Are the concerns of those opposing Turkeys admittance to ?the European Union well-founded? Can Islam, capitalism, and ?globalization co-exist? Reread the Country Focus Estimating

Case Analysis #2

· Due Sunday by 11:59pm

· Points 75

· Submitting a file upload

1. Reread the Country Focus “Turkey, Its Religion, and Politics” in chapter 4 and address this question:

· Are the concerns of those opposing Turkey’s admittance to the European Union well-founded? Can Islam, capitalism, and globalization co-exist?

2. Reread the Country Focus “Estimating the Gains from Trade for America” in Chapter 7 and address these two questions:

· What does the Institute for International Economics suggest about the benefits of free trade?

· According to the Institute for International Economics study, a move toward free trade would cause disruption in employment. Is it still worth pursuing free trade if it means that some people lose their jobs?

3. Reread the opening case “NAFTA 2.0: The USMCA” in Chapter 9 and address these three questions:

· Discuss NAFTA in the Trump era. What changes to trade based on the new USMCA agreement would he like to see?

· As an American consumer looking for a new car, what does NAFTA mean to you? Does your response change if you are a consumer from Mexico or Canada? What about under the new USMCA?

· As CEO of an auto company with manufacturing facilities in Mexico, what does the new USMCA deal mean to you?

Case Analyses must follow the following guidelines:

1. You must give a quality analysis of the cases based on the key terms showing mastery, using clear logic, and supporting facts. Also, the analysis must directly address the case using chapter readings and research.

2. Case Analyses test the understanding of key elements of International Business, therefore, they must be thoroughly addressed.

3. You must use citations with references to document information obtained from sources. The key elements and concepts of International Business are found in the sources listed in the syllabus (it is your duty to search for them, read, analyze, evaluate, summarize, paraphrase in your answers, and cite the authors who wrote the articles, books, term papers, memoirs, studies, etc. What it means is that you will have not less than 5 references from the listed sources.

4. Grammatically correct paper, no typos, and must have obviously been proofread for logic.

5. Avoid direct quotes, you must paraphrase and cite. If you direct quote (two words or three words, mission statements, phrases, etc.) you must include in your citation parenthesis page number or paragraph number. When you direct quote Brand taglines or Mission Statements, you must include the Brand name or Company name in the citation parenthesis.

6. Key terms or Questions must be typed out as headings, with follow up analysis or answers in paragraph format, and a summary or conclusion to contextualize your analyses at the end of the paper.

The Cases Analyses must be in APA format

Chapter 4: c o u n tr y F O C U S Turkey, Its Religion, and Politics

For years now, Turkey has been lobbying the European Union to allow it to join the free trade bloc as a member state. If the EU says yes, it will be the first Muslim state in the union. But this is unlikely to happen any time soon; after all, it has been half a century in the making!

Many critics in the EU worry that Islam and Western-style capitalism do not mix well and that, as a consequence, allowing Turkey into the EU would be a mistake. However, a close look at what is going on in Turkey suggests this view may be misplaced. Consider the area around the city of Kayseri in central Turkey. Many dismiss this poor, largely agricultural region of Turkey as a non-European backwater, far removed from the secular bustle of Istanbul. It is a region where traditional Islamic values hold sway. And yet it is a region that has produced so many thriving Muslim enterprises that it is sometimes called the “Anatolian Tiger.” Businesses based here include large food manufacturers, textile companies, furniture manufacturers, and engineering enterprises, many of which export a substantial percentage of their production.

Local business leaders attribute the success of companies in the region to an entrepreneurial spirit that they say is part of Islam. They point out that the Prophet Muhammad, who was himself a trader, preached merchant honor and commanded that 90 percent of a Muslim’s life be devoted to work in order to put food on the table. Outside observers have gone further, arguing that what is occurring around Kayseri is an example of Islamic Calvinism, a fusion of traditional Islamic values and the work ethic often associated with Protestantism in general and Calvinism in particular.

However, not everyone agrees that Islam is the driving force behind the region’s success. Saffet Arslan, the managing director of Ipek, the largest furniture producer in the region (which exports to more than 30 countries), says another force is at work: globalization! According to Arslan, over the past three decades, local Muslims who once eschewed making money in favor of focusing on religion are now making business a priority. They see the Western world, and Western capitalism, as a model, not Islam, and because of globalization and the opportunities associated with it, they want to become successful.

If there is a weakness in the Islamic model of business that is emerging in places such as Kayseri, some say it can be found in traditional attitudes toward the role of women in the workplace and the low level of female employment in the region. According to a report by the European Stability Initiative, the same group that holds up the Kayseri region as an example of Islamic Calvinism, the low participation of women in the local workforce is the Achilles’ heel of the economy and may stymie the attempts of the region to catch up with the countries of the European Union.

Sources: Marc Champion, “Turkey’s President Is Close to Getting What He’s Always Wanted,” Bloomberg BusinessWeek, February 8, 2017; “Dress in a Muslim Country: Turkey Covers Up,” The Economist, January 26, 2017; “Turkey’s Future Forward to the Past: Can Turkey’s Past Glories Be Page 104 Revived by Its Grandiose Islamist President?” The Economist, January 3, 2015.

Chapter 7: c o u n tr y F O C U S Estimating the Gains from Trade for America

A study published by the Institute for International Economics tried to estimate the gains to the American economy from free trade. According to the study, due to reductions in tariff barriers under the GATT and WTO since 1947, by 2003 the gross domestic product (GDP) of the United States was 7.3 percent higher than would otherwise be the case. The benefits of that amounted to roughly $1 trillion a year, or $9,000 extra income for each American household per year.

The same study tried to estimate what would happen if America concluded free trade deals with all its trading partners, reducing tariff barriers on all goods and services to zero. Using several methods to estimate the impact, the study concluded that additional annual gains of between $450 billion and $1.3 trillion could be realized. This final march to free trade, according to the authors of the study, could safely be expected to raise incomes of the average American household by an additional $4,500 per year.

The authors also tried to estimate the scale and cost of employment disruption that would be caused by a move to universal free trade. Jobs would be lost in certain sectors and gained in others if the country abolished all tariff barriers. Using historical data as a guide, they estimated that Page 205 226,000 jobs would be lost every year due to expanded trade, although some two-thirds of those losing jobs would find reemployment after a year. Reemployment, however, would be at a wage that was 13 to 14 percent lower. The study concluded that the disruption costs would total some $54 billion annually, primarily in the form of lower lifetime wages to those whose jobs were disrupted as a result of free trade. Offset against this, however, must be the higher economic growth resulting from free trade, which creates many new jobs and raises household incomes, creating another $450 billion to $1.3 trillion annually in net gains to the economy. In other words, the estimated annual gains from trade are far greater than the estimated annual costs associated with job disruption, and more people benefit than lose as a result of a shift to a universal free trade regime.

Source: S. C. Bradford, P. L. E. Grieco, and G. C. Hufbauer, “The Payoff to America from Global Integration,” in The United States and the World Economy: Foreign Policy for the Next Decade, C. F. Bergsten, ed. (Washington, DC: Institute for International Economics, 2005).

Chapter 9: NAFTA 2.0: The USMCA opening case

In his 2016 presidential campaign, Donald Trump repeatedly criticized the North American Free Trade Agreement (NAFTA) as an unfair deal in which Americans had been taken to the cleaners by Mexico. Trump claimed that NAFTA had cost American manufacturers millions of jobs, even though there is scant evidence to suggest that this is the case. After becoming president, Trump stuck to his word and initiated a renegotiation of NAFTA.

Trump's anti-NAFTA stance sent shockwaves through industry on both sides of the border. Since NAFTA was signed in 1994, trade between the United States, Canada, and Mexico has tripled to $1.3 trillion. In 2017, the United States exported $342 billion of goods and services to Canada and $277 billion to Mexico, while importing $339 billion from Canada and $355 billion from Mexico. The U.S. ran a $2.8 billion surplus in trade with Canada, and a $69 billion deficit with Mexico. Canada and Mexico are now the largest export markets for the United States, accounting for a third of all U.S. exports, and the largest sources of imports behind China.

The renegotiation of NAFTA was complicated by the fact that multilayered supply chains now span both sides of the U.S.–Mexican border. Nowhere is this more the case than in the automobile industry. Auto parts manufactured in the United States may be shipped to plants in Mexico, where finished cars are assembled and then shipped back to the United States for final sale (the converse also occurs, with parts manufactured in Mexico being shipped to U.S. final assembly plants). In 2017, U.S. producers exported $21 billion of finished automobiles and automotive parts to Mexico but imported $84 billion in autos and parts from Mexico. Without that $63 billion trade deficit in autos and auto parts, the United States would be running only a $6 billion trade deficit with Mexico.

Perhaps because he recognizes the lopsided nature of trade in auto and auto parts between the United States and Mexico, President Trump has taken it upon himself to criticize auto producers that have moved production to Mexico or are planning to do so. Following criticism from Trump, Ford canceled plans to build a $1.6 billion auto assembly plant in Mexico. President Trump has also criticized General Motors, Toyota, and BMW for their plans to invest in Mexican assembly operations. Jawboning aside, as part of the NAFTA renegotiations, the Trump administration was looking at different options for restructuring trade with Mexico. These include placing tariffs on imports of autos from Mexico.

In the event, on September 30th, 2018, the Trump Administration reached agreement with Mexico and Canada on a revised version of NAFTA. Known as the United States-Mexico-Canada Agreement, or USMCA for short, this agreement must now be ratified by legislators in all three countries. The USMCA does make some changes to the 25-year-old NAFTA agreement. Most significantly, NAFTA required automakers to produce 62.5 percent of a vehicle’s content in North America to qualify for zero tariffs. The USMCA raises that threshold to 75%. That’s meant to force automakers to source fewer parts for a car assembled in North America from Germany, Japan, South Korea or China. The new agreement also mandates that by 2023, 40% of parts for any tariff-free vehicle must come from a so-called “high wage” factory. Those factories must pay a minimum of $16 an hour in average salaries for production workers, which is about triple the average wage in a Mexican factory right now.

The Trump Administration clearly hopes these provisions will increase the production of automobiles and component parts in the United States. That may occur, but critics also note that the consequences may include higher costs to North American automobile producers, and higher prices for consumers.

Sources: U.S. Census Bureau, www.census.gov/foreign-trade/index.html, accessed April 10, 2018; Robbie Whelan, “Gloom Descends on Mexico’s NAFTA Capital,” The Wall Street Journal, January 26, 2017; Dudley Althaus and Christina Rogers, “Donald Trump’s NAFTA Plan Would Confront Globalized Auto Industry,” The Wall Street Journal, November 10, 2016; William Mauldin and David Luhnow, “Donald Trump Posed to Pressure Mexico on Trade,” The Wall Street Journal, November 21, 2016; and Siobhan Hughes et al., “Trump Tariffs Spark GOP Rift,” The Wall Street Journal, March 5, 2018

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