Factor Mobility Theory

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INTERNATIONAL

BUSINESSFACTOR MOBILITY THEORY


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The ability of land, labour or capital to beput to an alternative use or moved toanother location.

The degree to which a factor of production,such as labor or capital, is able to move,either among industries or among countries

Meaning :


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Economic growth of a contr! to "e#$rea% e&en'! throghot(

In%#trie# can "e encorage% to 'ocate

in rra' area# throgh incenti&e#) thenthe "ene*t# of in%#tria' %e&e'o$mentin a $artic'ar contr! can "e #$rea%more e&en'!(

Ena"'e# the tran#fer of e+$erti#e toarea# where it i# e,cient an% in%eman%(

Signi*cance :


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Manager# can contri"te to the%e&e'o$ment of a#$ect# of the *rm'ac-ing in manageria' e+$erti#e an% in#ome ca#e# the! can tran#fer their#-i''# internationa''!(

Mo&ement of factor# of $ro%ctionfrom #r$'# area# to %e*cit area#(

A"i'it! to mo&e factor# of $ro%ction.'a"or) ca$ita') or 'an%.ot of one$ro%ction $roce## into another

Conti////(


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Unem$'o!ment Income %i#tri"tion Regiona' %i#$aritie# F'e+i"i'it! in $ro%ction

Uti'i0ation of the otherwi#e i%'ere#orce#

Incenti&e to in&e#tment 1 Economicminimi0ation of 'o##e# whi'ema+imi0ing $ro*t#2earning#(

Signi*cance of FOM


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Immigrant# "ring hman ca$ita')th# a%%ing to the "a#e of acontr!3# #-i''# an% ena"'ing

com$etition in new area# In4ow# of ca$ita' to tho#e #amecontrie# can "e #e% to %e&e'o$

infra#trctreEna"'ing increa#e% $artici$ationin the internationa' tra%e arena(

A%&antage of FOM


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Between rms within an industryExample: When one steel plant closes butsells its production euipment to anothersteel rm

!cross industries within a countryExample: When a wor"er leavesemployment at a textile rm and beginswor" at a automobile factory.

Between contrie# either withinindustries or across industries Example:When a farm wor"er migrates to anothercountry or when a factory is moved abroad.

T!$e# of FOM


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LABOR: wor-er migration 5from'ow wage contrie# 5%e&e'o$ing

contrie#6 to high wagecontrie# 5%e&e'o$e% contrie#6

CA7ITAL: ca$ita' in&e#tment ten%

to 4ow from 'ow to high retrn8to8ca$ita' contrie#

Form# of internationa' factormo"i'it!


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F9I 5foreign %irect in&e#tment6 #long term investment into rms withthe aim of permanently beneting

the advantages of being present inthe foreign mar"ets $% &portfolio investment' # short termcapital investment with the aim ofmaximi(ing the return)to)capital&nancial investments'

Conti//(


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*ame several impediments to the freemovement of wor"ers between twoindustries.

*ame several costs associated with themovement of wor"ers between twoindustries.

EERCISE //(


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The World Trade +rgani(ation&WT+'

Established on st

-anuary / 0ocated in 1eneva, 2wit(erland

$urpose :3! global organisationdealing with rules of tradebetween nations4.

;TO :


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The #co$e of the multilateral tradingsystem was broadened from trade in goods&1!TT' to encompass trade in services&1!T2' and trade related aspects ofintellectual property rights &T5%$2'. %t was arule)based global trading system completewith its own dispute resolution procedures .


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The


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!dministers the WT+ !greements andfacilitates their operation andimplementation

$rovides a forum for trade negotiationsamong member states on matters coveredby the !greements and for furtherliberalisation of trade amongst members

5esponsible for the settlement ofdi6erences and disputes between members

Fnction#


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5esponsible for periodic reviews of thetrade policies of members

!lso provides technical assistance andtraining for developing countries

7ooperates with other internationalorganisations on sub8ects of mutual interest


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*on discrimination) 9ost avoured *ation&9*' and *ational Treatment obligations

reer trade # negotiations aimed at loweringtrade barriers

$redictability and transparency ) bindingcommitments, restrictions on the use ofbarriers to trade and transparent tradepolicies and regulatory framewor"s &e.g.

transparency obligations in the ma8or tradeagreements and the Trade $olicy 5eview9echanism'

7rinci$'e#


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The promotion of fair competition) 9*,national treatment and rules against unfairtrade practices &e.g. anti dumping'

Encouragement of development and

economic reform


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Mini#teria' Conference8 The apex body fordecision ma"ing &meets every ; years'.7omposition:)ministerial representatives.

>enera' Conci'8 performs the functions ofthe 7onference between meetings and has

specic duties assigned to it by the WT+agreements. 7omposition:) governmentalrepresentatives.

The 1eneral 7ouncil also meets as the9i#$te Sett'ement Bo%! and the Tra%e

7o'ic! Re&iew Bo%!( Conci'# for Trade in 1oods &oversees 1!TT', Trade in 2ervices &oversees 1!T2' and T5%$2which report to and assist the 1eneral 7ouncil.


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Committee# on special sub8ects,7ommittees functioning under the 7ouncilsand 7ommittees for the $lurilateral!greements.

Mem"er#hi$8 developed, developing, leastdeveloped countries and economies intransition.

9eci#ion ma-ing is by consensus. %fconsensus is not possible decisions will beta"en by a ma8ority vote.


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Mo#t Fa&ore% Nation #!rt. of 1!TT embodies the 9* rule. !t itssimplest, it reuires any favourabletreatment granted to a product originating

in or destined for any other country, to beaccorded immediately and unconditionallyto the li"e product originating in or destinedfor the territories of all other memberstates.

for e.g. free trade areas


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Factor Mobility Theory

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