Assignment 2 Case Study

f

:or

te Assignment 2 (Case Study)

of l.Cover Page include: Full name, student number, group registered & passport photo.

rns 2.OWN HAND WRITING answers.
In

:t 3.Compress to ONE pdf file (if possible zip file)

4.Send together with Assignment 3 (Chapters Exercises)

4.Send to e-mail:

5.DI-IE DATE T2I5I2O2O

rlp

a 0n February 4,2016, ministers trom 12 governments signed off on the trade. In the United States, critics of the deal were quickto registertheir
ty Trans Pacific Partnership (TPP), a free trade deal among 12 countries, opposition. Donald Trump, now president of the United States, said that the

including the United States, Japan, Australia, New Zealand, Chile, Canada, "TPP is a tenible deal." Bernie Sanders, one of the leading Democratic con-
Mexico, and Vietnam. China was not part of the deal. Together, these coun- tenders, called it "disastrous" and "a victory for Wall Street and other big
tries accounted for 36 percent of the world's GDP and 26 percent of world corporations." Many other politicians, wary of the fact that 2016 was a

Chapter Six International Trade Theorv 177

general election year in the United States, were also qulck to criticize the

deal. In contrast, the administration of Barack Obama heralded the TPP as
a historic deal of major importance. Editorials in influential publications
such as The Watt Street Journal and lhe Economist urged the U'S Con-

gress to ratify the deal.
The TPP olanned to eliminate or reduce about 18,000 tariffs, taxes, and

nontariff baniers such as quotas on trade between and among the member
countries. By expanding market access and lowering prices for consumers,
economists claimed that the deal would boost economic gfowth rates
among TPP countries and add about $285 billion to global GDP by 2025'
Because the United States already has very low tariff barriers, most of the

tariff reductions would occur in other countries. , ttlonu n"":'1n"* ll::*
U.5. agriculture would have been a big beneficiary. The TPP would
"collapse-but that did not happen. Instead, led by Japan, the remaining
eliminate import tariffs as high as 40 percent on U.S poultry products and
fruit and 35 percent on soybeans-all products where the United States nations pressed ahead with a revamped deal. Renamed the Compreh:--
has a comparative advantage in production. Cargill lnc., a giant U'S' grain
exporter and meat producer, urged lawmakers to support the pact. A num- sive and Progressive Trans Pacific Partnership (CPTPP)-or TPP for shol-
ber of large, efficient U.S. manufacturers also came out in support of the the deal signed in Chile on March 8, 20'18, will dramatically lower tar--
deal. which would eliminate import tariffs as high as 59 percent on U'S'
machinery exports to TPP countries. Boeing, the country's largest exporter, and other trade barriers between the 1 1 nations. The revised agreeme-:
said that the deal would help it compete overseas, where it gets 70 per- which still excludes China, covers 500 million people in nations tnat pr:-
cent of its revenue. Several technology companies, including Intel, voiced
support for the deal, pointing out that it would eliminate import taxes as duce more than 1 3 percent of global gross domestic product. According ::
high as 35 percent on the sale of information and communication technol-
David Parker. New Zealand's Trade Minister:
ogy to some other TPP countfies.
Some U.S. companies urged Congress to vote against the deal' Ford I think this agreement serves as an antidote to the protecti0nist
trend we're seeing in the world. I think the CPTPP is more important
opposed the deal because it would phase out a 2.5 percent tariff on imports
of Japanese cars into the United States and a 25 percent tariff on imports of .than it was a year ago. This rise of protectionism is worrisome. '
light trucks-even though under the agreement, those tariffs would be phased
down over 30 years. Labor unions opposed the deal, arguing that it would Countries that are in the agreement have got a different route
result in further losses of U.5. manufacturing jobs and lead to lower wages' where they can club together in a friendly manner, and facilitate the
The tobacco company Philip Morris opposed the deal because it would pre- growth of their own economies for the benefit of their people.
vent tobacco companies from suing foreign governments over antismoking
measures that restrict tobacco companies from using their logos and brands Although the United States is no longer party to this deal, several lead-
to market tobacco products. Several big drug companies also opposed the ers of the signatory nations have indicated that they would welcome the
deal because it only protected new biotechnology products from generic c0m- U.S. back into the fold, although this seems unlikely to happen so long as
Donald Trump is president. There are also indications that a post-Brexit
petition for 5 years, rather than the '1 2 years they had before. Britain might seek to ioin ihe CPTPP'
Data supporting these various claims and counterclaims was offered
Sources: Caitlin Mccee, "Controversial TPP Pact Signed amid New Zealand
by a number of independent studies, including those from the World Bank' Protests," Arbzeero, February 4, 201 6; Catherine Ho, "Fact Checking the Campaigns
the lnstitute of International Economics (llE), and Tufts University. Both the for and against the TPP Trade Deal," Woshington Post, February 1 1 , 201 6; Tripp
World Bank and the llE concluded that by creating more overseas demand Mickle and Theo Francis, "Trade Pact Sealed," The Woll Street Journol, October 6,
for American goods and services, by 2030 the TPP would raise U.S. wages 201 5; Peter Petri, and Michael Plummer, "The Economic Effects of the Trans Pacific
slightly above what they would have been without the deal. The llE study Partnership: New Estimates," Peterson Institute foI International Economics, working
estimated that the TPP would increase annual U'S. exports by $357 bittion, paper 1 6-2, January 1 , 201 6; "China Picks Up the U.S. Trade Fumble," Ihe l/o//
or 9 percent, by 2030. The llE study also calculated that overall, there Strcet Journol, November 11 ,2016i "The New TPP Trade Deal: Going Ahead without
would be no job losses in the United States. Although some sectors would Trump," Aljozeero News, March 24,2018; and "Japan Approves Bill to Ratify
see job losses, the llE suggested that these would be offset by job gains Successor to TPP Free Trade Pacl," Jopon fi,t?es, March 24'2018.
elsewhere. The study from Tufts University was the most pessimistic, esti-
mating that the dealwould result in the loss of 450,000 jobs in the United CASE DISCUSSION QUESTIONS
States over 10years. To putthis in context, between 2010 and 2015, the
U.S. economy created 13 million new jobs, so the worst-case estimate of 1. What were the proposed benefits of the TPP?
losses amounted to no more than two months of job growth during the
2. What were the potential drawbacks of the U'S. entering the TPP? What
20'10-2015 period.
Just three days into his administration, President Donald Trump with- would be the drawbacks to other nations?

drew the United States from the TPP, calling it a "ridiculous trade deal''' 3. Why do you think that Donald Trump was so ddamantly opposed to the
Many predicted that without the United States, the deal would quickly
TPP?

4. Why do you think the 1 1 remaining signatories went ahead with a

revised deal after the United States withdrew?

5. ls the CPTTP a threat to American economic interests?
6. What is the opportunity cost to the United States of withdrawing from

thc TPP?

178 Part Three The Global Trade and Investment Environment

The Swatch Group (swatchgroup.com) with its headquarters in Biel, always emphasized upfront in the company's annual repofi and something the
Swatch Group nurtures in various ways, such as via its Instagram account.
Switzerland (Europe), is a manufacturer of watches and jewelry. The company
was founded in 1983 by Lebanese-born Nicolas Hayek from the merging of 0n Swatch's Instagram (instagram.com/swatch), the storyline is clear.
Allgemeine Gesellschaft der Schweizerischen Uhrenindustrie and Soci6t6 Swatch wants you to create your own unique way ofaccessorizing bythe
Suisse pour l'lndustrie Horlogdre. lt is now the world's biggest watchmaker. use of a Swatch watch. A person can showcase his or her individualized
Swatch use by tagging #MySwatch. The new line of "Skin" watches also
helps users "dance with the unknown," break down barriers, and make
#YourMove with Skin. The product is minimalist in style but unique, stylish,
yet culturally diverse-much like Swatch has created its cultural unique-
ness for decades in the global marketplace. Swatch's own description of its
brand captures this cultural uniqueness:

i OPSL lmages/Alamy Stock Photo Everyone knows a Swatch when they see one. There's clearly some-
thing that makes Swatch different from every other watch brand.
Nicolas's daughter, Nayla Hayek, has been chair of the board of direc- What is it? The look, the colors, the plastic? The design, perhaps, or
tors of the Swatch Group since her father's death in 2010, and she is also the fact that it's Swiss made and versatile enough to be worn with al-
CEO of the luxury jeweler Harry Winston lnc., which was acquired by the most anything. There are Swaich watches for people of all ages, and
Swatch Group in 2013. Georges Nicolas "Nick" Hayek Jr. has been the CEO a Swaich for every occasion. But there's more to Swatch than market
and president of the Swatch Group since 2003. Today, the Hayek family coverage. Swatch is an attitude, an approach to life, a way of seeing.
controls nearly 40 percent of the company. The sight of a Swatch excites emotion. Wearing one is a way to com-
municate, to speak without speaking. Heart to heart.
Swatch and its 37 global subsidiafies employ about 37,000 people,
and the company's revenue is about 9 billion Swiss francs {CHF), or about The Swatch Group is not just about being culturally diverse, or a com-
$9 billion in U.S. dollars. The company's headquarters in Biel sits on the pany marketing products globally to customers of different cultures. In
language border between French- and German-speaking parts of many respects the company is actually creating the values, beliefs, norms,
Switzerland and is, by design, bilingual and culturally diverse. In fact, ev- and artifacts that form a globally unique culture worldwide. So, Swatch's
erything that Swatch engages in is based on diversity and culture. This large-scale production of watches and jewelry is used to help create indi-
cultural diversity is embedded in its overall brand and global strategizing. vidually and culturally based customer uniqueness.

For example, many of the Swatch brands have become cultural icons Sources: Corinne Gretler, "Swatch CEO Nick Hayek Sees Swiss Watch Turnaround in
among a strong core following of customers in the global marketplace. 2017 ," Bloomberg BusinessWeek, February 2, 201 7; Silke Koltrowitz, "Swatch
Some even talk about the "Swatch Revolution" that began when Nicolas Group Seeing Strong Demand So Far in 20'l 7," Reufers, March 16, 201 7 (www.
Hayek founded the company. lt was the combination of legendary Swiss reuters.com/article/us-swatch-results-idUSKBNl 6N1 5B); "The Amazing Adventures
watch making (with the Swiss being famous for watch brands such as of the Second Watch," Swatch History 20'17 (www.swatch.com/en-us/explore/
Patek Philippe, Rolex, Jaeger-LeCoultre) and the unexpected appearance history); "Swatch ls Challenging Google and Apple with lts own operating System,"
of an affordable plastic watch that turned the watch world upside down. Fortune. March 16.2017 .

Suddenly, a watch was more than a way to measure time. It was a new CASE DISCUSSION QUESTIONS
individualized culture, a new language, and a way to speak from the heart 1. With the Hayek family controlling nearly 40 percent of The Swatch
without words. By definition, "swatch" means a sample of material or color,
oftentimes referring to a small piece of fabric. lt is remarkable how Swatch Group, how do you think the family influence impacts the type of
has been able to develop culturally unique watches while also building the corporate culture in the company? What about the company's
fabric for a globally integrated world by its watch making. international culture being impacted by the Hayek family?

The Swatch Group's brands go far beyond the iconic Swatch watches, 2. Many of the Swatch brands have become cultural icons among a strong
though. They also include top Swiss brands like Blancpain, Breguet, and
Omega along with unique and classic products such as Balmain, Calvin Klein core following of custorners in the global marketplace. Some even talk
watches and jewelry, Certina, Flik Flak, Glashijtte, Hamilton, Harry Winston, about the "Swatch Revolution" that began when Nicolas Hayek founded the
Jaquet Droz, L6on Hatot, Longines, Mido, 0riginal, Rado, Tissot, Tourbillon, and company. Why do you think Swatch has such a strong cultural following?
Union Glashijtte. These brands form the "art" of Swaich-a focus that is almost
3. Swatch wants you to create your own unique way of accessorizing by

the use of a Swatch watch. A person can showcase his or her
individualized Swatch use by tagging #MySwatch. ls a watch a way to
show who a person is culturally? Does a watch get embedded into a
person's culture? Can a waich create a cultural image?

4. According to the company, " Swatch is an attitude, an approach to life, a

way of seeing. The sight of a Swatch excites emotion. Wearing one is a
way to communicate, to speak without speaking. Heart to heart." Do you
buy this overarching "branding" of a Swaich watch as a cultural icon?

118 Part Two National Differences