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Half Term DST
Trade Blocs
Create revision notes on Forms of Business,…
Half Term DST
Trade Blocs
- Create revision notes on Forms of Business, Liability and Business Objectives (Think Types, examples, Pros, Cons, What it all depends on)
- Complete Revision Notes on Protectionism and Trade Blocs
Protectionism
- Represents any attempt to impose restrictions on trade in goods and services
- Can be a Tariff, Quota, Export Subsidy or Domestic Subsidy
Tariff
- Tax or duty that raises the price of imported products and causes a contraction in domestic demand and an expansion in domestic supply
- E.g, The United States has an 11% import tariff on imports of bicycles from the UK.
Quota
- Quantitative limits on the level of imports allowed or a limit to the value of imports permitted into a country in a given time period.
- E.g, Until 2014, South Korea maintained strict quotas on imported rice
- Quotas do not normally bring in any tax revenue for the government
Export Subsidy
- Payment to encourage domestic production by lowering their costs
- E.g. Cotton subsidies for US farmers and farm subsidies introduced by countries such as Russia
Domestic Subsidies
- Government help for domestic businesses facing financial problems
- E.g. subsidies for car manufacturers or loss-making airlines.
Benefits
Individuals
- Domestic Jobs protected and will still operate
Businesses
- Protects small business from being overshadows by larger MNC's
Countries
- Keeps workers in jobs, so can continue to spend disposable income, which may help growing economy
- Reduces money flowing out of country
Drawbacks
Individuals
- Higher prices to do less competition
- Also smaller selection
- Could argue that free trade creates more high quality jobs than it destroys
Businesses
- Lack of needing to stay competitive may reduce innovation and lead to increase in inefficiencies
Countries
- Country you are imposing tariffs on may also simply do the same to you, limiting the exporting ability of your products
Trade Blocs
- Group of countries that agrees to reduce or eliminate trade barriers among members
- Examples include EU, NAFTA and ASEAN
Free Trade Area
- Where countries eliminate internal trade barriers from each other, but continue to maintain independent policies and dealings with external barriers
Custom Union
- Where countries not only eliminate trade barriers with each other, but agree on common external barriers
Common/Single Market
Where countries not only eliminate trade barriers with each other, but agree on common external barriers
Economic Union
- Eliminate internal barriers, adopt common external barriers, and allow free movement of resources, e.g. labour, among member countries, and a uniform set of economic policies
Advantages
- Freedom to trade E.g. UK Business can can sell goods and services across EU freely
- Much larger market can allow for EOS
- Larger market attracts FDI
- UK companies can employ people from anywhere in Europe
Disadvantages
- Domestic business under threat from similar businesses in bloc
- Retaliation from other countries, E.g. they may set up their own bloc, like NAFTA or ASEAN
- Reaching agreements with member states is slow
- Regulations made by trade bloc may not suit all business, E.g. non-ethical companies or policies of safety (Animal testing on companies or Ingredients in food)
Sole Trader
- One owner
- Can employ people, but they will not be involved in control of business
- Small businesses
- Unlimited Liability
Advantages
- Easy to set up due to no complicated forms
- Decisions can be made quickly
- Less capital needed
- All profits kept
- Owner is own boss = Motivation
Disadvantages
- Unlimited liability
- Difficult to raise money due to risk
- No one can take over in case of illness or holiday
Partnership
- Between 2 and 20 Partners
- Partners are joined owners of business
- Unlimited Liability
- Profits Shared is equal to capital invested
Advantages
- Little capital needed
- Partners contribute range of skills
- Profits go to partners = motivation
Disadvantages
- Unlimited Liability
- Partners may disagree on control of business, inviting new partners, or sharing of the profits
- If partner dies or becomes bankrupt the partnership is dissolved
Private Limited Company (LTD)
- Made of people who know each other
- Friends and family can buy shares in business, but cannot be bought by public
- Owner controls who buys shares
- Minimum of 2 people, but no maximum
- Limited liability
- Example - Eddie Stobart
Advantages
- Limited Liability
- Can raise capital by selling more shares so is easy to expand
Disadvantages
- Company Accounts not private
- Can be difficult and expensive to set up due to more administration
- Cannot sell shares on stock exchange