Globalization

Free trade is the idea that things should be able to be traded between countries with as few restrictions or limitations as possible. Pretty much nowhere in the word has 100% free trade; every country has a complex set of taxes on foreign goods (called tariffs), limits on how many goods can be brought in (called quotas) and outright restrictions on importing certain things. When people talk about ‘free trade’ they are talking about removing, or lessening some of these restrictions.

Protectionism is when a country tries to shield its own industries from international competition. Historically protectionism has been associated with countries trying to develop from rich to poor. The most common argument for protectionism is that before a country can compete internationally it needs time to develop it’s own industries. This is sometimes called the infant industry argument.

Comparative advantage is when a country can produce one thing more efficiently than it can produce another thing. The idea is straightforward enough: if Germany is better at making beer than it is at making pizzas it has a comparative advantage in brewing. But economists get really excited about the idea of comparative advantage because of what it implies about international trade.

Immigration is when people move from one country to another for more than just a short stay. People become migrants for all kinds of reasons, whether retirement, love, study, or fleeing war or persecution (we call these last people refugees). One of the biggest (and most controversial) groups are economic migrants.

Capital controls are limits on the amount of money that can be brought into (or out of) a country. We often talk about moving about stuff, and people, moving across borders – economics is full of debates about how to trade things between countries. But limits on moving money are often a little more under the radar. Partly, this is because there are now relatively few capital controls left in the world.

Foreign direct investment (FDI) is when a company owns another company in a different country. FDI is different from when companies simply put their money into assets in another country—what economists call portfolio investment. With FDI, foreign companies are directly involved with day-to-day operations in the other country. This means they aren’t just bringing money with them, but also knowledge, skills and technology.