ABSTRACT
This chapter focuses on the relationship between world product mandating and international trade. Conventional trade theory, often referred to as the Heckscher-Ohlin-Samuelson model, emphasises different factor endowments as the basis for trade. World product mandating is particularly important for a small country. In small domestic markets, such as Canada’s, product specific economies of scale in production cannot be attained without exporting. The subsidiary produces a wide variety of products, all in very short production runs, at costs which generally would not be viable without tariff or the equivalent nontariff barrier protection. The successive postwar tariff reductions, ending with the current Tokyo Round, have eroded protection. Moreover, a number of low cost newly industrialised countries have entered the Canadian market through imports. One solution is for the subsidiary to specialise by seeking a World Product Mandate for one of its product lines. The subsidiary changes the methods by which it produces these goods and lengthens the production run.
