Summary: New Economic Powers

Read the summary and the most important questions on New Economic Powers

• 1 Trade Protectionism

• Why do countries try to protect their trade?

  All countries seek to influence trade and respond to their economic, social and political objectives.

• 1.1.1 The Role of Stakeholder

• Why are stakeholder the most apparant to influence trade protectionism?

  Those most directly affected  such as workers, owners, suppliers, and local politicians whose livelihoods depend on the actions taken are most likely to speak out.

• 1.2.1 Fighting Unemployment

• Which group is most effective at fighting import restrictions?

  The unemployed

• Import restrictions to create domestic employment:

  - May lead to retaliation by other countries
  - Affect large and small economies differently. 
  - Reduce import handling jobs
  - May decrease jobs in another industry
  - May decrease export jobs because of lower incomes abroad

• 1.2.2 Protecting Infant industries

• What is the infant industry argument?

  A government should shield an emerging industry from foreign competition by guaranteeing it a large share of the domestic market until it can compete on its own.

• 1.2.3 Developing an industrial base

• Countries seek protection to promote industrialization because that  type of production:

  - can use surplus agricultural workers more easily
  - brings in investment funds
  - diversifies the economy
  - brings faster growth than primary products do

• 1.2.3.1 Industrialization argument

• What are the challenges with industrialization?

  - The output may increase if the agricultural workers produced little before
  - Demands on social and political services in cities may increase
  - Development possibilities in the agricultural sector may be overlooked
  - industrial jobs may not be forthcoming

• 1.2.3.2 Investment Inflows

• How does the industrialization influence investment inflows?

   If import restrictions keep out foreign-made goods, foreign companies may invest to produce in the restricted area.

• 1.2.3.3 Diversification

• Of what inflkuence is the industrialization on diversification?

  Although demand and prices for commodities fluctuate markedly, a shift to production of manufactures creates competitive risk.

• 1.2.4.1 Balance of trade adjustments

• BoT deficits may cause a government to act to reduce imports or encourage exports. Two options are:

  - Depreciating its currency
  - Relying on fiscal and monetary policy to to bring about lower price increases in general than those other countries