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BUSN601-Week1-Assignment-Globalization 1

Week1 Assignment Globalization

Tanen Ankh Aha Andrews

American Public University

BUSN601

09-05-2016
BUSN601-Week1-Assignment-Globalization 2

Abstract

China and India are emerging as the global powerhouses and are lining up various economic

partnerships which, in time may become a game changing event as a new group of the white-

collar type jobs are changing over to countries with cheaper labor. The fact remains that

programming training, engineering training and other advanced skilled jobs are relocating to

places such as the countries of China and India and it seems it may replace the doctrine of 200

years as it relates to the comparative advantage. The major trade theories that support China and

India recent rise has to be attributed to Mercantilism, Specialization and Factor Endowments. In

addition, which each country graduating more students in specialized fields of study and in

conjunction with low labor cost explains their rapid rise in globalization.
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The Trade Theories that Support the recent rise of China and India on the Global Stage

The steady economic growth of China and India has been attributed to the excessive growth of

their trades. In most cases this has benefited and provided opportunities to their trading partners

and for others strong competition in their home markets and other markets as well.

A main factor of distribution implies that the global competition is how far it will go before the

overlapping of Indias and Chinas basket of goods. China and India currently are manufacturing

labor extreme goods and skilled and capital rich modern countries are specializing in skillful and

capital extreme products. When you observe these various models, these modern economies have

really little to no concern about the economic development of the countries of China and India as

a world economic competitive power. If you factor in various labor rich developing countrys

economic infrastructures, then they will have plenty to worry about as the traditional theory will

reveal the pre-existing expanded products as the only source of export growth.

China

I see China taking advantage of free trade and potentially becoming the next super power of the

world. They possess the main components to making this happen as an absolute and comparative

advantage. China exercises all the major trade theories such as mercantilism, specialization and

factor endowments. In my personal opinion I believe China has figured out that other major

developed countries cater to capitalism and consumption. As for capitalism to run a successful

and profitable business; products and services which, attribute to operating expenses must be at a

bare minimum. To use the U.S. as an example consumer consumption is encouraged rather it be
BUSN601-Week1-Assignment-Globalization 4

responsible or not and China exposes and takes advantage of this flaw through manufacturing of

products for other countries who want to keep cost down because production of the product in

their country is inefficient. Chinas comparative advantage via the H-O Theory to this is it starts

to level the playing field somewhat because in some cases trade policies can hurt some countries

considered economically disadvantaged. So the key assumptions of the H-O Theory as I stated

above promotes perfect competition in the marketplace.

India

As for India this country has focused more on services. Their exports are made up of capital and

skill related goods and as specialization as a basis for trade theory is an absolute advantage and

comparative advantage. Now I agree with this to a certain extent because the only disadvantage

to this is when another country uses Indias service such as a call service and there is a language

barrier. With that said Indias use of the Factor Price Equalization Theory has allowed other

nations to utilized their resources for the purpose of efficiency and price equalization.

References:

Shaking Up Trade Theory. (2004). For Decades economists have insisted that the U.S. wins from

globalization. Now theyre not so sure. http://www.bloomberg.com/news/articles/2004-12-

05/shaking-up-trade-theory

World Bank. (2007). China, India and the Future of the World Economy: Fierce Competition of

Shared Growth? http://siteresources.worldbank.org/INTDEBTDEPT/Resources/468980-

1206974166266/4833916-1206974192224/PRWP4304.pdf