Countries participate in global economy → mainly through international trade → buy and cell goods with one another
- countries → trade in goods, such as food and appliances. others may also buy and sell services, such as finance and education
- countries trade with one another → may need or want goods + services they are unable to produce themselves / when produced by other countries, are cheaper and better quality.
not all countries participate in international trade to same degree
Countries also participate in global economy by investing in one another. known as international investment
- investment that country makes in another country / receives from another country → referred to as foreign investments
- Foreign investments that involve businesses from1 country setting up their operations in another country / investing in businesses of another country → known as foreign direct investments. FDIs typically long term
- FDIs arise → because businesses have identified opportunities to reduce costs, increase profit, expand into other markets by setting up their operations in another country / investing in businesses in another country
When country receives FDIs → results in inflow of foreign equipment, talent and expertise.
- enables local businesses to upgrade their tech + business practices.
FDIs benefit a country by:
- helping to increase amt of goods and services produced locally
- promoting transfer of skills and expertise to local businesses and workers + creating jobs with potentially higher wages
Through intl trade + investment → country’s economy becomes tied to other countries economies + integrated into global economy countries may try to improve their economic competitiveness → to promote intl trade and investment → with other countries
Country’s economic competitiveness → depends on:
- availability + quality of infrastructure and technology
- cost and skill levels of labour
- degree of political stability
→ advanced tech makes economic activities more efficient + productive → lower labour costs make country competitive in industries that require a lot of labour. → other hand highly skilled labour (cost more) → makes country competitive in industries that require advanced skills