International_Trade_Choice_of_Rodimia

International Trade Simulation “I have done a review of the Trade Report and it is my strongly advised opinion to open trade to our neighboring countries. After review of all the information I have learned that trade with other countries will increase wealth for Rodamia. We will be importing products from other countries that can make them more efficiently and offer Rodamia more in terms of quantity and price. These actions will also make the economy more vibrant. The limitations are minimal only because we are trading with only our closest neighbors. International Trade can be done all over the world. Eventually, broadening our import and export to other countries will be even more beneficial for Rodamia.” Romadia’s Trade Advisor. The simulation identified Rodamia’s bordering countries provide an opportunity for international trade and investments that could greatly benefit Rodamia. International trade with other countries would give consumers more choices in price and quality of goods. The domestic producers would increase production to meet market demands in other countries, producing more capital for investing in new avenues. The interaction of trade between the countries will make the countries more vibrant and wealthier. The main advantage to international trade is gains to all the countries involved when the right countries are exporting the most beneficial product and importing the right product from the right country. A country that is equipped to handle a certain product will succeed in doing so much like Rodamia and its domestic production of cheese and DVD players. From the choices the Rodamia had, these were the optimum products to produce themselves and export to neighboring countries. Rodamia still needed corn and watches so it decided to import corn from Uthania and watches from Suntize. This was in line with opportunity cost of production for each country and proved to be the best decision. The opportunity costs of producing goods were different for each country so there was potential gain for Rodamia to specialize in cheese and DVD players. However, when and if those conditions changed, Rodamia’s domestic industry could experience a great loss. In July of 2004 of the simulation, President Jacobs requests the Trade Representative determine whether or not to levy an anti-dumping tariff or to impose a quota restriction on imports from Suntize due to a recently discovered dumping margin of 25% to equal the price or watches. In response, the Trade Representative decided to levy a tariff at $40.00 per unit. This is equal to 25% of the export price, equaling the dumpling margin. The down side of this decision is that Rodamia’s domestic industry can be harmed. While dumping can cause harm to industry, consumers will benefit from the lowered the prices for a product. In Rodamia, the people will enjoy the low prices even though the domestic producers will be hurt. In response to a “corn boom” in January of 2005, President Jacobs makes another request of his Trade Representative: access whether or not a brief tariff should be imposed on imported corn from Alfazia and Uthania. If a tariff is to be imposed, the President needs to know at what level the tariff will be imposed. In reply, the Trade Representative can explain that a tariff for a short period of time the corn industry can improve their production efficiency and move towards a lower cost production run. Then the tariff can gradually be lifted. Comparative advantage is the name for the ability of one business entity to engage in production at a lower opportunity cost than another entity. Comparative advantage, rather than absolute advantage, is useful in determining what should be produced and what should be acquired though trade. Absolute advantage is the name for the ability of one entity to engage in more efficient production than another entity. Assuming equal inputs, the entity with an absolute advantage will have a greater output. In our simulation, absolute advantage would be the area of which Rodamia has the perfect agriculture for developing dairy products. They also have improved technology to advance the growth even more. The comparative advantage in our simulation was the review and choice of which product and which entity to trade with. Since Suntizes could make the most reputable watches, trading with them would be a good idea. They hold the comparative advantage over watches, not Rodamia, Alfazia or Uthania. The major influence on the exchange rate is the supply and demand of money. When companies buy services and products from other countries, they must first exchange their national currency for the currency of the country providing the product or service. The price of that money is, effectively, the exchange rate. Therefore, when the demand for the money of a certain country goes up, its price generally rises accordingly. Exchange rates significantly affect worldwide commerce and can be reactive to the perceived strength of individual economies. Exchange rates also affect the well-being of domestic importers and exporters as the demand for their products increases and decreases. Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world. For this reason, exchange rates are among the most reviewed, analyzed and governmentally manipulated economic measures.