Page 333 - Cambridge IGCSE Business Studies

26: Business and the international economy

Quotas are set on the import of certain commodities, either from specifi c

countries or globally. They may be set with or without consultation with the

exporting countries. Exporting countries may suffer as they will only be able to sell
a limited amount of goods to the country that has a quota.

ACTIVITY 26.2

Country B imports its clothing from three main countries, X, Y and Z. In 2012, Country B imposed a quota on imports of
selected clothing lines from Country X. Country B wanted to promote its own declining local clothing industry and improve
its competitiveness in the global market. People opposed to the policy argue that the quota has not worked.

Imports in 2011 Imports in 2012
Country importing from ($ millions) ($ millions) % share in 2011 % share 2012
X 30 16 60 32

Y 12 20
Z 8 14

Total imports 50 50

1 Complete the table above to show the % share of imports from Countries Y and Z in 2011 and 2012.
2 Do you think that this quota on imports from Country X has helped reduce the competition for the domestic clothing
companies? Use data from the table to support your answer.

331

TEST YOURSELF
1 Identify the key characteristics of globalisation and explain the impact of
globalisation on businesses.
2 Discuss the role of quotas and tariffs in international trade.

3 Explain how being part of a trade bloc can improve trade between the member
countries.

TOP TIP Importance and growth of multinational
Remember for a business to be companies
called a multinational it must
produce goods and services in
A company that wants to enter international markets usually starts by
more than one country. It does exporting its locally produced products to foreign markets. Later it may set
not apply to a business that
up operations in the host country by opening branches on its own or by
only sells its products in others
countries. having joint ventures with foreign companies. Once a company has operations
overseas, it is known as a multinational company (MNC). Whether a
business decides to expand internationally or become a MNC will depend
on what its objectives are. If successful, it may be able to produce enough
Joint ventures: see goods in the host country to export them back to their home or other
Chapter 14, page 197. countries.
Objectives: see Chapter 5, For a MNC to be successful, the host country needs to provide a positive
page 57. environment in which the business can establish and grow. Four main factors are
required, these are shown in Table 26.2, page 332.