Internet Exercises


1			The effects of the economic slowdown in the U.S. continue to be felt not only among U.S. corporations, but also among foreign companies, except perhaps Chinese firms. China has posted double-digit growth rates in recent years, and is quickly establishing itself as a major player in world trade. In fact, experts expect that China could become the world’s largest exporter in five years. Furthermore, the country has shifted from its earlier strategy of acting as a cheap assembly alternative for toys and clothing to becoming producers of a huge range of products including automobiles, consumer electronics, and semiconductors. China is also making it clear that it has a strong core of engineers and scientists who are ready to challenge the U.S. in technological innovation. Go to the U.S. Census Bureau (http://www.census.gov/foreign-trade/balance/c5700.html) and also to People’s Daily (http://english.peopledaily.com.cn/200210/04/eng20021004_104431.shtml) and explore the shift in trade between the U.S. and China, and also China and the rest of the world. Then explain the shift in China’s trading patterns. Which theory best explains China’s emergence as a major player in world trade? Some experts have suggested that the build up of industrial capacity in China is, at least in part, necessary to serve the Chinese market. How would David Ricardo (theory of comparative advantage) view this notion? Source: "World Depends on U.S. Consumers," The Akron Beacon Journal, 1/21/03, p. D1.




2			In recent years, the U.S. has seen a distinct change in its manufacturing base. Instead of developing and producing products within its borders, the country is developing technological products at home, but outsourcing production of those goods to foreign countries like China (see exercise 3 above) where labour costs are low. Some analysts are concerned that as the U.S.’s manufacturing base erodes, so too will the country’s intellectual property. In fact, as noted in exercise 3 above, China is making a case for its technological product development abilities. One analyst noted "there’s nothing they (China) want from us that they can’t make faster or cheaper themselves." Other experts however, maintain that taking advantage of foreign low cost labor is not a problem so long as the U.S. maintains its leadership in product development. One analyst cautioned that "we can’t let it slip away, we cannot." Go to http://www.census.gov/geo/landview/ and examine the trends in trading patterns between the U.S. and China over the last decade or so. Should the U.S. implement policies to limit the competition from countries like China and protect the U.S.’s position in manufacturing and product development? Why or why not? If policies were implemented, what would be the likely effect on economic growth? How would Michael Porter respond to these questions? Source: "World Depends on U.S. Consumers," The Akron Beacon Journal, 1/21/03, p. D1.

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