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Globalisation, free trade and protection |
INTRODUCTION:
- Define globalisation
- Evaluate the costs and benefits of multinational corporations to their host and home countries
- Evaluate the benefits of free trade for consumers, producers and the economy
- Analyse the effects of tariffs, import quotas, subsidies and embargoes
- Understand the reasons for protection
- Evaluate the effectiveness of protection and its impact on the home country and its trading partners.
GLOBALISATION:
EVALUATING MULTI-NATIONAL CORPORATIONS:
Pros:
Cons:
- Investment from abroad will help with the low investment in physical capital that contributes to the poverty cycle
- Increased employment of local workers
- Increase GDP through increased output and investment spending in the economy
- Increased incomes as the MNC will likely pay higher wages to workers than local economy would
- Boost the local economy and consumption of the MNC's goods in the domestic economy
- Increased tax revenues to the government to spend on merit goods (hospitals and schools)
Cons:
- Management and higher paid employees tend to be expatriate rather than local workers
- Can cause environmetal degradation as the MNC may exploit the natural capital of the country and may receive lower regulatory requirements as a enticement to invest (e.g. BP in Nigeria)
- Profits are expatriated to the country of origin/shareholders of the MNC and will not stay within the country
- In reality tax revenues may be relatively low as MNC's are able to use tax laws to their advantage.
EVALUATING THE BENEFITS OF FREE TRADE FOR CONSUMERS, PRODUCERS AND THE ECONOMY:
UNDERSTAND TRADE PROTECTION AND EVALUATE ITS EFFECTS ON THE DOMESTIC ECONOMY AND ITS TRADING PARTNERS:
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| protectionism_cards.docx |
| globalisation_free_trade_and_protection_37.pdf |