Textile Industry, and Apple
Task 1: Regional Economic Integration (Chapter 9)
What effect is the creation of a single market and a single currency within the EU likely to
have on the competition within the EU? Why?
Write a 1-page paper to summarize your thoughts.
Task 2: NAFTA, USMCA and the U.S. Textile Industry (Chapter 9)
Prior to the signing of the NAFTA agreement, many concerns were raised regarding the
potential for a significant loss of jobs in the American textile industry. Indeed, between 1994
and 2004, employment in the U.S. textile industry fell from about 858,000 to 296,000.
However, at the same time, U.S. consumers have enjoyed lower clothing prices and U.S.
fabric and yarn makers have seen a boost in their exports to Mexico.
QUESTION 1: Who gained from the process of readjustment in the textile industry after
NAFTA? Who lost?
QUESTION 2: With hindsight, do you think it is better to protect vulnerable industries such
as textiles, or let them adjust to the painful winds of change that follow entering into free
trade agreements? What would the benefits of protection be? What would the costs be?
QUESTION 3: On 1/16/2020, Senate passed USMCA, a revamped trade deal with Mexico
and Canada to replace NAFTA. Who would be the winners and losers of USMCA?
Write a 1-page paper to summarize your thoughts.
Task 3: CLOSING CASE (Chapter 10): Apple’s Earnings Hit by Strong Dollar
Summary
The closing case explores the implications of changing currency values on the profits of
computer giant, Apple. Apple reported a 2016 fourth quarter loss of $5 billion in revenue
due to exchange rate changes. The impact on the company was significant, bringing its
revenues from an 8 percent increase to just 2 percent. Apple engages in hedging to protect
itself from foreign exchange fluctuations, but noted that the rise of the dollar came more
quickly than had been forecasted leaving the company exposed.
QUESTION 1: Why did the strong U.S. dollar during 2015 have a negative impact on
Apple’s earnings?
QUESTION 2: Why did Apple not fully hedge its foreign exchange exposure to avoid a hit
on earnings?
QUESTION 3: Why was the US dollar so strong during the 2014‒2016 period? Was the
strength in the dollar a rational response to economic fundamentals?
QUESTION 4: Under what conditions do you think the U.S. dollar might weaken against
other major currencies (e.g. the euro, yen and yuan)?
QUESTION 5: How would a fall in the value of the US dollar against other major currencies
impact Apple?
QUESTION 6: Some companies do not hedge their foreign exchange exposure. Do you
think Apple is correct to hedge? Why?
