Q # 01

The world's poorest countries are at a competitive disadvantage in every sector of

Their economies. They have little to export. They have no capital; their land is of poor
Quality; they often have too many people given available work opportunities; and
they are poorly educated. Free trade cannot possibly be in the interests of such
Nations! Discuss.
Poor countries still live in ancient times, we may tell because of their challenges. Their
thinking and techniques are archaic for business. They have no free trade choices, which is
why they charge imports of things with enormous charges. But their impact on these
countries is vice versa. Because that makes people more unable to buy products because of
high prices. Human resources were misused or unfairly treated by providing low
compensation and amenities. It is a question of employee unhappiness. Peoples were
exploited by these countries' bureaucracy, politicians and rich people. The rate of crime is
high and the legal system is not very responsible. This leads to insecurity in companies,
warehouses, offices and other organizational possessions and items. Outdated items in these
countries are still emerging. This is a favorable factor in these countries for imports.
Unequal economic growth
While for many countries globalization tends to promote economic growth, growth is not as
wealthy as developing countries often benefits.
Lack of local businesses
Globalizing policies tend to favor firms with resources and infrastructure that operate or
distribute their supply chain in many different countries, such as hide small local businesses,
and it may be difficult for the local New York Hamburg group to compete with the prices of
multinational burger companies
Increases potential global recessions
When economic systems of several countries interweave, they expand greatly, as a chain
reaction that can simultaneously impact many others might spark a worldwide economic
crisis when an economy begins to battle.
Exploits cheaper labor markets
Globalization makes it possible for firms to grow employment and economic possibilities in
poorer countries, which usually have cheaper labor costs. However, overall economic
development can be moderate or stagnant in some countries.
Causes job displacement
Globalization does not lead to more jobs; it redistributes jobs by shifting from cost-effective
to cheaper countries. This indicates that high-cost countries often lose jobs due to
globalization and output.
Developing Nations a Competitive Disadvantage
Developing nations are left alone at a competitive disadvantage in international commerce.
Developed nations have the advantages of free trade agreements; they can aggressively expand
their own enterprises to the global markets and draw on foreign technologies and resources to
enhance their development and competitiveness. But poor countries can also gain from free
trade, as the benefits are not only for affluent countries. Although free trade may result in a
drain from the developing country, it also opens up several chances for foreign investment and
for opening up new markets to improve their competitiveness and gradually develop into a
developed country.
Comparative Advantage
Comparative advantages are the ability for an economy to manufacture a certain good or
service at a lower cost than its trading partners. A comparative benefit allows a company to
sell goods and services at a cheaper price than its competitors and to achieve better sales
margins.
The law of comparative advantages is typically credited with the English economist David
Ricardo and his work of 1817 "On the Principles of Political Economy and Taxation" even if
this concept was probably brought about by Ricardo's mentor James Mill.
Diversity of Skills
People learn their comparative benefits through salaries. This leads people to the jobs they
are comparatively excellent at. If a talented mathematician gets more money than a teacher
than an engineer, when they practice engineering they and everybody they work with are
better off.
Wider opportunities gaps allow for better production levels of value through more efficient
organization of labours. The more diverse people and their skills are, the greater the prospect
for advantageous commerce by means of a comparative advantage.
Consider a prominent athlete like Michael Jordan as an example. Michael Jordan is an
extraordinary athlete, who as a known basketball and baseball player surpasses that of most
other individuals. Michael Jordan might, say, rapidly paint his house, thanks to his ability and
great height.
Barriers of Poor Countries
There are two kinds of development barriers: those that can be attributed to those based on
circumstances within the countries involved. Low productivity levels, poverty of natural
resources (for example, limited availability of land for agriculture and fast population
growth), can all be major hurdles for development and undoubtedly largely explain the
economic backwardness of many parts of the world. However plenty has been done to
overcome such obstacles, partially by institutional adjustment or innovation within and partly
through the use of solutions that depend on the external environment.
Q # 02
Suppose that one country subsidizes its exports and the other country imposes a
"Countervailing" tariff that offsets its effect, so that in the end relative prices in the
Second country is unchanged. What happens to the terms of trade? What about
Welfare in the two countries?
Suppose, on the other hand, that the second country retaliates with an export subsidy
Of its own. Contrast the result.
A CVD is basically an import charge to mitigate the impacts of the export subsidy from
outside the EU. The tariff, like any large importing country, will lead to Increase in importing
nation prices and decrease in exporting country prices. (CVDs) are tariffs put on imported
products in order to compensate subsidies granted to producers in the exporting country for
these commodities. CVDs are intended to balance the competitiveness between domestic
manufacturers and international producers of the same product who can afford to sell the
product at a reduced price because of their state subsidies
Countervailing Duties Work
Countervailing duties (CVDs) are crucial regulations to offset the negative impacts on the
same industry in other countries, which are not supported for the manufacturing of the
product, by subsidies for a production of an item in one country. Unchecked, these subsidized
imports can have a serious impact on the native industry, leading to the closure of factories
and the loss of jobs. Since export subsidies are seen as unfair commercial practices, the
Global Commerce Regulations have comprehensive processes in place to determine the
situations under which countervailing tariffs can be levied by an importing nation.
Example of Countervailing Duties
Take the example of countervailing duties. Assume that Pakistan gives a subsidy for
exporting widget makers around the country who ship mass widgets to China at 8 dollars a
widget. China has a widget industry of its own and domestic widgets are $10 per widget
available. If China deems that unrestricted imports of subsidised widgets affect the domestic
widget industry, it can levy a 25 percent compensating charge on widgets imported from
Pakistan so that the resulting import costs of the widgets are also $10. This eliminates the
unfair price advantage that widget manufacturers in Pakistan have because of their
government's export subsidy.
B)
Terms of trade
The connection between export prices of a country and the prices paid for its imports. When
export prices of a country increase compared to import prices, its trading terms are being
pushed in a positive direction, as more imports are now being received per unit of items that
are being exported. The terms of trade, which depend on the global supply and demand of the
products concerned, decide how the international commercial gains will be split between the
trading countries. The approach is also applied in several economic areas (e.g., agricultural
and manufacturing sectors).
A sudden changes in a country's trading conditions (e.g., dramatically decreasing prices of
the primary product, a country's main export) may cause substantial problems in balancing if
the country relies on its exports to pay for its imports of manufactured products and capital
equipment.
Welfare Countries
The phrase "Welfare State" refers to a political system in which the national government
plays a major part in preserving and promoting the economic and social well-being of its
inhabitants. A welfare state is built on concepts of equality of opportunity, fair distribution of
income and accountability to those who cannot use the minimal good-life provisions. Social
security, unemployment insurance programmers imposed by government and welfare
payments to those who are not able to work are examples of the welfare state.
The so-called welfare state employs certain elements in most modern countries. It is
sometimes referred to as a state in which the government in question offers incentives beyond
reason which result in rewards for a worker who earns more than a hard worker. The welfare
state is also described as a 'nursery state,' in which adults are treated like kids.
C)
On the other hand, China has given us Covid-19-vaccine to help Pakistan with the
elimination of the virus and to help us at every hurdle level in Pakistan's growth. China, also
CPEC partner for Pakistan's growth in Gawadar, improves infrastructure which greatly
contributes to increasing the economy and allows Pakistani people the chance to enhance
their family support. Pakistan is helping China to increase its business worldwide by giving it
access to the entire world for its prosperity and for Pakistan's economic progress. China
provides us with trained staff who help us to educate our employees and improve their
abilities which contribute greatly to Pakistan's development.
Q # 03
Describe some potential benefits to a multinational company as a result of foreign
Direct investment (FDI). Elaborate on each type of benefit. Which motives for FDI
do you think encouraged Kia Motors Corporation, a leading automobile company, to
Expand its production in Pakistan? Also discuss why going into an FDI is better
Choice for the companies in automobile sector of Pakistan than to export its products
Internationally.
 Foreign Direct Investment 
(FDI) means an investment in the commercial interests of a corporation or individual in one
country In another country. In another country. FDI generally occurs when an investor enters
a foreign business or purchases a foreign business assets in a foreign corporation.

Types of FDI

FDI horizontal. The most prevalent sort of FDI is the FDI which mainly focuses on
investing funds in a foreign company that is part of the same industry as the FDI investor.

 Vertical FDI

 Conglomerate FDI

Advantages of foreign direct investment

Human capital development
Human capital involved employee knowledge and skills. Training and experience gained by
employees can increase education and human capital of a country. It can train human
resources in other areas and corporations with a ripple effect
Technology
Targeted countries and companies have access from all over the world to the newest
financial instruments, technologies and operating methods. The introduction of new and
enhanced technologies leads to the diffusion of the company into the local economy and
improves efficiency and efficiency of the industry.
Increase in exports
Many products manufactured by FDI have global markets, not just domestic consumption.
Establishing 100% export-oriented units can help FDI investors improve exports from other
nations.
Exchange rate stability
The FDI influx to a country translates into constant foreign exchange flows, allowing the
central bank of a country maintain a prosperous foreign reserve resulting in stable exchange
rates.
Economic growth
The most evident advantage of FDI is job creation, one of the main reasons why a country
(particularly a developing country) is interested in attracting foreign direct investment. FDI
boosts the manufacturing and services sector, leading to job creation and reducing the
country's unemployment rate. Increased employment means higher earnings and gives the
public more purchasing power, strengthening a country's total economy.
Increased Employment and Economic Growth
Economic growth is a prerequisite for expanding employment, paired with increases in jobs
and labour productivity. In general, the quantity of jobs and productivity and incomes from
work must be increased.

B)

Yes kIA motives for FDI encourage as a leading automobile company in Pakistan to groom
up the industry for the improvement of economy and provide job opportunities and gave
them a chance to other countries came in Pakistan because if the manufacturing unit is in
other country then the delivery charges is too much high and increase the price of KIA cars.
The car demand and production is popular in our country day by day and people like KIA
cars for their quality and safety features.
KIA Lucky Motors Pakistan Limited (KLM) has declared that commercial vehicle
manufacturing will commence. Kia Motors issued Pakistan Stock Exchange a notice of
production targets for The first quarter of the financial year 2019-20.
KLM is a Rs20 billion enterprise comprised of KLM parent Yuns Brothers Group' Rs14
billion (YBG). The company cooperates with the fortunate group of Kia engines from South
Korea.
KIA is one of Pakistan's new car market entries. In the automobile sector
C)
Open markets and allow for FDI inflows
Reduce FDI restrictions. To ensure that all sorts of companies, whether local or international,
have an open, transparent and dependable environment including: business facility, import
access, reasonably flexible labor markets and intellectual property protection.
Set up an Investment Promotion Agency (IPA)
A successful IPA might target relevant international investors and become a link with the
domestic economy. It should, on the one hand, be a one stop shop for investors from the host
country. The host economy, on the other hand, should be the catalyst to provide superior
infrastructure and access to competent staff, technicians, engineers and managers who would
have to entice these investors.
Put up the infrastructure required for a quality investor
Sufficient neighboring transit infrastructure (airport, ports), appropriate and safe supply of
energy, adequate workforce, specialized training facilities for employees and investors were
developed excellently.
Encourage first-time foreign direct investors
Foreign corporations that are not already part of a broad network of companies are more
prepared to enter domestic providers.
Encourage foreign direct investors from diaspora members
They are also more likely to link with native enterprises and contribute to host country
globalization
Provide access to credit by reforming domestic financial markets
The creation of an entrepreneurial financial system allows indigenous companies to adapt to
the difficulties and stimulants of overseas arrivals.
Be patient and rely on domestic economic
slow structural reform. Could investors come on waves. Thermionic tubes, valves,
transistors, TV and broadcast systems, peripheral and computer. data processing systems, for
example. Investors. In these ways, FDI can help diversify and strengthen local production.
Reasons of KIA export internationally
 Price is low then other country
 Production is enhancing day by day
 Expand the distribution in Pakistan all provinces