Text Book Answers (Ch1)

15. i. a free trade policy with little government intervention

ii. a free flow of capital and has no foreign exchange controls
iii. a favourable location (near the Mainland)
iv. well educated and well trained staff
v. hardworking and productive labour
vi. good financial infrastructure
vii. sound legal system (no corruption is allowed)
viii. simple tax system and low tax rate
ix. free press and free flow of information
x. private property rights
xi. good transport infrastructure (eg. The airport) (this is a minor reason)

16. i. a free flow of capital and no foreign exchange controls

ii. a free flow of information
iii. advanced information and communication technology (ICT)
iv. sophisticated financial system
v. simple tax system and low tax rate.
Comments: Confusion between reasons and factors.
Factor: something that actively contributes to the production of a result (ingredient)
Reason: the thing that makes some fact understood, intelligible (cause)

21a) i. a free market economy with little government intervention

ii. a laissez-faire policy
iii. can freely start a business
iv. free flows of goods, capital and information

21b) i. a favourable location (close to the Mainland)

ii. upholds the rule of law and respects and protects private property rights
iii. hardworking and productive labour force
iv. simple tax system and low tax rate
Text Book Answer (Ch 2)
18. Aim:
i. to promote free trade
ii. to serve as a forum for multilateral trade negotiations and dispute settlement
between its members

Fuctions:
i. to enforce the rules of trades
ii. to enforce the arbitrates in trade disputes between its members
iii. to impose trade sanctions if members fail to comply with the rules and
decisions of the WTO

Principles:
i. treat all members equally and treat local firms and foreign firms equally
ii. achieve freer trade through negotiations and gradual removal of trade
barriers
iii. maintain predictability and stability of the international trading. It rules
the commitments that open markets are binding and trade polices should
be transparent
iv. promote fair competition and encourage development and economic
reforms.

23a. Explain the benefits that MNCs obtain when they are outsourcing (eg. To save
costs, to expand the markets, to gain comparative advantage)

23b. Explain the issues and concerns that MNCs are facing when they outsource their
production processes. Factors other than costs should be considered.

For example, cultural differences, monitoring the quality of products,

control of the production processes.

Also explain how MNCs address the issues and concerns (ie., how MNCs
solve those problems)
For example, training, frequent visits, enforcement of code of conduct and
good practices .

Comments: Answer according to the given scenario. Don’t give the general
comments.