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Globalisation and Protectionism.

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Introduction

Globalisation a). Globalisation is the increasing integration of national markets that were previously much more segmented from one another. This includes the increasing dominance of multi-national corporations (MNCs) in global markets. This means that production takes place in various countries, so that components are manufactured in several countries in order to produce a finished product, which is often assembled in another country in order to sell the product worldwide on the global market. This leads to a rapid increase in international trade and growing direct investment by MNCs in several countries. b). Since 1980 the developing countries have experienced an increase in the percentage of exports that manufactured goods account for, from approximately 29% to just over 80% of total exports. The percentage that mineral exports account for has experienced a decrease over this period from approximately 55% of total exports to approximately 10%. There has been a slight decrease in the percentage that agriculture accounts for from about 16% to about 10%. ...read more.

Middle

MNCs setting up in countries would cause a positive multiplier effect in that country creating even more jobs and income. However, globalisation can cause environmental problems and lead to an over-dependence on rich countries. d). Protectionism is the word used to describe the methods used by individual countries or regional trading blocs to restrict the level of imports into the home market. A country can protect its own economy from foreign competition is several ways. This includes using tariffs, quotas, environmental controls as well as subsidies. There are arguments both for and against protectionism. A country may want to use such measures in order to protect infant industry. An infant industry is a newly established industry that has a potential comparative advantage. It may be unable to compete with other countries in which established rivals are already benefiting economies of scale. Governments often protect these industries during the early growth by means of tariffs and subsidies. However, there are several problems with this type of protectionism. It reduces competition and therefore can lead to price increases for consumers. ...read more.

Conclusion

This can take two forms, one of which is when products are sold below costs of production in a foreign market as a result of a country subsidising its exports. The other is when products are sold at a price below that which they are sold in the country of origin as a result of a firm practising price discrimination. An example of this is the Common Agricultural Policy employed by the EU. Economies can also be protected in order to correct a balance of payments deficit. Also, economies may want to be protected in order to prevent unemployment. A country may regard the cost of structural unemployment, resulting from free trade, as unacceptable. Overall, I think that countries should not be allowed to protect their own economies, even though globalisation can lead to environmental problems. This is because protectionism reduces competition and leads to inefficiency. Also, protectionism means that comparative advantage is not achieved as inefficient firms are safeguarded. Countries should not protect their economies as it prevents the development of the poorer countries, as they are prevented from gaining access to the markets of the developed richer countries. ...read more.

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