6.2 Globalisation, Free Trade and Protection Flashcards
What is globalization?
Globalisation is a process of interaction and integration among the people, companies, and governments of different nations, driven by international trade and investment and aided by information technology.
What are Multinational Corporations (MNCs)?
MNCs are businesses that have operations, factories, and assembly plants in more than one country.
What is the home country in the context of MNCs?
The home country is the country where the multinational corporation (MNC) is based.
What is the host country in the context of MNCs?
The host country is the country where the MNC operates outside of its home country.
What are the advantages of MNCs to the home country?
Advantages include marketing opportunities, job creation, economic growth, and a favorable balance of payments.
What are the advantages of MNCs to the host country?
Advantages include employment, skills transfer, GDP growth, increased competition, consumer choice, and tax revenues.
What are the disadvantages to the home country from MNCs?
Disadvantages include capital transfer abroad, no employment creation, and neglect of the home country’s industrial development.
What are the disadvantages to the host country from MNCs?
Disadvantages include competition with domestic businesses, unethical practices, cultural imposition, and tax avoidance.
What is free trade?
Free trade is when there are no restrictions on trade between countries.
What are the advantages of free trade?
Advantages include increased specialization, more consumer choice, competition, new business opportunities, access to global resources, and reduced international conflict.
What are the disadvantages of free trade?
Disadvantages include potential job loss in developed countries, exploitation of workers and resources, and increased income inequality.
What is protectionism?
Protectionism is the use of trade barriers to restrict market access and competition.
What are some types of trade barriers?
Types of trade barriers include tariffs, subsidies, quotas, embargoes, and excessive quality standards.
What are the reasons for protectionism?
Reasons include protecting infant industries, sunset industries, strategic industries, limiting over-specialization, protecting from dumping, and correcting trade imbalances.
What are the consequences of protectionism?
Consequences include restricted consumer choice, higher costs, inefficiency, retaliation from other countries, and the potential for a trade war.
What is dumping?
Dumping is when imports are sold below the cost of production or below their price in the home market to eliminate competition.
How can protectionism correct a trade imbalance?
Protectionism can limit imports and reduce expenditure on foreign goods, thus correcting a trade imbalance.
What happens when other countries retaliate to protectionism?
Other countries may retaliate against trade barriers, leading to a trade war and worsening international relations.
What are the effects of being heavily protected and not engaging in free trade?
Countries that are heavily protected and do not engage in free trade may fail to grow, develop, and miss out on the benefits of free trade.
