BSB119 Lecture Notes - Lecture 5: Tax Exemption, Free-Trade Zone, Westphalian Sovereignty
GLOBAL BUSINESS LECTURE 5
Today’s Coverage
1) Trade and investment: An introduction
2) Motives for government intervention in trade
- Political motives
- Economic motives
3) Instruments of intervention in trade
- Tariff barriers
- Non-tariff barriers
4) FDI: Host country perspective
5) Government intervention in FDI
International Business Environments
- Political Economy: Political System, Legal System, Economic System
Trade and Investment: An Introduction
- The taditioal diide… Fee tade s. Potetiois
- Protectionism: emphasises the importance of government intervention in international
trade and investment
o Why? To protect national interest by restricting the inflow and influence of foreign
goods and business
o Loss in knowledge/efficiency
- Example: Australia and farming – droughts-> not efficient enough to maintain this industry
(economic efficiency) – reality -> Australian people/media/politics fight to protect these
farmers (economic efficiency is not the only important factor in Australia, form of
protectionism)
- Example: France -> wine -> high tariffs on imported wine
o Wh ot? I the log te, it doest ake aoe oe
- Free Trade: emphasises the absence of barriers to the free flow of goods and services
between countries
o Why? Trade promotes efficiency, competition and creates economic growth and
national wealth
Early trade-related theoretical arguets…
- Mercantilism: a county should maximise exports and minimise imports (to conserve national
wealth)
o Dominant practice in Europe during 16th to 18th century
- Absolute Advantage: a country should export goods it can more efficiently produce and
trade them for imports that can be more efficiently produced by other countries
o Itodued Ada Siths puliatio
Why Australia Trades
- Trade gives us the chance to choose from the most competitively priced goods and services
from around the world
- Trade allows Australia to specialise in the goods and services in which we have comparative
advantage, thereby maximising out economic growth
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Economic motives: trade and investment: an introduction, motives for government intervention in trade, instruments of intervention in trade. Non-tariff barriers: fdi: host country perspective, government intervention in fdi. Political economy: political system, legal system, economic system. To protect national interest by restricting the inflow and influence of foreign goods and business: loss in knowledge/efficiency. Example: australia and farming droughts-> not efficient enough to maintain this industry (economic efficiency) reality -> australian people/media/politics fight to protect these farmers (economic efficiency is not the only important factor in australia, form of protectionism) I(cid:374) the lo(cid:374)g te(cid:396)(cid:373), it does(cid:374)(cid:859)t (cid:373)ake a(cid:374)(cid:455)o(cid:374)e (cid:373)o(cid:374)e(cid:455) Trade promotes efficiency, competition and creates economic growth and national wealth. Mercantilism: a county should maximise exports and minimise imports (to conserve national wealth: dominant practice in europe during 16th to 18th century. Absolute advantage: a country should export goods it can more efficiently produce and trade them for imports that can be more efficiently produced by other countries.
