International Business Another Econ 4143 Interna

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International Business Another Econ 4143 Interna

This exercise requires you to discuss International Business issues for the future, based on current global trends. The purpose in having these Discussion Boards is to make you read outside the textbook. So, more points will be awarded to those that can demonstrate this aspect. Discuss some of the following issues:

  • How important is Exports to a country’s growth? Check the % share of exports to GDP for some large economies. (what is US exports share?)
  • What are the current obstacles to export growth in the US?
  • What products or markets can US exports grow in?
  • Is it possible to increase US exports through incentives? What are some things that the government can do? What can corporations do
  • upto 50: for making a meaningful comment + introducing relevant new links / citation + supporting or refuting others’ comments with substantial evidence + linking issues to international business.

-another student comment

1. How important is Exports to a country’s growth? Check the % share of exports to GDP for some large economies. (what is US exports share?)

“Exports of goods and services represent the value of all goods and other market services provided to the rest of the world. They include the value of merchandise, freight, insurance, transport, travel, royalties, license fees, and other services, such as communication, construction, financial, information, business, personal, and government services. They exclude compensation of employees and investment income (formerly called factor services) and transfer payments” (The World Bank). Exports are significantly important to a country’s growth being that a lack there of results in declining relative productivity, meaning that U.S. firms are less able to price competitively against other exporters. This is a disadvantage that would lead to a loss of revenue share in common export markets. “In a large body of research, the size of a nation’s economy has been shown to be an important determinant of the size of its international trade flows, with larger countries both importing and exporting more. Therefore, the brisk rate of, say, China’s GDP growth relative to that of the United States would imply a higher Chinese share and a lower U.S. share in any product traded by both countries” (Current Issues, Volume 18, 2012). Although there has been a decline in export growth for the U.S. in recent years, it was one of the top three merchandise traders in 2017 alongside China and Germany in 2017 (World Trade Organization, 2018). The % share of exports to GDP for each country in the year 2016 are as follows: U.S.– 11.9, China– 19.7, and Germany– 46.1 (The World Bank).

https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci18-1.pdf

https://databank.worldbank.org/data/reports.aspx?source=2&type=metadata&series=NE.EXP.GNFS.ZS

2. What are the current obstacles to export growth in the US?

Some current obstacles to export growth in the U.S. are related to the composition of world trade and economy growth rate. “If the rest of the world is increasingly trading goods that the United States does not produce, then the U.S. export share will fall—even if U.S. firms remain just as productive as their competitors in the goods that they do export” (Current Issues, Volume 18, 2012). From 1984 to 2010, the U.S. share of global exports of goods fell by almost one-third. Through 1999, it was fairly stable at a level of roughly 12 percent, then dropped 3.5 percentage points between 2000 and 2010. Clearly, the decline in U.S. share in the 2000s was not particular to merchandise exports: the services measure fell precipitously from its initial value of about 25 percent before stabilizing in the later years at just above 5 percent. While the data’s incomplete coverage of countries and services makes it difficult to ascribe too much precision to the services share levels, the dynamics of the services market share are remarkably similar to those of the goods market share. This finding rules out the argument that a U.S. industry shift from manufactured goods exports to services exports explains the drop in the U.S. share of merchandise exports. More recently, U.S. exports are actually up 6% despite said reporting of a steady decline.

3. What products or markets can US exports grow in?

Found in an article on CNN Business Insider, this is a breakdown of the biggest U.S. export industries in 2017, according to the U.S. Commerce Department: 1. Food, beverage and feed: $133 billion. Soybeans were the number one product in this category, with sales of $22 billion, followed by meat and poultry at $18 billion. 2. Crude oil, fuel and other petroleum products: $109 billion. This is one of the fastest growing areas of US exports, up 37% in just the last year. 3. Civilian aircraft and aircraft engines: $99 billion. This is what makes Boeing (BA) the nation’s largest single exporter. 4. Auto parts, engines and car tires: $86 billion. Many of these are shipped to assembly plants owned by both US and foreign automakers in Mexico and Canada. It’s one of the reasons losing NAFTA would be so hard for the auto industry. 5. Industrial machines: $57 billion. 6. Passenger cars: $53 billion. American auto plants supply much of North and South America with cars, and also ship to other markets as well. BMW’s largest plant is in South Carolina, where it builds all of its X series SUVs. Last year it exported nearly three-quarters of the 371,000 cars it built there, making it the biggest car exporter in the United States. 7. Pharmaceuticals: $51 billion. Moreover, services are the biggest U.S. export, with total foreign sales of $778 billion last year. Indeed, the United States has a $243 billion trade surplus in services, which is good news since service industries account for 71% of US jobs. These are the service industries that bring in the most money: 1. Travel and transportation: $236 billion. 2. Finance and insurance: $76 billion. 3. Sales from intellectual property: $49 billion. This includes software, movies and television shows.

https://money.cnn.com/2018/03/07/news/economy/top-us-exports/index.html

4. Is it possible to increase US exports through incentives? What are some things that the government can do? What can corporations do?

“It is in the government’s best interest to keep the economy healthy by, among other things, ensuring an encouraging environment for small and large businesses. This being the case, the government has a number of tools at its disposal to encourage business activity throughout the economy or in specific industries” (Chron, 2019). Using incentives can most definitely increase U.S. exports including government and corporate actions. A list of these incentives and actions are as follows: 1. The Federal Reserve can alter the Federal Funds Target Rate – the figure that directly influences the prime interest rate – to stimulate lending to businesses and consumers. 2. Tax incentives to certain types of businesses, or incentives for consumers who patronize certain industries, can give fledgling markets a powerful boost. A prime example of this is the business and residential solar power industry. 3. Foreign trade policies, such as tariffs and import quotas, can be lowered or eliminated to encourage foreign trade. Relaxed trade restrictions and free-trade zones can allow local businesses to realize significant cost savings, allowing them to increase their bottom lines. 4. Government entities directly encourage business activity when they contract with private companies to perform government responsibilities. Counties, for example, can contract with third-party road pavers, snow plowers and towing services rather than creating internal departments for these activities. 5. The government has access to an entire population’s worth of individual and business tax money, and has the ability to distribute that money to affect change throughout the economy. Loans and grant programs offered directly to entrepreneurs are one way to use tax revenue to stimulate business activity. Another way, according to America.gov, is to fund agencies and programs such as the Small Business Administration, which provide assistance to startup entrepreneurs.

https://smallbusiness.chron.com/ways-can-government-encourage-business-activity-2282.html