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The company is also involved in the wholesale and retail of

International Business and Trade consumer in Europe, The Middle East, Africa, Asia, Australia, and
North America. The Group’s operations are global in many ways.
Emirates is renowned for its excellent customer service, but how
does it attract new customers and keep current customers happy
when it operates worldwide in many different countries and
cultures?
The Answer is that global customers need global services too.
If you visit Emirates’ Web site ( see www.emirates.com ) you will it
has multi-language booking services, customized in-flight
The Challenges entertainment and provides international food and drink during the
flight. Furthermore, Emirates Group employs about 50, 000 people,
of Globalization and its interesting to note that its cabin crew is highly diverse in
terms of nationality, religion, languages, In fact, the group operates
a global recruitment process, and its staff from cabin crew to
engineers, comes from all over the world. That is an example of
how globalization is reshaping our personal lives and altering
activities of International Companies.

CHAPTER 1 GLOBALIZATION The Birth of Globalization

Globalization is reshaping our lives and leading us

Globalization : Meaning
into unchartered territory. As new technologies drive
down the cost of global communication and travel, we
Forces Driving Globalization are increasingly exposed to the traits and practices of
other cultures. As countries reduce barriers to trade and
Untangling the Globalization investment, globalization forces industries to grow more
Debate competitive if they are to survive.

Key Players in International Globalization refers to the trend toward greater

Business economic, cultural, political, and technological
interdependence among national institutions and
Why International Business is economies.
Special?

What is Globalization?
Emirates’ Global Impact
It encompasses the socio-economic
Dubai, United Arab Emirates – The
Emirates Group, founded in 1985 and reform process of eliminating trade,
headquartered in Dubai, is one of the
world’ leading commercial air investment, cultural, information
transportation service providers. technology, and political barriers
Emirates has built up a strong brand
name as a leader in the aviation across counties, which could lead to
industry, particularly in terms of its increased economic growth and
excellent customer service and its rapid
growth. It provides passenger, cargo, geo - political integration and
and postal carriage services to
approximately 100 destinations interdependence among nations of
worldwide. the world.
https://www.bloomberg.com/opinion/articles

1

Globalization as a trend is characterized by the
following:
Denationalization – (national boundaries are becoming less
relevant)
Internationalization –
(entities cooperating across national boundaries)
The greater interdependence that globalization is
causing means an increasingly freer flow of goods, services,
money, people, and ideas across national borders.
Globalization of Markets
Globalization of markets refers to
convergence in buyer preferences in
markets around the world.
This trend is occurring in many product categories,
including consumer goods, industrial products, and
business services. Clothing retailer L.L. Bean, shoe
producer Nike, and electronics maker Sony are a just
few companies that sell global products.
Global Products
Semiconductors (Intel, Philips)
Aircraft (Airbus, Boeing)
Construction equipment (Caterpillar, Mitsubishi)
Autos (Honda, Volkswagen)
Financial Services (Citicorp, HSBC)
Air travel (Lufthansa, Singapore Airlines)
Accounting services (Ernst & Young, KPMG)
Consumer goods (Procter and Gamble, Unilever)
Fast Food (KFC, Mc Donalds)
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Globalization of Markets
Advantages:
- Reduces marketing costs (standardizing certain
marketing activities)
- Creates new market opportunities
domestic market saturation / untapped markets (ex. Search
engines Google and Yahoo)
- Levels uneven income streams
Supplementing domestic sales with international sales
- Yet local needs are important
Think global act local
Think Global and Act Local: Application
The benefit of serving customer with an adapted
product may outweigh the benefit of a standardized
one. For instance, soft drinks, fast food, and other
consumer goods are global products that continue to
penetrate market around the world. But sometimes
these products require small modifications to better
suit local tastes.
In southern Japan, Coca-Cola sweetens its
traditional formula to compete with sweeter-tasting
Pepsi. In India, where cows are scared and the
consumption of beef is a taboo, McDonald’s market
the “Maharaja Mac” – two all-mutton patties on a
sesame-seed bun with all the unusual toppings.
Globalization of Production
Globalization of Production refers to
the dispersal of production activities
to locations that help a company
achieve its cost-minimization or
quality-maximization for a good or
service.
This includes the sourcing of key production
inputs (such as raw materials or products for
assembly ) as well as the international outsourcing
of services
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Globalization of Production Tariffs and Non-tariff Barriers

Advantages:
- Access lower-cost workers (reduced overall production
costs through access to low-cost labor ex. India, China and
Philippines) Tariffs – are essentially taxes levied on traded
- Access technical expertise goods
(companies also produce goods and services abroad to benefit
from technical know-how ex. Film Roman produces the TV series
The Simpsons, but it provides key poses and step-by-step frame Non-tariff barriers – are limits on the quantity
directions to AKOM Production in Seoul, South Korea)
of an imported product.
- Access production inputs
(allows companies to access resources that are unavailable or
more costly at home ex. Japan’s largest paper company – Nippon
Seishi )

Forces Driving Globalization

Falling Barriers to Trade and Investment

- General Agreement on Tariffs and Trade (GATT)

- World Trade Organization (WTO)
- Regional Trade Agreements
- Trade and National Output

General Agreement on Tariffs and World Trade Organization (WTO)

Trade (GATT) An international organization that
enforces the rules of international
A treaty designed to promote trade.
free trade by reducing both tariffs
and non tariff barriers to There are three main goals of the WTO:
international trade. - to help free flow of trade
- help negotiate the further opening
of markets.
- settle trade disputes among others.

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What the World Trade Organization does ??? The North American Free Trade Agreement
(NAFTA) is an agreement among the United
• Administering trade agreements States, Canada and Mexico designed to
• Acting as a forum for trade remove tariff barriers between the three
negotiations countries.
• Settling trade disputes
• Reviewing national trade policies
• Assisting developing countries
with trade policy issues, through
technical assistance and training
programs
• Cooperating with other
international organization like IMF
and World Bank.

Difference Between GATT and WTO The European Union (EU) is a

political and economic union of 28
GATT was ad hoc and WTO is permanent member states that are located
provisional primarily in Europe. Its members
have a combined area of
GATT has contracting parties WTO has members
4,475,757 km2 (1,728,099 sq mi)
and an estimated total population
of about 513 million.
GATT allows existing domestic WTO does not allow violations
legislation to continue even if on the agreement The EU has developed an
the agreement is violated. internal single market through a
standardized system of laws that
GATT was less powerful and its WTO is more powerful and its apply in all member states in those
dispute settlement mechanism dispute settlement mechanism matters, and only those matters,
was less efficient was more efficient where members have agreed to
act as one.

Regional Trade Agreements

4

ASEAN MEMBER COUNTRIES
ASEAN was established on 8 August
1967 in Bangkok by the five original
member countries: Indonesia,
Malaysia, Philippines, Singapore, and
Thailand. Brunei Darussalam joined
on 8 January 1984, Vietnam on 28
July 1995, Laos and Myanmar on 23
July 1997, and Cambodia on 30 April
1999.
Trade and National Output
Gross Domestic Product (GDP) – is the value
of all goods and services produced by a
domestic economy over a one-year period. (
excludes nation’s income generated from
exports, imports and the international
operations of its companies).
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Trade and National Output
Gross National Product (GNP) – is the value of
all goods and services produced by a
country’s domestic and international
activities over a one-year period.
GDP or GNP per capita – nation’s GDP or GNP
divided by its population.
Per capita income: Implications
• Per capita income is often used to measure a
sector's average income and compare the wealth
of different populations.
• Per capita income is often used to measure a
country's standard of living. This helps to
ascertain a country's development status.
• It is one of the three measures for calculating
the Human Development Index of a country.
Forces Driving Globalization
Technological Innovation
- E-mail and Videoconferencing (operating across
borders and time zones complicates the job coordination and
controlling business activities)
- Internet and World Wide Web (companies uses the
internet to quickly and cheaply contact managers in distant
locations / eliminating intermediaries)
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Forces Driving Globalization

Technological Innovation
- Company Intranets and Extranets (internal company
web sites and information networks (intranets ) give
employees access to company data using personal
computers ex. Volvo Car Corporation)
- Advancement in Transportation Technologies
(ex. Global Positioning System (GPS) with Radio Frequency
Identification)

Untangling the Globalization Debate

The World Bank is an international

financial institution that provides loans Arguments against globalization
and grants to the governments of
poorer countries for the purpose of
- Eliminates Jobs in Developed
pursuing capital projects. Nations
- Lowers Wages in Developed
It comprises two institutions: Nations
1. The International Bank for
- Exploits Workers in
Reconstruction
2. Development, and the International
Development Association.

The International Monetary Untangling the Globalization Debate

Fund (IMF), also known as the
Fund, is an international
organization headquartered
in Washington, D.C., consisting of Arguments favoring globalization
189 countries working to foster - Increases wealth and efficiency
global monetary cooperation, in all nations
secure financial stability, facilitate - Generates labor market
international trade, promote high flexibility in developed nations.
employment and sustainable
economic growth, and - Advances economies of
reduce poverty around the world developing nations
while periodically depending
on World Bank for its resources

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Globalization and National Sovereignty Key Challenges Facing International Business

National sovereignty involves the idea that a nation-state:
1. is autonomous
2. can freely select its government
3. cannot intervene in the affairs of other nations
4. can control movements across its borders
5. can enter into binding international agreements.
Opposition groups allege that globalization erodes
national sovereignty and encroaches on the authority of local
and state governments. Supporters disagree, saying that
globalization spreads democracy worldwide and that national
sovereignty must be viewed from long-term perspective.
Technological Sophistication
Advances in communications, information
technology, and manufacturing processes have created
new foreign markets and helped firm internationalized.
While technology can make life easier for international
business in certain respects, it also can increase
complexity in other areas and help accelerate how
quickly new crises hit companies – challenges that
management must grapple with.
The key for international management is take
advantage of technology while creating operational
resilience and agility in the company to respond to the
changes in the environment.

Globalization and Inequality Debate We see the result of

embracing globalization in
For debate over inequality within nations, studies suggest this photo skyscrapers in
that developing nations, studies suggest that developing the Lujiazui Financial and
nations can boost incomes of their poorest citizens by Trade Zone of Pudong
embracing globalization and integrating themselves into the New Area in Shanghai,
global economy. China. After years of
expansion, Shaghai has
emerged as a key city for
In the debate over inequality between nations, nations open companies entering
to world trade and investment appear to grow faster than rich China’s market place.
nations do. Meanwhile, economies that remain sheltered China developed Pudong
from the global economy tend to be worse off. and reinvigorate Shanghai
as an international trade
and financial center.
Finally, for the debate over global inequality, although Pudong is now a modern,
experts agree inequality has fallen in recent decades, they cosmopolitan district.
https://en.wikipedia.org/wiki/Shanghai
disagree on the extent of drop.

International Business Concepts Key Challenges Facing International Business

International Business is any commercial transaction
that crosses the borders of two or more nations
Imports – goods and service purchased abroad and
brought to the country.
Exports – goods and services sold abroad and sent out of
a country.
e-business (e- commerce) – use of computer networks
to purchase, sell, or exchange products; service
customers; and collaborate with partners.
International Volatility
A very challenging area of volatility of international
management is currency fluctuation. National currencies
can move up or down in ways that dramatically impact
businesses – and often very quickly.
Volatile currency fluctuations underscore the impact of
rapidly shifting business conditions as well as the use of
technology by sophisticated investors. Sudden currency
updrafts can make a firm’s export s more expensive
overnight, increasing the pressures to reduce cost.

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Key Challenges Facing International Business

International Workforce Challenges
Offshoring – refers to the process of sending jobs
overseas and is not limited to big multinationals.
Reason for Offshoring:
1. The chase for cheap labor
2. Education quality and location factors (e.g. Political
stability)

Reshoring – when firms that offshored skilled

manufacturing jobs or knowledge workers (such as
software designers and programmers) have pulled back
to their home countries, the process is known as
offshoring.

Key Challenges Facing International Business

Workforce Quality and Competitiveness
The common bottom line for international firms
everywhere is that they need employees who can handle
increasingly complex work. The best workforce usually win
(and keeps) their job in process.

Increasing Work Diversity

Workforce competitiveness aside, globalization is also
bringing people from diverse cultures and backgrounds
together. Many American and European companies
aggressively recruits foreign immigrants, especially for job
requiring specific technical skills. Demographic shifts within a
nation are having similar impact. A diverse workforce can
help firms better serve their increasingly diverse customer
base.

Individual pain is
worth the collective
gain

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The Benefits of International Business and

Benefits of Trade Trade
Major Theories of
International Trade

The Practice of Trade Policy

Current Practice of
“Managed” Trade

Chapter 2 The Evolution of

International Business and Trade

The Evolution of International Business Major Theories of International Trade

Learning Objectives:
1. Describe the relation between
international trade volume and world
output and identify overall trade patterns.
2. Describe mercantilism and explain its
impact on world powers and their
colonies.
3. Explain the theories of absolute
advantage and comparative advantage.
4. Explain the factor proportions and
international product life cycle theories.
5. Explain the new trade and national
competitive advantage theories.
• Wealth Accumulation as a Basis for Trade Theory:
Mercantilism
• Specialization as a Basis for Trade Theory: Absolute and
Comparative Advantage
• International Product Life Cycle Theory
• Factor Endowments as a Basis for Trade Theory: Heckscher-
Ohlin and Factor Price Equalization
• New Trade Theory
• Porter’s “Diamond” Model of National Competitive
Advantage.

Overview of International Trade Evolution of the Trade Theories

The purchase, sale or exchange of goods and

services across national borders is called
International Trade. This is in contrast to domestic
trade which occurs between different states, regions,
or cities within a country.
In recent years, nations that embrace
globalization are seeing trade grow in importance for
their economies. One way to measure the
importance of trade to a nation is the examine the
volume of an economy’s trade relative to its total
output.
https://slideplayer.com/slide/7270391 /

1

Mercantilism
The trade theory that nations should accumulate
financial wealth usually in the form of gold, by
encouraging exports and discouraging imports is
called Mercantilism.
It states that other measures of a nation’s well-
being, such as living standards or human
development, are irrelevant. Nation-states in Europe
followed this economic philosophy from 1500 to the
late 1700s. The most prominent mercantilist nations
included Britain, France, the Netherlands, Portugal
and Spain.
Trade Surplus
Condition that results when the
value of a nation’s exports is
greater than the value of its
imports.
Trade Deficit
Condition that results when the
value of a country’s imports is
greater than the value of its
exports.
The Theory of Absolute Advantage
Scottish economist Adam Smith first put forth
the theory of Absolute Advantage in 1176. The
Ability of a nation to produce a good more efficiently
than any other nation is called an Absolute
Advantage.
In other words, a nation with absolute
advantage can produce greater output of a good or
service than other nations using the same amount of
or fewer, resources.
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• The differentiation between the varying abilities of
companies and nations to produce goods efficiently
is the basis for the concept of absolute advantage.
Absolute advantage looks at the efficiency of
producing a single product.
• This analysis helps countries avoid the production of
products that would yield little or no demand,
leading to losses. A country’s absolute advantage, or
disadvantage, in a particular industry, can play an
important role in the types of goods it chooses to
produce.
https://www.investopedia.com/ask/answers/
• As an example, if Japan and Italy can both produce
automobiles, but Italy can produce sports cars of a
higher quality and at a faster rate with greater profit,
then Italy is said to have an absolute advantage in
that particular industry.
• In this example, Japan may be better served to
devote the limited resources and manpower to
another industry or other types of vehicles, such as
electric cars, in which it may enjoy an absolute
advantage, rather than trying to compete with Italy's
efficiency.
• https://www.investopedia.com/ask/answers/
The Theory of Comparative Advantage
An English economist named David Ricardo
developed the theory of comparative advantage in
1817. He proposed that, if one country held absolute
advantages in the production of both products,
specialization and trade could still benefit both
countries.
A country has a Comparative Advantage when it
is unable to produce good more efficiently than
other nations but produces the good more efficiently
than it does any other good. In other words, trade is
still beneficial even if one country is less efficient that
in the production of two goods, as long as it is less
inefficient in the production of one of the goods.
2

• Comparative advantage takes a more holistic view,
with the perspective that a country or business has
the resources to produce a variety of goods.
The opportunity cost of a given option is equal to the
forfeited benefits that could have been achieved by
choosing an available alternative in comparison.
• In general, when the profit from two products is
identified, analysts would calculate the opportunity
cost of choosing one option over the other.
https://www.investopedia.com/ask/answers/
• For example, assume that China has enough resources
to produce either smart phones or computers. China
can produce 10 computers or 10 smart phones.
Computers generate a higher profit.
• Therefore, the opportunity cost is the difference in
value lost from producing a smart phone rather than a
computer. If China earns $100 for a computer and $50
for a smart phone then the opportunity cost is $50. If
China has to choose between producing computers
over smart phones it will select computers.
https://www.investopedia.com/ask/answers/
First – Mover advantage and Economies of
Absolute Advantage – the ability of one country to
produce a good or service more efficiently than another.
(the focus in on productivity)
Comparative Advantage – the ability of one country that
has an absolute advantage in the production of two or
more goods (or services) to produce one of them
relatively more efficiently than the other. (the focus is on
OPPORTUNITY COST ).
While absolute advantage refers to the superior
production capabilities of one entity versus another in a
single area, comparative advantage introduces the
concept of opportunity cost. https://www.investopedia.com/ask/answers/
2/18/2021
In microeconomic theory, opportunity cost, or
alternative cost, is the loss of potential gain from
other alternatives when one particular alternative is
chosen over the others. In simple terms, opportunity
cost is the loss of the benefit that could have been
enjoyed had a given choice not been made. Wikipedia
The New Trade Theory
During the 1970s and 1980s, another theory
emerged to explain trade patterns. The New Trade
Theory states that (1) there are gains to be made
from specialization and increasing economies of
scale (2) the companies first to market create
barriers to entry, and (3) government may play a role
in assisting its home companies. Because the theory
emphasizes productivity rather than a nation’s
resources, it is in the line with the theory of
comparative advantage but at odds with factor
proportions theory.
Scale
A first-mover advantage is the economic and
strategic advantage gained by being the first
company to enter the industry. The first-mover
advantage can create a formidable barrier to entry
for potential rivals.
Economies of scale are cost advantages reaped
by companies when production becomes
efficient. Companies can achieve economies of scale
by increasing production and lowering costs. This
happens because costs are spread over a larger
number of goods. Costs can be both fixed and
variable.
https://www.investopedia.com/terms/e/economiesofscale.asp
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First – Mover advantage and Economies of International Product Life Cycle

Scale
Economies of Scale
The size of the business generally matters when it
comes to economies of scale. The larger the
business, the more the cost savings.

Economies of scale can be both internal and external.

Internal economies of scale are based on
management decisions, while external ones have to
do with outside factors.

https://slideplayer.com/slide/4781706 /

Factor Proportions Theory National Competitive Advantage Theory

In the early 1900s, an international trade theory emerged
that focused attention on proportion (supply) of
resources in a nation. The cost of any resource is simply
the result of supply and demand: factors in great supply
relative to demand with be less costly than factors in
short supply relative to demand.
Factor Proportions Theory states that countries
produce and export goods that requires resources
(factors) that are abundant and import goods that
require resources in short supply. The theory resulted
from the research of two economist. Eli Hecksher and
Bertil Ohlin, and is therefore sometimes called the
Heckscher-Ohlin Theory.
Michael Porter put forth a theory in 1990 to
explain why certain countries are leaders in the
production of certain products. His National
Competitive Advantage Theory states that a nation’s
competitive industry depends on the capacity of the
industry to innovate and upgrade.
Porter’s work incorporates certain elements of
previous international trade theories but also to
make some important new discoveries.

International Product Life Cycle Theory National Competitive Advantage Theory

Raymond Vernon put forth an international
trade for manufactured goods in mid 1960s. His
International Product Life Cycle Theory says that a
company will begin by exporting its product and later
undertake foreign direct investment as the products
moves through its life cycle. The theory also says
that, for a number of reasons, a country’s export
eventually becomes its import.
Although Vernon developed his model around
the United States, we can generalize it to apply to
any developed and innovative market such as
Australia, the European Union, and Japan.
Porter is not preoccupied with explaining the
export and import patterns of nations but rather
with explaining why some nations are more
competitive with certain industries. He identifies four
elements present to varying degrees in every nation
that form the basis of national competitiveness. The
Porter’s Diamond consist of the following:
1. Factor conditions
2. Demand conditions
3. Related and supporting industries
4. Firm strategy, structure and rivalry

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Custom Duties – taxes on imports that

are collected by a designated
government agency responsible for
regulating imports.

Import Quotas – also known as

Quantitative Restrictions (QRs are
regulations that limit the amount or
number of units of products that can
be imported to a country.

Doing Business in the Pacific Rim

To do business effectively in Asian countries that rim the
Pacific Ocean, remember that Asian are as diverse as
their cultures, and aggressive sales tactics do not work.
Before going to visit these countries, it is helpful to
review some general rules:

1. Make Use of Contacts. Asians prefer to do business

with people they know. Cold calls and other direct-
contact methods seldom work. Meeting the right people
in an Asian company often depends n having the right
introduction. If the person with whom you hope to do
business respects your intermediary, chances are that he
or she will respect you.

The Practice of Trade Policy Doing Business in the Pacific Rim

Trade Policy – all government actions that seek
to alter the size of merchandise and / or service
flows form and to a country.
Tariffs – taxes on imports; also known as
customs duties in some countries.
2. Carry Bilingual Business Cards. To make good first
impression, have bilingual cards printed even though
many Asian speak English. It shows both respect for the
language and a commitment to doing business in a
country. It also translates your title into the local
language. Asians generally are not comfortable until they
know your position and whom you present.
3. Respect, harmony, Consensus. Asian cultures
command respect for their investments in music, art,
science, philosophy, business, and more. Asian business
people are tough negotiators, but they dislike
argumentative exchanges. Harmony and consensus are
the bywords in Asia, so be patient but firm.

5

Doing Business in the Pacific Rim
4. Drop the Legal Language. Legal documents are
subordinate to personal relationships. Asian tend not to
like detailed contracts will often insist agreements be left
flexible so adjustments can be made easily to fit
changing circumstances. It’s important to foster good
relations based on mutual trust and benefit. This
importance of a contract in many Asian societies is not
what it stipulates but rather who signed it.
5. Build Personal Rapport. Social ease and friendships
are prerequisites to doing business across much of Asia.
As much business is transacted at informal dinners as in
corporate settings, so accept invitations, and be sure to
reciprocate.
Economic Sanctions and Political Barriers
to Trade
Economic Sanctions
are commercial and financial penalties applied by
one or more countries against a targeted self-
governing state, group, or individual.
Economic sanctions are not necessarily imposed
because of economic circumstances—they may also
be imposed for a variety of political, military, and
social issues. Economic sanctions can be used for
achieving domestic and international purposes.
https://en.wikipedia.org/wiki/Economic_sanctions
Economic Sanctions and Political Barriers
to Trade
• Economic sanctions generally aim to create good
relationships between the country enforcing the
sanctions and the receiver of said sanctions.
However, the efficacy of sanctions is debatable and
sanctions can have unintended consequences.
• Economic sanctions may include various forms
of trade barriers, tariffs, and restrictions on financial
transactions. An embargo is similar, but usually
implies a more severe sanction, often with a
direct no-fly zone or naval blockade.
https://en.wikipedia.org/wiki/Economic_sanctions
2/18/2021
What is Trade Embargo ???
An embargo (from the Spanish embargo, meaning
hindrance, obstruction, etc. in a general sense, a trading
ban in trade terminology and literally "distraint" in juridic
parlance) is the partial or complete prohibition of
commerce and trade with a particular country/state or a
group of countries.
Embargoes are considered strong diplomatic measures
imposed in an effort, by the imposing country, to elicit a
given national-interest result from the country on which it
is imposed. Embargoes are generally considered legal
barriers to trade, not to be confused with blockades, which
are often considered to be acts of war.
https://en.wikipedia.org/wiki/Economic_sanctions
Embargoes can mean limiting or the act of banning
export or import, creating quotas for quantity,
imposing special tolls, taxes, banning freight or
transport vehicles, freezing or seizing freights, assets,
bank accounts, limiting the transport of particular
technologies or products (high-tech).
In response to embargoes, a closed economy
or autarky often develops in an area subjected to
heavy embargo. Effectiveness of embargoes is thus in
proportion to the extent and degree of international
participation. Embargoes can be an opportunity to
some countries to develop faster a self-sufficiency.
However, Embargo may be necessary in various
economic situations of the State forced to impose it,
not necessarily therefore in case of war.
Economic Protectionism
What Is Protectionism?
Protectionism refers to government policies that
restrict international trade to help domestic
industries. Protectionist policies are usually
implemented with the goal to improve economic
activity within a domestic economy but can also be
implemented for safety or quality concerns.
• Protectionist policies place specific restrictions on
international trade for the benefit of a domestic
economy.
6

Economic Protectionism
• Protectionist policies typically seek to improve
economic activity but may also be the result of safety
or quality concerns.
• The value of protectionism is a subject of debate
among economists and policymakers.
• Tariffs, import quotas, product standards, and
subsidies are some of the primary policy tools a
government can use in enacting protectionist
policies.
https://www.investopedia.com/terms/p/protectionism.asp
Free Trade and Trade Liberalization
What Is Trade Liberalization?
Trade liberalization is the removal or reduction of
restrictions or barriers on the free exchange of goods
between nations. These barriers include tariffs, such
as duties and surcharges, and nontariff barriers, such
as licensing rules and quotas. Economists often
view the easing or eradication of these restrictions as
steps to promote free trade.
https://www.investopedia.com/terms/t/trade-liberalization.asp
Free Trade and Trade Liberalization
• Trade liberalization removes or reduces barriers to
trade among countries, such as tariffs and quotas.
• Having fewer barriers to trade reduces the cost of
goods sold in importing countries.
• Trade liberalization can benefit stronger economies
but put weaker ones at a greater disadvantage.
https://www.investopedia.com/terms/t/trade-liberalization.asp
2/18/2021
Free Trade and Free Trade Area
What Is a Free Trade Area?
A free trade area is a region in which a group of
countries has signed a free trade agreement and
maintain little or no barriers to trade in the form of tariffs
or quotas between each other.
Free trade areas facilitate international trade and the
associated gains from trade along with the international
division of labor and specialization. However, free trade
areas have been criticized both for costs that are
associated with increasing economic integration and for
artificially restraining free trade.
https://www.investopedia.com/terms/f/free_trade_area.asp
Free Trade and Free Trade Area
• A free trade area is a group of countries who have mutually
agreed to limit or eliminate trade barriers among them.
• Free trade areas tend to promote free trade and the
international division of labor, though the provisions of the
agreement and the resulting scope of free trade is subject to
politics and international relations.
• Free trade areas have benefits and costs, and corresponding
boosters and opponents.
https://www.investopedia.com/terms/f/free_trade_area.asp
Free trade is a trade policy that does not restrict imports or
exports. It can also be understood as the free market idea
applied to international trade. Wikipedia
What is a Cartel?
A cartel is an organization created from a formal
agreement between a group of producers of a good
or service to regulate supply in order to regulate or
manipulate prices.
In other words, a cartel is a collection of
otherwise independent businesses or countries that
act together as if they were a single producer and
thus can fix prices for the goods they produce and
the services they render, without competition.
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What is a Cartel ?
• A cartel is a collection of independent businesses or
organizations that collude in order to manipulate the
price of a product or service.
• Cartels are competitors in the same industry and seek to
reduce that competition by controlling the price in
agreement with one another.
• Tactics used by cartels include reduction of supply, price-
fixing, collusive bidding, and market carving.
• In the majority of regions, cartels are considered illegal
and promoters of anti-competitive practices.
• The actions of cartels hurt consumers primarily through
increased prices and lack of transparency.
https://www.investopedia.com/terms/c/cartel.asp

https://www.cnbc.com/video/2016/03/10/free-trade-good-or-
bad.html