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Impact of Opening Branches in Other Countries

Question

Discuss whether or not an economy would benefit from one of its industries opening branches in other countries.

Category:

International Trade and Exchange Rates

Frequently asked question

Preview Answer

I. 🍃Introduction
- Definition of foreign direct investment (FDI)
- Importance of FDI in the global economy

II. Advantages of FDI
- Improving the balance of payments/current account
- Obtaining foreign currency
- Getting around trade restrictions
- Taking advantage of subsidies
- Lowering costs of production and increasing competitiveness
- Increasing output
- Reducing external costs at home

III. Disadvantages of FDI
- Opportunity cost of producing in the home country
- Lower potential output and employment
- Reduced government tax revenue
- Corporation tax paid to foreign governments
- Reduced supply of skilled managers and workers in the home country

IV. Case studies
- Examples of successful FDI
- Examples of unsuccessful FDI

V. 👉Conclusion
- Overall assessment of FDI
- Recommendations for policymakers and businesses.

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