Applying International Trade Simulation

Essay by lucinicCollege, Undergraduate December 2007

download word file, 4 pages 3.0

This assignment consists of using a simulation pertaining to international trade advantages and limitations of international trade the country of Rodamia. The simulation is assigned to familiarize one with the tools of International trade that government uses to keep the economy moving ahead. The purpose of this paper is to summarize the International Trade Simulation, explain the basic concept of International Trade, emphasize the four key points from the reading assignments in the simulation, and apply these concepts to my workplace.

In the International Trade simulation, I am the Trade Representative of a small country called Rodamia. Rodamia is a large country in terms of area, population and level of economic development in comparison to its neighbors. Four percent of the country's GDP comes from agriculture; mainly corn, wheat, cotton and dairy and poultry products, 30% comes from industry and 66% from services. Decisions will have to be made for four scenarios.

In the first segment, the objective is to evaluate what products to produce within the country and what products to import based on the Production Possibility Frontier (PPF). Due to comparative advantage, Rodamia should export cheese and DVD players, and import corn and watches. The reasons to export were determined from the Trade Commission Report and the Production Possibility Frontier that both showed the opportunity costs for each country's production.

In the second and third segment, decisions are made pertaining to tariffs and quotas. Because the dumping margin could be an ongoing variance, Rodamia should impose an anti-dumping tariff at $40 a unit, or 25% of export price. The Trade Commission reports indicate that a tariff will lower imports and increase domestic supply. The government gains profits to offset any loss in consumer surplus. No trade restrictions should be imposed on imported corn. The Trade Commission weighed the...