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A Brief Introduction on How Foreign Direct Investment (FDI) Affects the Global Economy

by GBAF mag

Trade involves the transfer of products or services from one entity or individual to another, most often in exchange for cash. Economists call such a transaction as a transaction or market which enables trade. This involves both the buying and selling of commodities, currencies or stock. Some of the more common things traded are: foreign exchange, stocks, bonds, futures, options, commodities, inventory and wheat. The more complicated things traded are futures, warrants, derivatives, interest rates, ETFs and options.

In the stock market, you need to buy shares at the lowest price possible and sell them when the price increases. There are many people who make a lot of money by trading the stocks. The best strategy is to invest your money in a variety of stocks and bonds to diversify your portfolio. You can research on the stock market to find out which companies are doing well, as well as poorly.

International trade allows countries to trade with each other. The goods that are traded internationally are goods that are manufactured in one country and sent to other countries. The most common goods that are traded internationally are cars, machinery, appliances, chemicals, textiles, foodstuffs and fruit. Although there are some physical movement of goods, much of the trade takes place electronically.

Exports and imports affect the value of the US dollar. When there is an increase in exports, the dollar value of the US currency decreases. On the other hand, when there is an increase in imports, the value of the US dollar increases. As the trade deficit grows, the balance of trade in the US economy turns towards the country with the highest surplus, thus stimulating economic growth.

One of the effects of protectionism is that it reduces the foreign investment opportunities available to a country’s economy. Protectionism has led to a shrinking of the open markets for foreign investment, and this results in less foreign investment in the domestic economy, and more foreign investment in the booming economies of the emerging nations. The result is less competition for the capital available in these emerging markets. The result is less investment in research and technology, more over-production, and less innovation.

Broadly speaking, protectionism refers to a government policy that restricts imports or prevents the entry of certain goods into a country. Such policies may be implemented directly by the government, or indirectly through trade barriers caused by foreign trade. Protectionism can be national, regional or global in scale. It is a double burden levied on the global citizens by the state.

In simple terms, trade generally refers to the buying and selling of goods between buyers and sellers. The concept of trade is widely known. It is also called economic activity. Basically, trade takes place within the boundaries of a country’s economy, causing an increase or decrease in the wealth of citizens within that country.

The process of negotiation of trade is called negotiations. Negotiations aimed at establishing a beneficial trade agreement are called trade negotiations. There are three phases in every negotiation; the negotiatory stage, preparatory phase and negotiation phase. During the pre negotiatory stage, there exists a vision, strategy and tactics for the successful negotiation. Once, these are finalized, the negotiations commence. Generally, it is during this time when the country’s domestic market conditions are studied and modifications are made in line with the strategy.

The main objectives of all countries, be it developed or developing, is to increase the efficiency of the international trade. By allowing countries to work together for the benefit of consumers and companies, we help the global economy grow. Each country has a unique set of circumstances, but overall, the goal is mutual prosperity for all. For developing nations, being part of the global economy would mean having access to international markets for manufactures and raw materials that allow them to develop products that sell in the domestic markets at a reasonable price and that helps raise the national income and standard of living. Buyers from developing countries are usually businessmen who can afford to buy the products at the cheapest price and resell them internationally to earn high profits.

Buyers from developed countries can purchase manufactured goods at the most inexpensive prices and sell them internationally at a higher profit to earn higher returns. This type of trading is called competition, which is what leads to the emergence of goods and services that have higher efficiency at lower costs. Such goods and services enable consumers and companies to enjoy the benefits of competition at low prices, an advantage that sellers from developed countries need to exploit in order to remain competitive. Most countries have experienced an economic imbalance between them and the rest of the world due to trade barriers, creating a situation wherein one country has a greater purchasing power than the other. For example, the United States has a large amount of dollars and European Union’s money has a similar amount.

However, in the modern world, with a more interconnected world, even nations with vastly different systems of production and distribution can gain access to the global economy through effective trading. Through effective trading, developed countries can reduce their imports and exports and become a stronger trading partner with developing countries. The integration of countries’ economies allows them to work together for mutually beneficial results.

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