New Patterns of Trade - Essay Example

Name: Instructors name: Course code: Trade 5002 June 7, 2012 FIRST MEMORANDUM INTERNAL MEMO From: Chief economist June 6, 2012 To: Company directors SUBJECT MATTER: STRATEGIZING FOR COMPANY’S ADVANTAGE This memo will highlight two key issues: reasons for positive change and implications of the predicted ASEAN-Japan FTA. THE REASONS FOR THE POSITIVE CHANGES The company is an Australian multinational firm that is vertically integrated in mining and smelting company that this responsible for exporting semi-fabricated metals and metal products and has been successfully over the past ten years. However, in the last two years there have been major positive shifts in the company based on a number of reasons. The key changes can be attributed to technological advancement as over the years the company was capable of purchasing advanced machineries from China and United States at an affordable prices (Varian 23). The acquired machines have assisted the company to produce quality products within minimum time using less manpower. The mentioned has assisted the company to have a competitor edge in the market, reduce time wastage, and maximize its operational profit. Another aspect that has contributed to the company’s positive change is competition. The company’s key competitors are from Chile, Indonesia, and Thailand and they also have a share in the Japanese market. Competition has made the company to adopt advanced and aggressive marketing strategies so that they gain entry into new markets as well as maintaining existing markets making it to enjoy a large market share not only nationally but also internationally (Varian 23). For instance, the company’s products are price competitive as compared to that of its competitors making it to enjoy a large client base. Moreover, the company has ensured that its products are of high quality by employing professional manpower and ensuring constant in house training. This has made the company to have a trademark in the international market. Hence, it is evident that competition has made the company to be alert and improve I its operations by ensuring that it meet the international standards an aspect that is likely to make the company to be on top in the next five years (Feenstra 40). The implications of the ASEAN-Japan FTA Currently, there are a number of implications of the ASEA-Japan FTA. Generalized equilibrium model is applied in anticipating the collisions of the eight theoretical East Asia trade agreements. According to the generalized equilibrium model, Japan is in a position to benefit from both the regional and the bilateral trade agreements an aspect that is likely to impact on the price of the products. However, it is important to note that superior economic benefits will be obtained from regional trade agreements and not from bilateral trade agreements. Therefore the company will be able to maximize its profit and enjoy wider market share locally and internationally and attain its annual targets as a result of the regional agreements (Goldman 21). However, based on tariff information and hypothetical price to graphically reflect the effects of the company’s exports mainly to Japan ASEAN-Japanese free trade agreements, the company’s profits will be minimized, hence t it will be impacted on negatively. This is because the company will need to pay taxes (Hindley 15). In the recent past, reports have indicated that there has been a flood of cheap copper in the market. The company can put in place ways of dealing with a flood of cheap copper in the Australia market. The company should aim at positioning itself in the market by ensuring that there are of high quality by establishing campaign programs to promote the quality against the cheap prices. In attaining this, the company should have sufficient evidence to prove that their products are of high quality as compared to the cheap copper imports. Scientific is helpful in showing how the durability and strength of the copper products. The proof will make the Australian government to curb or stop the importation of low quality and cheaper copper products that results into the company experiencing huge losses (Schott 29). Finally, the company should establish custom loyalty and discourage the clients from purchasing imported copper by informing the customer base about the complications involved. Finally, the company should also inform the Australian government on the importance of supporting the local products over the imports by increasing the tax on the imports thus making them expensive (Hindley 17). Insert name Insert signature Chief economist FOURTH MEMORANDUM From: The first president of government relations June 6, 2012 To: Company directors INTERNAL MEMO SUBJECT MATTER: IMPORTANCE OF BILATERAL AGREEMENTS AND CHALLENGES FACED BY THE COMPANY This memo addresses two key issues: importance of Australian government adapting bilateral agreements and challenges faced by the company and how to address the problems. It is essential for the Australian government to accept the bilateral investment treaty even if it fails to incorporate “fair and equitable treatment” and investor-state dispute settlement provision. This is because bilateral treaties will entice investors into the country an aspect that can further increase the profit margin of the company. Additionally, increased investors results into improved infrastructure in the country thus the company can benefit positively (Grimwade 45). The most recent free trade agreement was enforced in 2010 which is the ASEAN-Austraian-new Zealand. In this particular treaty, there are various signatories including new Zealand, Australian and ASEAN nations such as Malaysia, Singapore, Brunei, Laos, Myanmar, Cambodia, Vietnam and Thailand (Goldman, Bodrug and Warner 56). It is important for the Australian government to sign the agreement because the framework has tariff elimination for the member states. Additionally, the company is in a position to enjoy protection if it invests in the member countries as this is one of the benefits of the bilateral agreements (Goldman, Bodrug and Warner 56). Additionally, Australian investors like the company which is interested in investing in Vietnam will be more confident to do so. This is because the agreement accords certain protection to the investors which include: Prohibition against any form of expropriation: the member states that enter the agreement are protected from nationalizing or expropriating a covered investment. Therefore, the company will not be afraid to take in any risk as a result of the protection against nationalizing/expropriation (Goldman 17). National treatment: bilateral agreement treaties results into equal treatment of all the member states without any form of discrimination. For instance a foreign tax on any member state is regarded as a form of discrimination which is prohibited under national treatment. Hence the company is likely to enjoy this form of protection if the government allows it to enter into an agreement with Vietnam (Goldman, Bodrug and Warner 56). Fair and equitable treatment: the bilateral agreements oblige the member states to provide all the protected investments fair and equal treatment. This include: demanding that every member state is not denied justice in case of disagreement, administrative and legal disagreements (Feenstra 14). Full protection and security for the member states: the member states are required to take all necessary measures that are essential in ensuring not only protection but security of the covered investment (Hindley 14). Compensation for losses occurred as a result of state of emergency, civil strife or armed conflict: the policy requires that no member state treats foreign investors unfavorable in regard to restitution, indemnity, or compensation than it treats local investors (Hindley 16). Transfers: the treaty or agreement allows covered investors to transfer all the gains freely without any form of delay in and out of the member nations however an aspect that is subject to particular laws. This is in return will boost the nation’s income (Hindley 15). In line with the above outlined policies, the country and the company can benefit in a number of ways (Feketekuty and Rogowsky 19) which include: The company will enjoy a large market share in the international market thus increasing the income of both the company and the nation. The Australians will have an opportunity to learn one or two things from the people of Vietnam, for instance their lifestyle, culture, believe and religions. Through signing of the treaty a great friendship between the two countries will be created that cannot be easily broken. With the agreement between Australia and Vietnam will encourage immigration from the home country or state to the other one for instance between Australia and Vietnam. The agreement will further protect the company from any form of competition as the agreement may award the whole business prohibiting any players from exploring the same marketing resulting into increased profit for the company and income for the state (Feketekuty and Rogowsky 19). Problem competing with Mexicans Mexican charges low prices for its products an aspect that can result into the sales of the company diminishing as consumers prefer cheap good in the market (Hindley 50). However, in the world trade organizations there are competitions principles that each nation should follow. Some of the competition policies that have been use include anti-dumping policies. This can assist the company to determine the quality of the products sold by the Mexicans (Fox and Ordover 34). On the other hand, to curb the problem, the Australian company can enter into negotiation on competition policies with the Mexican companies. In this case the companies can refer to WTO rules on trade and competition policies (Schott 32). Apart from the negotiations on the competition policies with the Mexican company, it can put in place other strategies which include: Marketing-the company should perform several marketing strategies in order to maintain some of the consumers and get other new ones (Graham and Lawrence 20). Finally, company should be able to put up stations to various parts of the country that will make the consumers to get access to the oil without having any difficulty. This will attract consumer as a result of the accessibility. Insert name Insert signature The first president of government relations Works Cited Feketekuty, Geza, and Robert A. Rogowsky . The scope, implication, and economic rationale of a competition-oriented approach to future multilateral trade negotiations. Manuscript. Monetary, CA: monetary institute of international studies. 1996. Fox, Eleanor M and Janusz A Ordover. “The harmonization of competition and trade law the case Modest linkage of law and limits to paro chial state action” world competition 19:5- 34. 1995. Feenstra, Robert C. Advanced international trade: theory and evidence. California: Princeton University Press, 2004. Goldman, Calvin S., John D. Bodrug and Mark A Warner “Canada” in global competition policy, ed by Edward M Graham and J David Richardson. Washington institute for international studies. 1998 Grimwade, Nigel. International Trade: New Patterns of Trade, Production & Investment. USA: Ruutledge, 2000. Graham, Edward M., and Robert Z. Lawrence. Measuring the international contestability of markets: a conceptual approach . “Journal of world trade 30, no 5:5-20. 1996. Hindley, Brian. competition law and the WTO; alternative structures for agreement “in fair trade and harmonization: prerequisites for free trade ? ed. By Jagdish N.Bhagwati and Robert E.Hudec. Cambridge:MIT Press. 1996. Leonard Cheng, "International trade and technology: A brief survey of the recent literature," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 120(1), pages 165-189, March, 1999. Schott, Jeffrey J., ed. The world trading system: challenges ahead. Washington: institute for international economics. 1996. Varian, Hal, R.” Price discrimination”. In handbook of industrial organization, vol 1, ed by Richard Schmalansee and Robert Willig. Amsterdam: North Holland. 1996. Read More