Week3: Are All Barriers on Trade Intentional?

From the title “Terrorist Attack Results in Added Costs and Slowdowns for US Freight System” in the textbook, it shows that unintentional outside factor have an impact on international trade such as the incident of the terrorist attacks on September 11, 2001. It created new kind of trade barrier which is US border security that makes it hard to trade between US and other countries.

The main focus that I will talk is oil price. Oil is conquering new heights every day. It is the single largest commodity affecting world economy today. Oil has a larger impact, especially when it comes to international trade; in a globalized world. As transportation costs had a major hand in the success of globalization, the increase in oil price has disrupted this pillar of globalization. Transportation costs are increasing worldwide due to fuel price increase and it might increase to such an extent that it may not become economically plausible for a country to buy or sell goods outside. The transportation costs may become the deciding factor of the final price of goods and hence would account for an obvious collapse of the cost advantage that nations enjoyed previously.

For Thailand, although Thai exports in 2011 are expected to increase steadily, there are several key risk factors such as the appreciation of the baht and an increase in interest rates which create an impact on Thailand’s international trade. Fuel price is one of the factors because higher oil prices will also increase production and transportation costs.

Week2: Detroit's Big Three Face Obstacles in Restructuring

The 'Big Three' automobile manufacturers that we talk about are Ford Motors, General Motors and Chrysler. In the past, they controlled more than 90 percent of the US market. As time went by, their market share has greatly diminished because of foreign competition, mostly Japanese companies. This problem forces “the big three” to alter price policies, production methods, work rules, compensation levels, and product quality.

The topic that will be focus is healthcare benefit. The American auto industry is one of the last bastions of generous benefits that were once part of many employers' largess: fully paid health insurance, retiree medical coverage and pensions. In my opinion, I think paying a portion of healthcare benefits make it hard for “the big three” to compete with foreign competitive. Healthcare benefits will limit the company from reduce their products’ price. Also, it is a huge portion of company cost and can’t fix or decrease it easily. Moreover, "It is a well-known fact that the U.S. automobile industry spends more per car on health care than on steel," says Lee Iacocca, the retired chairman of Chrysler who in the early 1990s advocated a national health care program as a solution.

To improve the comparative advantage of US car manufacturers;

First, they should import the necessary technology for manufacturing, build labor and management skills, and develop a home market for US vehicles. A compilation of elements, such as low-cost skilled labor and cheap raw materials, will help US modify their manufacturing processes. 

Secondly, they should emphasize on exporting automobiles to the rest of the world. The success will directly relate to the automobile manufacturers' ability to achieve gains in labor productivity through new manufacturing processes. In order to keep their employees' goals consistent with company productivity goals, they should offer annual bonuses and incentives to employees based on productivity gains and company profitability reinforced this strategy. Also, Automobile manufacturers should begin benchmarking their products after manufacturers in other countries.

Week1: How open to openess are you?

Since ancient times, we have been receptive to influences and ideas from outside – from India, from China, from the West. With our long-standing tolerance for diversity and openness, all levels of Thai society are experienced in adapting to cross-pressures from abroad. We recognized early on that survival depended not upon closing ourselves off from the rest of the world, but upon absorbing external influences and making them our own. Our policies, be they in trade or other matters, have always been open. 

Thai economy is export-dependent, with exports of goods and services equivalent to nearly 70% of GDP in 2010. We relied largely on external demand from the United States and other foreign markets since recovery from the 1997-1998 Asian financial crisis and "openness" has become necessary for Thailand. 

Thai Government welcomes foreign investment, and investors who are willing to meet certain requirements can apply for special investment privileges through the Board of Investment. To attract additional foreign investment, the government has promised to look for ways to expand investment opportunities, focusing more on green technology/manufacturers.