3.2 Political and economic decision making

• Free Market Economy


  A situation where a country allows foreign interests/ companies to invest (FDI) and compete equally without restriction with domestic interests/ companies for business within that country
• Tariff


  The taxes that are paid when importing or exporting goods and services between countries. A form of Protectionism
• Trade (economic) liberalisation 


  To reduce or remove the rules governing trade and economic activity thereby encouraging free trade
• Free trade 


  The ability to buy and sell globally without restriction e.g tariffs and quotas
• Privatisation 


  Transferring ownership of a business, agency service or property from the public sector (government owned) to the private sector 
• Offshoring 


  Some TNCs build their own new production facilities in ‘offshore’ low wage economies
• Foreign Mergers


  Two firms in different countries join forces to create a single entity
• Foreign Acquisitions 


  When a TNC launches a takeover of a company in another country
• Transfer pricing 


  Some TNCs have sometimes channelised profits through a subsidiary company in a low-tax country.

  The Organisation for Economic Cooperation and Development (OECD) is now attempting to limit this practice.
• Censorship 


  The government restricts the flow of information and knowledge through state-controlled media outlets and internet restrictions. Censorship can be used to limit a population’s knowledge of foreign culture and ideas (such as democracy) which could undermine a dictatorship government.
• Limiting Migration 


  Most countries have some sort of border control and migration monitoring. With the rise of right-wing, extremist views, more countries have adopted strict migration controls.
• Trade Protectionism 


  Trade protectionism involves subsidies, tariffs and quotas which help a country to protect domestic industries. For example, in 2016 Chinese steel flooded global markets at very low prices - “dumping” - due to Chinese government subsidies. This caused major problems for steel industries around the world including the UK Tata Steel Works, which closed and sold all of its plants as it lost £1 million every day.
• Why do some people/ governments/ companies see flows as a threat?

  Importing raw materials and commodities could hurt domestic suppliers and industries

  Migrants from abroad could create tensions as they may not be wanted

  Foreign Information could be seen as a threat (E.g China's great Firewall)
• Free Trade Bloc 


  A group of countries that have agreed to reduce or eliminate trade barriers between themselves