Why do many countries protect their industries?

Exam questions Market leader 3 year Trade 1) What is free trade? How do countries benefit from free trade?

Free trade - it is a situation in which goods come into and out of a country without any controls or taxes.

Free trade is an economic practice whereby countries can import and export goods without fear of government intervention. Government intervention includes tariffs and import/export bans or limitations. Developing countries can benefit from free trade by increasing their amount of access to economic resources. Nations usually have limited economic resources. Small developing nations often have the lowest amounts of natural resources in the economic marketplace. Free trade agreements ensure small nations can obtain the economic resources needed to produce consumer goods or services.

Benefits – countries which open their markets usually have a policy of deregulation, they free their companies to compete in markets without government control or subsidies because of this consumers in free trade areas are offered a wider range of high quality products at low prices. People in those areas can move to the most productive parts of the economy and get better jobs with higher wages or salaries.

What is the major concern in international trade and how to deal with it?

3) What are the main barriers to trade?

Two main barriers are:

- Tarrifs are taxes on imported goods so they can not compete so well against domestic products.

- Subsidies – are money paid to domestic producers, so that they can sell their goods more cheaply than foreign competitors.

Other less important barriers – are quotes, expensive licences for importers and regulations relating to documents which a company must have to export its goods to certain countries.

Why do many countries protect their industries?

1. Some people say why should we practice free trade if other nations compete unfairly. For example dumping is fairly common international trade. Companies can only do that when they are heavily subsidized by the government.

2. Many people believe that strategic industries must be protected. These are steel, power, communications and so on. In the US many Americans think that the steel industry should be protected against cheap imports from the other countries. If US depends too much on foreign-made steel, this could be bad in a time of war

3. Finally, some people say that in developing countries industries need to be protected until they are strong enough to compete in world markets.

5) Do you think globalization has an impact on international trade? If so,how?
6) What is the essence of good (bad) times in market activity? What two common types of stock market investors are known?
7) Why are companies interested in export trade? What are the most important reasons for exporting?

Quality
8) How to define quality in business? How important is it?
9) What different business philosophies are practised to control quality?
10) Does high quality mean high cost? Give your reasons.
11) Which features express the idea of quality in the best way? Why?

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