Assignment Problem: International Financial Management
Comparative advantage (Ricardo, 1817) suggests countries should focus on producing goods where they are relatively more efficient and trade with countries who have other relative efficiencies. The argument being that this should lower prices for all. Tariffs, however, can impede comparative advantage.
"Economists argue about a lot of things, yet many would probably agree on the benefits of free trade, which generates wealth by allowing the free flow of goods across international borders, without taxes and other such barriers..... Rather than being used to raise revenue, they are imposed to increase the price of foreign goods in order to make domestic produce comparatively cheaper, with the aim of encouraging domestic production and protecting firms from global competition." Partington (2018)
Required:
Problem 1: Explain comparative advantage in more detail.
Problem 2: Describe how tariffs can restrict international trade.
Problem 3: Using the following article and other sources you consider appropriate, summarise the possible impact tariffs imposed by the US have had in the US.
Following on from the Bombardier/Boeing/Airbus case we discussed in the seminar, Hollinger (2019) reports
"Arbitrators at the World Trade Organization on Wednesday ruled on the amount of punitive tariffs Washington can slap on a range of European goods.
Problem 4: Summarized the issues which have led to WTO ruling.
Problem 5: Choose one of the products and comment on the reaction to the imposition of the tariffs. You will need to use news articles for this but please remember which sources you are using and whether there may be potential biases in the reporting.
1,500 words
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