Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism & Free Trade Country’s sometimes put barriers up on trading certain items with another country Leads to trade disputes between countries Ex: Vietnam decides that no rice from Thailand can be imported into the country. Thailand may respond by not allowing any coffee from Vietnam to be imported into Thailand. Question – should there be limits on trade or should trade be restricted?

Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism When a government puts limits on foreign trade to protect businesses at home To keep out foreign competitors Note Businesses at home often protected are core / major contributors to a country’s economy 2. Countries do not want to share what they produce

Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism Why restrict trade? Foreign companies can lower the demand for products made at home - how? Too many of the same/similar products are available 2. Companies at home need to be protected from unfair foreign companies - what does this mean? Some countries subsidize industries, lowering the cost to companies to produce products, thus cheaper to sell

Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism Why restrict trade? 3. Industries that make products related to national defense – like what? Weapons, aircraft, certain technologies satellites 4. Use of cheap labour in other countries can lower wages or threaten job at home - what does this mean? Cheaper labour means cheaper product means unfair advantage

Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism Why restrict trade? 5. A country can become too dependent on another country for important products – like what? Oil, steel, grain, water 6. Different standards concerning the environment or human rights - like who/what The USA towards almost everyone else – Vietnam, China, North Korea, Iran, etc…

Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism Trade Barriers A way for countries to limit competition and protect local businesses Tariff Quota Embargo

Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism Trade Barriers Tariff A tax placed on imports to increase their price in the domestic market This can make the cheaper foreign product more expensive that the local product Ex: Vietnam – tariff on imported coffee from Brazil ???? Vietnam Customs Portal - FIND SOME SPECIFIC EXAMPLES

Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism Trade Barriers 2. Quota A limit placed on the quantities of a product that can be imported This forces most of the domestic consumers to buy the domestic product

Chapter 10: Business in a Global Economy 10.2 –Global Competition Protectionism Trade Barriers 3. Embargo A ban on the import or export of a product Are rare and usually done against another country for political or military reasons Ex: Arms, consumer goods, money: USA against – Cuba Ex: OIL: Arab nations against – USA Ex: Live cattle: Australia against – Indonesia

Chapter 10: Business in a Global Economy 10.2 –Global Competition Free Trade Few or no limits on trade between countries 1. Benefits Opens up new markets in other countries Creates jobs (in shipping, banking, communications) Competition forces business to be efficient & more productive More choices for consumers (variety, prices, quality) Promotes cultural understanding Helps countries raise their standard of living

Chapter 10: Business in a Global Economy 10.2 –Global Competition Free Trade Few or no limits on trade between countries 1. Concerns / Problems Jobs can be lost – moved to another country Ex: American auto industry moved to Mexico Working in a car factory used to be a stable, well paying middle class job. Now, they are all gone.

Chapter 10: Business in a Global Economy 10.2 –Global Competition Free Trade Few or no limits on trade between countries 1. Trade Alliances When countries merge their economies into one market NAFTA – North American Free Trade Agreement USA – Canada - Mexico ASEAN – Association of Southeast Asian Countries Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam