Dr.

Korovyakovskaya
BUSA 3145-01 – Global Business Issues
Assignment #3

Please use textbook and Additional Readings and Sources of Information to answer the
folllowing questions :
1. Free market economies stimulate greater economic growth, whereas state-directed
economies stifle growth. Please discuss this statement.
- Due to the fact that individuals are able to own different assets, such as
property, it pushes people to come up with new products and ideas, become
hard workers, and come up with more creative advertising campaigns. They
do this in hopes of increasing their wealth and personal capital. Economic
growth is created by individuals continuously searching for ways to gain more
wealth. However, in a command economy, it’s the complete opposite. People
are not allowed to own an ample amount of assets. In this type of economy the
more so goal is to work for the good of the society, which does not push
people to do things to increase economic growth like a free market economy.

2. You are the CEO of a company that has to choose between making a $100 million
investment in either Russia or Poland. Both investments promise the same long-
run return, so your choice of which investment to make is driven by
considerations of risk. Assess the various risks of doing business in each of these
nations. Which investment would you favor and why?
- I would first take a look at the economic, legal, and political risks of
conducting business in Russia and Poland. While the political risks are high in
Russia, governmental changes continues since they were being led by Putnin
and now they are being led by Dmitry Medvedev. Political violence continues
to increase the risk of loss which keep investors thinking. Russia carries a lot
of substantial potential risks. Poland on the other hand has been added as a
member of the EU. Poland’s risk are still lower than Poland’s. Poland
experiences a 2.7% GDP year on year growth. Therefore, I would definitely
favor Poland because it is less risky and experiences more growth.

3. Unions in developed nations often oppose imports from low-wage countries and
advocate trade barriers to protect jobs from what they often characterize as
“unfair” import competition. Is such competition “unfair?” Do you think that
this argument is in the best interests of (a) the unions, (b) the people they
represent, and/or (c) the country as a whole?
4. – Countries should always produce the products that they can produce in the most
effective way and should retrieve the products that they don’t produce so well
from other countries. Free trade creates economic growth. So if low-wage
countries are able to produce products efficiently than those of high-wage
countries, they should most definitely produce and export. Workers and
companies can be protected by trade barriers. I believe it is in the best interest of
the country as a whole because it will cause economic growth and have more
 efficiently produced products.

5. Given the arguments relating to the new trade theory and strategic trade policy,
what kind of trade policy should business be lobbying government to adopt?

- Governments should start focusing on discovering technology that will be

useful from now into the future. With the technology, they should make useful
of subsidies for support. Export subsidies should be given by the government
until first mover advantage has taken effect.