Specialisation, free trade and globalisation

G3 Economics - syllabus K343, 2027

Why countries specialise and trade, globalisation and MNCs, and the methods, reasons and consequences of protection.

• Specialisation by country

  Countries specialise in what they can produce best or at lowest cost, then trade for the rest.

• Free trade

  Free trade means trade between countries without barriers such as tariffs and quotas.

• Globalisation: causes and consequences

  Globalisation is the growing connection of the world's economies, driven by fewer trade barriers, cheaper transport and communication, and MNCs.

• Multinational companies

  An MNC operates in more than one country; it can bring jobs and investment to host countries but may also cause harm.

• Methods of protection

  Governments protect domestic industries with tariffs, import quotas, subsidies and embargoes.

• Why governments restrict trade

  Governments protect infant, declining and strategic industries, fight dumping, cut deficits, raise revenue and block harmful goods.

• Consequences of restricting trade

  Protection can save some jobs at home, but raises prices, reduces choice and may provoke retaliation.

• Put it together: Respond to cheap imports

  A country's domestic bicycle industry is losing sales to cheaper imported bicycles. Compare the government's options.