4 Short Essay Mid term (Finish in 3hrs!!!)

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Question 1: Chile has recently proposed amendments to its Food Health Regulations. The new
regulations would require “STOP” sign labels on junk food to alert the consumer to stop and think
before consuming the unhealthy food. Hershey’s is a US producer of many different junk food
products, and has been exporting these goods regularly to Chile. Discuss the reasons why Chile’s
proposal to require “STOP” signs on junk food would be a topic for consideration by the WTO.
Would it make a difference if Chile required the “STOP” sign warnings only on imported junk
food and did not have the same requirements for junk food that was produced in Chile? What effect
would this regulation have upon Hershey and upon the local and global economy?
Discuss the reasons why Chile’s proposal to require “STOP” signs on junk food would be a topic
for consideration by the WTO.
Would it make a difference if Chile required the “STOP” sign warnings only on imported junk
food and did not have the same requirements for junk food that was produced in Chile?
What effect would this regulation have upon Hershey and upon the local and global economy?
Question 2: Caterpillar, Inc. is a leading US manufacturer of tractors. While they sell many
tractors in the United States, they also are a leading exporter to destinations all around the world.
Like many manufacturers, Caterpillar uses imported components in their final product, and they
rely upon imported steel to keep the cost of their final product competitive. Recently, a US steel
producer association has been lobbying for a higher tariff on imported steel rods. Discuss the 3
major effects that a higher tariff on imported steel will have upon Caterpillar’s business as well as
the local and global economy.
Question 3: After unprecedented growth in the United States over the past ten years, Alex and
Ani, a US jewelry manufacturer, has begun to expand its global retail sales efforts. Alex and Ani
has opened retail stores in Japan, the EU and in several Caribbean islands. Sales have been strong
in these countries, and they may be considering further expansion efforts into Africa, with
Morocco being a key target market for their charm bracelets. Most of Alex and Ani’s jewelry is
created using recycled metal material, and the costs of production are quite low as a result. The
charm bracelets are sold in the US and Europe for $28-$38 each while the cost to manufacture the
bracelets is closer to $5.00 each. While this is considered a reasonable price in the US and Europe,
the market in Morocco may not sustain this pricing structure and may lead Alex and Ani to
consider lowering the final price of their bracelets in markets such as Morocco. Why should Alex
and Ani be concerned about lowering prices to accommodate markets in Morocco? Explain your
answer completely, providing any recommendations you may have and any insight you have
regarding the effects upon Alex and Ani and the global and local economy.
Question 4: Founded in 1937, Westland Milk Products in New Zealand is a leading independent
co-operative dairy company, owned by over 425 farmer shareholders that supply milk for
processing. In the video we watched, it was evident that Westland had started as a small
independent dairy farm and has grown into a significant competitor within that industry. Most
significantly, Westland has expanded their product offerings from simple dairy products to include
nutritional supplements made from dairy processing.
a. Discuss the sources of comparative advantage that would have led to the original success of the
Westland Milk Products company. How did sources of comparative change over time and how did
that likely influence the plans for Westland’s production?
b. Suppose the New Zealand government created a policy that would give tax incentives to
exporters of infant and toddler nutritional dairy products (which Westland currently produces for
their domestic customers). What concerns would Westland need to discuss before deciding to take
advantage of this government subsidy? Explain your answer fully, providing any
recommendations you may have regarding the effects upon Westland and the local and global
economies.

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