the global economy (4.3)

advantages of trade protection

• protection of infant industries

• national security

• health & safety

• environmental standards

• anti-dumping

• unfair competition

• balance of payments protection

• generating government revenue

• protection of jobs

• ELDC diversification

infant industries

new or unestablished industries that have the potential to achieve a comparative advantage but are too underdeveloped to compete with foreign firms

dumping

the sale of good & services by foreign firms at a price lower than the cost of production

balance of payments

financial record of a country’s transactions with the rest of the world

includes the country’s trade of goods and services with other countries

Economically least developed countries

(ELDCs)

low income countries facing severe structural barriers to sustainable economic development

low levels of human capital

highly susceptible to economic & environmental shocks

disadvantages of trade protection

• misallocation of resources

• retaliation

• increased costs → higher prices

• less choice

• domestic firms lack incentive to become more efficient

• reduced export competitiveness

retaliation

actions taken by a country in response to trade restrictions being imposed on it from other countries

export competitiveness

the ability of domestic firms to export products successfully to foreign markets owing to their ability to compete in foreign markets