International trade links advantages
Advantages:
- Economic development in each country
- Growth in world trade
- Develop political and social links
international trade links disadvantages
Disadvantages:
- Loss of output and jobs from domestic businesses -> because they cannot compete with imported goods
- Decline in domestic goods -> loss of trade and imports
Free trade
no restriction on the limit or prevention of trade between two countries
Tariffs
taxes imposed on imported goods to make them more expensive than their original price
Quotas
the limit on the physical goods that are imported to a country
Voluntary export limits
a country agrees to limit the physical goods that are sold and imported to one country
Protectionism
using barriers to free trade in order to protect a country’s goods
Benefits of free trade
Wider choice of goods and services
Increases business competitiveness
Increases rate of industrialisation
Globalisation
the increasing freedom of movement of goods, capital and people around the world
Multinational business
a business that has its headquarters in one country, but its factories, assembly plants and branches in other countries
Benefits of becoming a multinational business
- Closer to the main markets
- Lower transport costs
- Understanding local consumer tastes
- Gaining local consumer loyalty - Lower costs of production
- Lower labour rates
- Cheaper rental cost
- Government grants and incentives given - Avoids import restrictions
- Access to the country’s natural resources
Drawbacks of becoming a multinational business
- Language and cultural differences
- Coordination between headquarters and other branches is difficult
- Skill of employees may be low in other countries -> require additional training costs
Benefit of multinational business on host countries
Bringing in foreign currency -> increase the rate of foreign exchange
Increased business competitiveness
More employment opportunities
Raises GDP -> increases total output of the economy
Drawback of multinational businesses on host countries
Domestic businesses unable to compete with imported goods hence they close down
Exploitation of local workforce
Pollution levels increase
Privatisation
selling state owned and controlled business sectors to investors in the private sector
FOR privatisation
- Profit-motive can increase sales revenue and profit of the business
- Stronger motivation -> managers and employees are now responsible for the business’ success
- Decision-making can be made much quicker
- No government restriction on growth of the business
AGAINST privatisation
- The state should take decisions on essential industries instead of privatising them (e.g. water, electricity)
- Competing with privately run businesses can increase competition for state-owned businesses
- Privatising companies may exploit consumers with high prices, leading to less sales for the business
