Multinational Financial Management 11th Edition by Alan C. Shapiro Solution manual

What leverage do the trade unions have in persuading Al Gore and other Democratic candidates to pay attention to their anti-free -trade position? Explain why these particular unions might be particularly powerful.
Answer. The unions’ leverage stems from the fact that their membership is concentrated in six large industrial states that are crucial swing states in presidential elections. Al Gore needs these states with their large vote totals to win a national election. There are enough industrial union members in these six states that they could tip a close race. If the union membership were dispersed throughout the United States, their leverage would be greatly diminished since they couldn’t concentrate their votes to deliver key states.
What trade-offs do Al Gore and other Democrats face in accommodating labor? Explain.
Answer. If Al Gore gives in to protectionist sentiment to accommodate these industrial unions, he risks losing states like California (Silicon Valley), Washington (Boeing), New York (Wall Street), and New Jersey (pharmaceutical firms) that depend on foreign trade for their livelihood. For example, Gore has made a particular push to gain money and votes from Silicon Valley, which is highly dependent on exports. Pushing protectionist policies could lead to a backlash against Gore from Silicon Valley executives who understand that foreign countries would likely retaliate against U.S. products. Moreover, a protectionist stance could cost Gore farm state votes as well because farmers are highly dependent on exports. Gore also has to be concerned that he will lose the votes of  middle-of-the-road Democrats and independents if he is viewed–as Walter Mondale was–as a tool of labor.
How can U.S. manufacturers compete with foreign producers? Are they doomed, as suggested by the president of the United Steelworkers of America?. Explain.
Answer. The objective evidence shows that U.S. manufacturers can compete against foreign producers, although not across the board. Rather, U.S. firms have a comparative advantage in a number of high technology industries and industries where close coordination between customer and producer is key (such as fashion design). In fact, U.S. industrial output is up but the number of manufacturing jobs has not risen; it’s just that higher productivity means that companies don’t have to hire as many new workers to produce the higher output. U.S. companies also have a comparative advantage in many service industries, such as financial services, consulting, and telecommunications.
Are the unions and their members right to be concerned about the effects of free -trade policies? What are these effects that they are concerned about? Who would be helped and who would be hurt if the unions got their way on trade? Explain.
Answer. Yes. The industrial unions have set wages and benefits well above market levels. They were able to get away with such high levels of compensation as long as they were not facing competition from lower-paid foreign workers whose labor is embodied in imported products. Lower-priced foreign imports will put pressure on competing U.S. goods and, therefore, on the compensation enjoyed by industrial union members. Thus, protectionist policies will protect the wages and benefits of these union workers. At the same time, they will lead to higher prices to U.S. consumers of both foreign goods and services and the domestic goods and services that compete with them. A less obvious effect will be the harm caused to companies that export. Protectionism will lead to less demand for foreign exchange, thereby raising the value of the dollar and making U.S. exports less competitive overseas.
6. In 2007, Senator Obama’s campaign called Hillary Clinton “the senator from Punjab,” referring to her and her husband’s close political and economic ties to India. However, in 2010, President Obama traveled to India with an entourage of almost 250 businesspeople to drive home the message that India could be a goldmine for American jobs. What might account for the turnaround in Barack Obama’s public position on the importance of India for American jobs?
Answer. In 2007, Senator Obama was running for the Democratic nomination and was seeking to appeal to the most ideological members of his party since they have a higher propensity to vote in the primaries. Ardent Democrats tend to be against free trade. Hence, Obama’s position on trade, which mirrored that of his supporters, emphasized its negative aspects. Once he became president, he had to focus more carefully on what was in the nation’s best interest. Free trade helps create jobs. Notice, however, that his position on free trade hasn’t changed that much. He is promoting American exports, not free trade. He is not promoting outsourcing or trade as a means of reducing costs and improving the options available to consumers.