MNCs etc

The following are the major differences between domestic trade and international
trade:- 1. Mobility in Factor Of Production
* Domestic Trade: Free to move around factors of production like land, labor,
capital and labor capital and entrepreneurship from one state to another within
the same country. * International Trade: Quite restricted
2. Movement Of Goods
* Domestic trade: easier to move goods without many restrictions. Maybe
need to pay sales tax,etc
* International Trade: Restricted due to complicated custom procedures and
trade barriers like tariff, quotas or embargo
3. Usage of different currencies
* Domestic trade: same type of currency used
* International trade: different countries used different currencies
4. Broader markets
* Domestic trade: limited market due to limits in population, etc
* International trade: Broader markets
5. Language And Cultural Barriers
* Domestic trade: speak same language and practice same culture
* International trade: Communication challenges due to language and cultural
barriers.
Benefits from International Trade
1. International trade helps to widen the range of choice of goods or products. A
country is able to consume imported products not able to be produced locally due
to lack of knowledge or technology, weather conditions.
2. Allows the transfer of knowledge, technologies and information between
trading partners. Research & development from developed countries can benefit
developing countries through trade
3. It acts as a catalyst of growth to developing countries as these countries can
benefits from the transfer of technology and new methods of production from
advanced countries.
4. Increased competition because of international trade hence the need to be
efficient and effective in the production, helps to further stimulate research and
development and more rapid adoption of new technology to reduce costs of
production in order to compete with imported products

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5. International trade enables countries to embark on specialization which
ultimately increases world output and improves the standard of living.
6. International trade leads to more efficient resource allocation and lower cost
per unit of output as the market is very much bigger and broader to exercise
economies of scales, etc
7. Non-economic advantages like political, social and cultural advantages to be
gained by fostering international trades like in the case of the ASEAN, AFTA,
EEC,etc
Liberalization is loosening the control of government. In the world of business,
it means that it is easier to get a building permit to build a house or factory.
Privatization means that the government tries to do less in the world of
business and allows citizens to own their own factories and businesses. A country
that owns the oil wells and gas stations would decide to "get out of the oil
business" and allow it to be run by private citizens. The government still collects
money from taxes but no longer has to run the business.
Globalization means that you cross borders. If you want to build a new car to
sell in America, you might buy the steel from India; set up the factory in Mexico;
open dealerships to sell the cars in America.

A Multinational Corporation (MNC) is a corporation with extensive ties in

international operations in more than one foreign country. Examples are General
Electric, Exxon, Wal-Mart, Mitsubishi, Daimler Chrysler, etc... They manage
production or delivers services in more than one country. They are also referred
as international corporations. MNCs exert powerful influence in local economies
as well as the world economy and play a vital role in international relations and
globalization. A Transnational Corporation is a MNC that operates worldwide
without being identified with a national home base. It is said to operate on a
border less basis. Market imperfections, differences in taxes, company laws,
labor costs, transportation costs, environmental regulations etc are responsible
for the growth of MNCs. As Bhagwati has pointed out, MNC profits are tied to
operational efficiency, which includes a high degree of standardization. MNCs
tailor production processes in all of their operations in conformity to those
jurisdictions where they operate (which will almost always include one or more of
the US, Japan or EU) which has the most rigorous standards. As for labor costs,
while MNCs clearly pay workers in, e.g. Vietnam, much less than they would in

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the US (though it is worth noting that higher American productivity—linked to
technology—means that any comparison is tricky, since in America the same
company would probably hire far fewer people and automate whatever process
they performed in Vietnam with manual labour), it is also the case that they tend
to pay a premium of between 10% and 100% on local labor rates. Finally,
depending on the nature of the MNC, investment in any country reflects a desire
for a long-term return. Costs associated with establishing plant, training workers,
etc., can be very high; once established in a jurisdiction, therefore, many MNCs
are quite vulnerable to predatory practices such as, e.g., expropriation, sudden
contract renegotiation, the arbitrary withdrawal or compulsory purchase of
unnecessary 'licenses,' etc. Thus, both the negotiating power of MNCs and the
supposed 'race to the bottom' may be overstated, while the substantial benefits
which MNCs bring (tax revenues aside) are often understated.