international product life theory still relevant to...

ANSWER IN DEPTH WITH SPECIFIC EXAMPLES!

1. Is the international product life theory still relevant to trade theory? Explain.

2. Explain the levels of economic integration and trace the evolution of economic integration in Europe.

Solutions

Expert Solution

1. In the modern economy, where globalization is key parameter associated with each economy, international product life theory is very much relevant to trade theory. Lets state and example of mobile phones. It all started in US, EU & other developed economies like Japan where it was manufactured and used. Companies like Nokia, Apple had the lead with their innovation. However, with rise in global usage of mobile phones and greater acceptance of smartphones, countries like China took the lead in manufacturing of smartphones with its low cost phones. It was able to do so because of lower costs associated with labor and increased government support. In the current times, US trade tariffs on China basically aims to disrupt this very movement, thus, restricting US patents to its own usage only.

2. I believe that the economic integration in Europe started when the idea of single currency Éuro' started to emerge in the late 1980's and early 1990's. The idea for a single currency was first proposed by Werner report during early 1970. However, if we closely observe the European economy, it has witnessed incremental progress during the last 2 decades. With the concept of Euro, a sense of óne team' emerged where countries under EU umbrella supported each other economy through free trade flows and ease of currency flows( because of single currency).

How remarkable the progress of EU can be, but the recent possibility of Brexit, in which UK is determined to exit from EU, leaves a mark of uncertainty. If a major economy like UK departs from the system of EU, it poses insecurity to the whole umbrella. Other economies might be tempted to leave EU and adopt their own currency. This will lead to increased trade difficulties and pose a concern regarding economic stability of EU.


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