econ paper

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California State University, Fullerton *

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416

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Economics

Date

Feb 20, 2024

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pdf

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Uploaded by SargentPowerRam3

Question 1: Chap.11 Trade restrictions- Indonesia (are not American free trade partners) and Zimbabwe. Subsidies are detrimental to exporters; however, importers benefit from subsidies. Industrialized countries like Singapore and the United Kingdom are too small to compete with the largest economic blocs regarding providing subsidies. The German government has proposed Intel $11 billion in subsidies to develop two semiconductor facilities, which is referred to as the most significant foreign direct investment in German history. Another example in the article is Company Arrival, which makes electric vehicles. It said last year that it intends to concentrate its manufacturing in the United States rather than the United Kingdom due to tax benefits. As a result of the Inflation Reduction Act, the United States is receiving a surge of foreign investment and is providing $369 billion in incentives and subsidies for renewable energy. The Inflation Reduction Act will benefit consumers by saving energy and lowering the cost of clean energy. According to South Korean companies Hyundai and LG, batteries worth $4.3 billion will be built in Georgia. New battery factory construction has begun in South Carolina by German automaker BMW. Panasonic, a Japanese company, is constructing a facility in Kansas. For domestic producers, the Inflation Reduction Act provides incentives for those who participate. Due to the requirement that foreign enterprises establish their facilities in the host country, export restrictions aid in the development of manufacturing in that nation. Furthermore, more advanced businesses use improved technology, contributing to an overall productivity rise. Indonesia wants to become a global leader in the battery business by utilizing its enormous nickel resources. However, the US has placed a trade restriction on Indonesia because they are not American free-trade partners.

Question 2: Chapter 12(compare Indonesia to US in subsidies) The recent trend of foreign direct investment is to strengthen relationships with wealthy trading partners and gain from their industrial strategies. The U.K. has been struggling for quite a while now in the global economy after leaving the European Union in 2020. Brexit supporters initially suggested that the United Kingdom might aggressively pursue globalization and negotiate superior bilateral trade agreements with other nations. Calls from all sectors of the British economy are coming for the government to implement its revitalized industrial policy in response to the global economic interventionist trend. The owner of Jaguar Land Rover recently decided to construct a new EV battery facility in the United Kingdom, which boosted the country's car industry. Mineral export bans, including those on nickel, bauxite, and lithium, have been implemented by Zimbabwe and Indonesia. One of the conditions for exporting these minerals is that foreign corporations must construct processing plants inside their borders. NAFTA restricts other countries that are not the United States, Mexico, or Canada. The NAFTA agreement encouraged trade between the United States, Mexico, and Canada. This agreement helps promote free trade and lower tariffs among the three countries. The European Union includes 27 countries, which formed a common market where there is unrestricted trade and free movement of people. Trade blocs are favorable for the member countries included in the agreement. However, trade blocs may lead importers to choose trading partners over the most productive product exporters. Question 3: Chapter 16 When a business makes an investment in a foreign enterprise with the intention of controlling and owning it, this is known as a foreign direct investment. Typically, for an investment or loan to qualify as a foreign direct investment, the foreign investor must hold at

least 10% of the foreign company. Foreign direct investment is vital for developing market countries that are trying to expand and in need of multinational funding. Some advantages of foreign direct investment include economic growth, advanced technology, increased exports, and a competitive market. Foreign direct investment can hurt small countries with smaller economies. They cannot compete with the United States.

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