Global Economy: Trade, Factor Mobility, and Supply Chain Analysis

This assignment delves into various aspects of the global economy, starting with an analysis of trade protectionism and its impact on domestic industries. It examines government interventions such as tariffs, subsidies, and quotas, and explores strategies for businesses to mitigate import competition. The assignment then shifts to the market for foreign exchange, discussing its characteristics and methods governments use to control currency flows, emphasizing the importance of managing currency fluctuations for companies. Furthermore, it explores the trade and factor mobility theory, highlighting the benefits of free trade and the relationship between foreign trade and international factor mobility. Finally, the assignment addresses global supply chain management, identifying critical environmental, geopolitical, economic, and technological factors for success, and outlining transportation options for establishing a robust transportation network. Desklib offers a platform to explore more solved assignments and resources for students.

GLOBAL ECONOMY

Table of Contents
Trade Protectionism.........................................................................................................................3
Question 1....................................................................................................................................3
Question 2....................................................................................................................................3
Question 3....................................................................................................................................3
Question 4....................................................................................................................................4
Market for Foreign Exchange..........................................................................................................4
Question 1....................................................................................................................................4
Question 2....................................................................................................................................5
Trade and Factor Mobility Theory..................................................................................................5
Question 1....................................................................................................................................5
Question 2....................................................................................................................................6
Global Supply Chain........................................................................................................................6
Question 1....................................................................................................................................6
Question 2....................................................................................................................................6
REFERENCES................................................................................................................................1

Trade Protectionism
Question 1
The government restrict trade in order to develop domestic industries. If domestic industries
fail to compete with the foreign industries, then government restrict trade. Example of trade
restriction is tariffs and import quotas. On the other hand, to increase economic welfare and
reduce overall trade cost, the government enhance international trade. It is also help the workers
and businesses to create and grasp new economic opportunities (Sigler and et.al., 2021).
Example of enhancing trade is free trade agreement of EU with the other countries forming part
of EU.
Question 2
The potential effect of government intervention on the free flow of goods that it is one of
main way of domestic trade protectionism. For this, the government basically uses the tariff and
non-tariff trade barriers instrument. It is also helps in addressing the inefficient allocation of
resources in the market and protect domestic industry from foreign. The actual effect sometime
create loss to the economy such as lack of incentives, resources etc. because of high government
intervention. The local companies face difficulty in obtaining cheap resources from the other
countries along with the highly talented workforce because of government intervention on the
free flow of trade.
Question 3
The four primary and major tools with the help of which the government of country can
regulate and restrict trade are as follows:
 Tariffs: This is a tax or duty which is paid on the certain class of imports and exports of
goods and services. This is basically designed to distort international trade and enhance
domestic products.
 Subsidies: This tool state that every recipient required to meet the export target set by
government or have to use domestic products rather than imported goods from foreign
country.
 Quotas: This is also known as import quota where the government set the target on the
quantity imported into a country over a particular period of time (Sigler and et.al., 2021).

 Currency manipulation: This is a way in which any of trading partners buy US assets in
order to make their products expensive and foreign products cheaper.
Question 4
In order to reduce and deal with the import competition, the businesses have to enhance
their export opportunities by dealing with more and more foreign consumers and businesses.
This helps the company in increasing their total exports which further helps in reducing the risk
of the import competition. Beside this, the domestic businesses need to enhance the technology
and innovation so that they can generate the same resources in house which they import from
other countries (Outlook, 2021). The more and more exporting helps the companies grow their
business in other countries as well which further leads to the growth of economy.
Market for Foreign Exchange
Question 1
Characteristics of foreign currency market:
 This is basically one of the most liquefiable financial market all over the world thus
consider as high liquidity market.
 The foreign currency market is highly transparent and clear as the traders have full
access over the data and information related to market.
 This is also considered as a dynamic market because the value of the currencies changes
in every seconds and hours.
 It functions and operates 24 hours a day which provide the traders with the facility to
operate at any point of time (Febiri and Hub, 2021).
Ways through which the governments control flow of currencies across national border:
The various ways with the help of which the government of countries control flow of
currencies with other foreign countries are as follows:
 By banning the use of foreign currency within the domestic country.
 By banning local processing of foreign currency.

 By implementing fixed exchange rates that individual and businesses need to pay in order
to exchange foreign currency to domestic currency.
 By imposing restriction on the amount of currency that is imported and exported to and
from country.
 By restricting the currency exchange by introducing the government approved
exchangers (Febiri and Hub, 2021).
Question 2
The primary goal of companies to deal in foreign currency is to avoid losses. It means the
companies have to buy and sell different currencies around the world because it will help them in
managing their profitability via fixing the price of foreign currency exchanges. For example,
Walmart is a UK based company which uses the fixed rates of foreign currency exchange while
signing purchase contracts with its Chinese suppliers (Luca, 2021). In this way, Walmart and
also other companies can solve and manage their currency fluctuation concern. This will also
help them in managing the losses and increasing the profitability from the foreign currency
markets.
Trade and Factor Mobility Theory
Question 1
Free trade helps in the growth of the economy because it reduces the imported-input cost
which is need to be paid by company. The impact of which the cost of production of company
reduces that leads to high economic growth. Beside this, free trade also improves the efficiency
and innovation of the economy. The results of free trade are more dynamic economy where the
individuals able to get and create new job opportunities for themselves and businesses able to
hire more talented workforce across the world. The higher wages to workers is also one of the
benefits of free trade which ultimately improve the productivity and efficiency of the worker,
businesses and economy (Gupta and Maheshwari, 2021). It also drives the competitiveness
within the domestic and foreign industry which leads to more growth of the economy. Free trade
also promotes fairness, that every country has to follow same rules and regulations.

Question 2
The relationship between foreign trade and international factor mobility is such that
international factor mobility is basically acts as a substitute for international trade in goods and
services. The factor mobility means the ability to move the factors of production such as labour,
capital etc. from one production process to another. It means that if the free trade of production
moves across the national border with free trade than in such case most efficient allocation of
resources will be take place within the country and economy. This is a relationship between the
foreign trade and factor mobility (Luca, 2021).
Global Supply Chain
Question 1
The critical factors which plays significant role in the successful global supply chain
management are as follows:
 Environmental factor: This involve the identification of situations whose probability of
occurrence is higher such as natural disaster, extreme weather and pandemic.
 Geopolitical factor: There are several geographical factors which plays major role in the
success of the global supply chain management. This includes political stability, Free
trade, no corruption, no terrorism etc.
 Economic factor: The other factors involve economic which helps in the success of global
supply chain management such as high demand, excessive energy, no border delay, no
currency fluctuations etc.
 Technological factor: The last factor which is important in the success of the supply chain
management is high technology and innovation. The high speed internet, high
infrastructure and non ICT disruption is key to success of global supply chain (Кондіус,
2021).
Question 2
The following transportation option have to be keep open by the company in order to establish
successful transportation network as a part of global supply chain:
 Private fleets: This involve employing own transports such as private jet and other road
transportation and employ own driver as well.

 Dedicated (outsourced fleets): The company can also deal with the third party in order to
manage their own equipment and driver.
 For-hire carriers and freight brokers: The company can also hire the trucking and
logistics companies based on capacity and lane rates in order to transport goods from one
country to another country (Gupta and Maheshwari, 2021).

REFERENCES
Books and journals
Sigler, T. and et.al., 2021. The structural architecture of international industry networks in the
global economy. Plos one. 16(8). p.e0255450.
Outlook, G., I. 2021. The Global Economy and the Outlook for th e United States and
Canada. Fuel. 250. p.300.
Febiri, F. and Hub, M., 2021. Digitalization of Global Economy: A Qualitative Study Exploring
Key Indicators use to Measure Digital Progress in the Public Sector. In SHS Web of
Conferences (Vol. 92). EDP Sciences.
Gupta, R. and Maheshwari, S., 2021. CROSS BORDER TRADE–MAIN DRIVER OF
GLOBAL ECONOMY. Journal of Economics and Economic Education Research. 22.
pp.1-2.
Luca, M. D., 2021. The effects of the COVID-19 pandemic on the global economy with
implications on the Romanian economy. Ecoforum Journal. 10(1).
Кондіус, І. С., 2021. RESEARCH THEORIES OF REGIONAL CONVERGENCE IN
GLOBAL ECONOMY. Академика. Серия: Экономические и Юридические
науки. 1(1). pp.8-13.
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