697407
Description
Mind Map by bella.calonje, updated more than 1 year ago
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Created by bella.calonje
over 10 years ago
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international trade and development
- Trade Strategies
- Import substitution (producing goods domestically instead of importing)
- Advantages
- Protects domestic jobs and can increase domestic employment since foreign firms are prevented from competing so domestic firms dominate
- Protects the local culture and social habits by isolating the economy from foreign influence
- Protects the economy from the power and influence of MNCs
- Protects the economy from the power and influence of MNCs
- Protects the local culture and social habits by isolating the economy from foreign influence
- Protects domestic jobs and can increase domestic employment since foreign firms are prevented from competing so domestic firms dominate
- Disadvantages
- It may only create jobs in the short run, in the long run economic growth may be lower and this could lead to lack of job creation
- Country does not have access to comparative advantage and specialization so production may be relatively inefficient
- no competition could lead to inefficiency and lack of R & D
- may lead to inflation due to domestic aggregate demand supply constraints
- may cause other countries to take protectionist measures
- may cause other countries to take protectionist measures
- may lead to inflation due to domestic aggregate demand supply constraints
- no competition could lead to inefficiency and lack of R & D
- Country does not have access to comparative advantage and specialization so production may be relatively inefficient
- It may only create jobs in the short run, in the long run economic growth may be lower and this could lead to lack of job creation
- Necessary conditions
- government adopted policies of organizing the selection of goods to produce (normally labour intensive, low skill manufactured)
- Subsidies are made available to encourage domestic industries
- Protectionist system with tariff barriers to keep out foreign imports
- government adopted policies of organizing the selection of goods to produce (normally labour intensive, low skill manufactured)
- Advantages
- Export Promotion
- increasing exports should lead to an increase in GDP and in turn higher incomes and eventually growth in domestic and export markets
- Country needs to adopt liberalized trade to open up domestic markets to international competition in order to gain access to foreign markets
- Liberalised capital flows: reduce restrictions on FDI
- Floating exchange rate
- Investment in the provision of infrastructure to enable trade to take place
- Deregulation and minimal government intervention
- Deregulation and minimal government intervention
- Investment in the provision of infrastructure to enable trade to take place
- Floating exchange rate
- Liberalised capital flows: reduce restrictions on FDI
- Country needs to adopt liberalized trade to open up domestic markets to international competition in order to gain access to foreign markets
- Disadvantages
- Advantages
- increasing exports should lead to an increase in GDP and in turn higher incomes and eventually growth in domestic and export markets
- Import substitution (producing goods domestically instead of importing)
- Trade Liberalization (removal/ reduction of trade barriers that block
the free trade of goods and services between countries- elimination of
trade barriers, quotas, export subsidies and administrative legislation
- Diversification
- solves the problem of over-specialization or PPD
- Aims to move away from primary product exportation to the production and export of semi-manufactured products
- Protects the country from volatile prices, stabilizes and increases export revenue and employment- there will be an increased use of technology and
demand for more highly skilled workers
- Protects the country from volatile prices, stabilizes and increases export revenue and employment- there will be an increased use of technology and
demand for more highly skilled workers
- Barriers
- tariff escalation from other developing countries and the need for a highly skilled more qualified work force in
order to produce relatively more sophisticated products
- tariff escalation from other developing countries and the need for a highly skilled more qualified work force in
order to produce relatively more sophisticated products
- Aims to move away from primary product exportation to the production and export of semi-manufactured products
- solves the problem of over-specialization or PPD
- Free trade (aims to ensure that producers receive a fair price when they sell their products)
- minimum price that covers production costs and provides a living income
- trader must be commited to a long-term contract which in turn gives security to the producer
- trader must be commited to a long-term contract which in turn gives security to the producer
- minimum price that covers production costs and provides a living income
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