Protectionism ALSO CALLED AS TRADE BARRIER © Mrs. P's Interactive Classroom 2020 Free trade Is trading without hindrance in the form of barriers such as import tariffs. © Mrs. P's Interactive Classroom 2020 Reasons for protection To help a infant industry to grow To protect domestic jobs Can be a source of government revenue To protect domestic industries against dumping (selling at a price that is below the cost) To protect domestic industries from cheap subsidized imports To protect strategic industries, e.g. electricity, gas, wind and solar energy. To encourage green & environmentally friendly technologies. To protect intellectual property rights © Mrs. P's Interactive Classroom 2020 Consequences of protectionism Competitors tend to take retaliatory action when they are imposed. The net effect will be a reduction in global trade. Distorts market signals and therefore can lead to a global misallocation of resources. Can lead to increased costs of production due to the lack of competition and of incentives to be efficient or innovative. May protect jobs in the short term, but it is likely to lead to slower economic growth overall. © Mrs. P's Interactive Classroom 2020 Impact of tariffs Impact of quotas Impact of subsidies Warm Up This Photo by Unknown Author is licensed under CC BY-NC-ND © Mrs. P's Interactive Classroom 2020 This Photo by Unknown Author is licensed under CC BY-SA-NC This Photo by Unknown Author is licensed under CC BY-NC This Photo by Unknown Author is licensed under CC BY-SA This Photo by Unknown Author is licensed under CC BY Multinational Corporations What is an MNC? An MNC maintains facilities and conducts business in a minimum of one country abroad © Mrs. P's Interactive Classroom 2020 Think About It What examples of MNCs have you seen when you have traveled? Have you ever seen a fast food chain adopt elements of the local culture into their menu? © Mrs. P's Interactive Classroom 2020 Measuring the size of multinationals + Benefits & disadvantages of operating in many countries • They gain access to natural resources that may be in limited supply in their domestic market. • They can access a source of labor • They have the opportunity for a global market There may be different tastes, requirements and legal standards in different countries. © Mrs. P's Interactive Classroom 2020 + Benefits & disadvantages of operating to host countries • bring employment, new products and new technologies to host countries Not paying enough for raw materials and employees •Speed up development Caused pollution © Mrs. P's Interactive Classroom 2020 Global Economic Organizations What international economic organizations oversee the world economy? The World Bank: primarily designed to assist developing nations in growing economically through aid, financing, research, and guidance The International Monetary Fund (IMF): observes and assesses the economic trends and climates across nations, noting how differing nations’ economies affect one another; promotes economic stability and helps or lends to countries in need The World Trade Organization (WTO): regulates the international rules of trade with the goal of promoting free trade and benefitting all member nations © Mrs. P's Interactive Classroom 2020 Case study ACTIVITY Research a multinational company that has its home base in your country or operates in your country. Find out: How many other countries it operates in? What is the current value of the shares in the company? How many people does it employ? Give examples of the range of its products. Produce a poster or wall chart to display your findings.