TOPIC #4

Benefits and Costs of International Business

Benefits and Costs of International TradeBenefits and Costs of International Trade

Benefits to Society and ConsumersBenefits to Society and Consumers::1.1. Availability of products and services unavailable Availability of products and services unavailable

in your own countryin your own country2.2. Broader range of prices offered (cheaper to Broader range of prices offered (cheaper to

purchase various goods)purchase various goods)3.3. Job creationJob creation4.4. Political Benefits – “countries that trade with Political Benefits – “countries that trade with

one another seldom go to war with each other.”one another seldom go to war with each other.”5.5. Opens up communication lines with people, Opens up communication lines with people,

improves mutual understanding, and increases improves mutual understanding, and increases the level of respect people from different the level of respect people from different countries have for one another.countries have for one another.

Costs of International TradeCosts of International Trade

The hidden or social costs of The hidden or social costs of international business engaging in international business engaging in offshore outsourcing:offshore outsourcing:

1.1. Human rights and labour abusesHuman rights and labour abuses

2.2. Environmental degradationEnvironmental degradation

Offshore OutsourcingOffshore Outsourcing

Also known as “contracting out.”Also known as “contracting out.”

The practice of hiring individuals from The practice of hiring individuals from countries where labour costs are lower to countries where labour costs are lower to complete some or all of the steps in the complete some or all of the steps in the production process.production process.

Example:Example: Many companies use call centres in India, Many companies use call centres in India,

China and Costa Rica for customer service China and Costa Rica for customer service and IT customer service.and IT customer service.

Offshore OutsourcingOffshore Outsourcing

AdvantagesAdvantages Lower costs to company which can focusLower costs to company which can focus

on tasks it does better on tasks it does better

Be closer to natural resources neededBe closer to natural resources needed

Proximity to more efficient technologiesProximity to more efficient technologies

Increase profits from lower labour costs,Increase profits from lower labour costs, another country’s innovations, and another country’s innovations, and different tax structure different tax structure

Human Rights Issues and Labour Human Rights Issues and Labour AbusesAbuses

Typical abuses in poor countries include:Typical abuses in poor countries include:

1.1. Physical abusePhysical abuse2.2. Sexual abuseSexual abuse3.3. Forced confinementForced confinement4.4. Non-payment of wagesNon-payment of wages5.5. Denial of food and health careDenial of food and health care6.6. Excessive working hours with no restExcessive working hours with no rest7.7. Child labourChild labour

Human Rights Issues and Labour AbusesHuman Rights Issues and Labour Abuses

Child Labour defined:Child Labour defined: Regular employment for boys and girls Regular employment for boys and girls

under the age of 16under the age of 16 Many countries ignore abuses that target Many countries ignore abuses that target

children and women.children and women.

What can be done to stop Child Labour and What can be done to stop Child Labour and Human Rights Abuses?Human Rights Abuses?

International Labour Organization (ILO)International Labour Organization (ILO)

United Nations (UN) specializedUnited Nations (UN) specialized agency that seeks the promotion of agency that seeks the promotion of social justice and human and labour social justice and human and labour rights that are accepted by all rights that are accepted by all countries. countries.

Other?Other?

Environmental DegradationEnvironmental Degradation

Occurs when nature’s own resources Occurs when nature’s own resources such as trees, habitat, earth, water, such as trees, habitat, earth, water, and air are being used up and air are being used up (consumed) faster than nature can (consumed) faster than nature can replenish them.replenish them.

Sustainable DevelopmentSustainable Development

The process of developing land,The process of developing land, cities, businesses, and communities cities, businesses, and communities that meet the needs of the present that meet the needs of the present without compromising the ability of without compromising the ability of future generations to meet their future generations to meet their own needs. own needs.

Businesses need to be looking toBusinesses need to be looking to provide sustainable business practices. provide sustainable business practices.

Examples of Sustainable Business PracticesExamples of Sustainable Business Practices