Seminar 5 rta - International Business Environment PDF

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International Business Environment...

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Seminar 5: Tutorial on the effect of a country moving out of an RTA Country X and Y are in a regional trade agreement named ALPHA-RTA. Currently, country X is importing product P from country Y and country Y is importing product Q from country X. Both countries charge a 50% tax on imported products from the countries outside the ALPHA-RTA (ALPHA-RTA). The production cost of product P and Q in the two countries are as follows.

Now, country X leaves the ALPHA-RTA and continues to charge a 50% tax on imported products. Task 1: In this scenario, what would happen to the trade of product P and Q when country X leaves the ALPHA-RTA. X= UK

Y=GERM

BEFORE LEAVING RTA

P

Q

X

Y

X

Y

Y

X

AFTER LEAVING RTA

P

Q

X

X

X

Y

Y

Y

Task 2: Country Z is outside the ALPHA-RTA and can produce the product P and Q at the following costs.

Z= CHINA

In this scenario, what are the implications on the trade of product P and Q when country X leaves the ALPHA-RTA?

BEFORE LEAVING RTA

P

Q

X

Y

X

Y

Y

X

AFTER LEAVING RTA

P

Q

X

Z

X

Y

Y

Z...