Ans: The complete statement showing how the production process in the garment industry is spread across countries is:

In making garments, the company may, for example, get cotton fibre from Korea, get the yarn made from the cotton in China, get the cloth woven in India, get the garments designed and stitched in Thailand, and then sell the finished garments in the United States and Europe under its own brand name.

This shows that the production process is divided into small parts and spread out across the globe so that each step can be done where it is cheapest and most efficient.

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1. Would you say Ford Motors is a MNC? Why?

Yes, Ford Motors is a multinational corporation (MNC) because it is an American company that owns and controls production in more than one nation. It has production spread over 26 countries of the world, including India, and it sets up offices and factories in regions where it can get cheap labour and other resources to earn greater profits.

2. What is foreign investment? How much did Ford Motors invest in India?

Foreign investment refers to the money that is spent by MNCs to buy assets such as land, building, machines and other equipment in a foreign country, with the hope that these assets will earn profits. Ford Motors invested Rs 1,700 crore to set up a large plant near Chennai in India.

3. By setting up their production plants in India, MNCs such as Ford Motors tap the advantage not only of the large markets that countries such as India provide, but also the lower costs of production. Explain the statement.

India provides a large market because of its huge population and growing number of well-off buyers who can afford cars. At the same time, the cost of production in India is lower because labour and other resources are available at cheaper rates. By setting up plants in India, MNCs like Ford Motors can produce cars at a lower cost and sell them not only in India but also export them to other countries. This helps them earn greater profits.

4. Why do you think the company wants to develop India as a base for manufacturing car components for its global operations?

(a) Cost of labour and other resources in India: Labour and other resources are available in India at low costs, which reduces the overall cost of production.

(b) The presence of several local manufacturers who supply autoparts to Ford Motors: India has many local manufacturers who can supply auto parts at competitive prices, reducing the need to import components.

(c) Closeness to a large number of buyers in India and China: India and China are both large markets with a huge number of potential buyers, so producing components here helps the company serve these markets quickly and cheaply.

5. In what ways will the production of cars by Ford Motors in India lead to interlinking of production?

Ford Motors' production in India leads to interlinking of production because:

• It buys auto parts from several local Indian manufacturers.
• It collaborates with Indian companies like Mahindra and Mahindra.
• It exports cars and car components to other countries.
• It uses skilled and unskilled labour from India.

Thus, production in India becomes linked with production in other countries where Ford operates.

6. In what ways is a MNC different from other companies?

A MNC is different from other companies because:

• It owns or controls production in more than one nation.
• It sets up offices and factories in regions where it can get cheap labour and other resources.
• It has huge wealth and can buy up local companies or form partnerships with them.
• It can control price, quality, delivery and labour conditions of small producers around the world.
• It spreads its production process across the globe to reduce costs and increase profits.

7. Nearly all major multinationals are American, Japanese or European, such as Nike, Coca-Cola, Pepsi, Honda, Nokia. Can you guess why?

Nearly all major multinationals are American, Japanese or European because:

• These countries were the first to industrialise and developed advanced technology and large companies.
• They have huge wealth and capital to invest in other countries.
• They have skilled workers, research facilities and strong infrastructure.
• They had colonial trade links with many developing countries, which helped them expand their businesses.
• Their governments support and protect the interests of their companies in foreign markets.

Ans: In the past, the main channel connecting countries was foreign trade. Raw materials, food stuff and finished products crossed the boundaries of countries. Colonies such as India exported raw materials and food stuff and imported finished goods.

Now, the situation is different because:

• Foreign trade has increased rapidly, and a large part of it is controlled by MNCs.
• MNCs are spreading their production across countries through foreign investment.
• Production is organised in increasingly complex ways, with different stages of production taking place in different countries.
• Along with goods and services, investments, technology and people are also moving between countries.

Thus, the main channel is still trade, but it is now accompanied by foreign investment and global production networks.

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(a) Steel companies in China: They will face greater competition from Indian steel. If Indian steel is cheaper, Chinese steel companies may lose customers and their profits may fall. Some may even have to reduce production or shut down.

(b) Steel companies in India: They will get a larger market for their steel and can expand production. This will increase their sales, profits and employment opportunities.

(c) Industries buying steel for production of other industrial goods in China: They will benefit because they can buy steel at a lower price from India, which will reduce their cost of production and increase their profits.

Ans: The import of steel from India into Chinese markets will lead to integration of markets for steel in the two countries in the following ways:

• Chinese buyers will have a greater choice of steel from both domestic and Indian producers.
• Prices of steel in the two markets will tend to become equal because competition will force producers to keep prices competitive.
• Producers in India and China will closely compete against each other even though they are separated by thousands of miles.
• This will connect the steel markets of the two countries and integrate them into a single global market.

Ans: MNCs play a major role in the globalisation process in the following ways:

• They spread their production across countries by setting up factories and offices where they can get cheap labour and resources.
• They make foreign investments in different countries.
• They buy up local companies or form partnerships with them.
• They control production of small producers around the world by placing orders and selling under their own brand names.
• They control a large part of foreign trade in goods and services.

Thus, MNCs are the main force behind the integration of production and markets across countries.

Ans: Countries can be linked in the following ways:

• Foreign trade: Exchange of goods and services between countries.
• Foreign investment: MNCs investing in production facilities in other countries.
• Movement of technology: Transfer of technology and know-how between countries.
• Movement of people: People migrating from one country to another in search of better income, jobs or education.
• Information and communication technology: Internet, telecommunication and satellite links that connect people across the world.

Ans: The correct answer is (b) greater competition among producers.

When countries are connected through globalisation, producers from different countries compete with each other in the same markets. This leads to greater competition among producers, which generally benefits consumers through lower prices and better quality goods.

Ans: The words describing the use of technology in production are:

• Internet — for sending the text of the magazine and for e-banking.
• Telecommunication facilities — for getting orders on how to design the magazine.
• Computer — for designing the magazine.
• Air transport — for sending the printed magazines to London.
• E-banking — for instant payment through the Internet.

Ans: Information technology (IT) is closely connected with globalisation in the following ways:

• IT has made it possible to communicate instantly across the world at negligible costs.
• It allows companies to spread out production of services across countries, such as call centres, data entry, accounting and designing.
• It enables e-banking, which allows instant transfer of money between countries.
• It helps in accessing and sharing information on almost anything from anywhere in the world.
• Telecommunication facilities like mobile phones, fax and satellite communication connect remote areas to the global network.

It would have been very difficult for globalisation to happen without the expansion of IT. IT has reduced the cost of communication and made it possible for companies to coordinate production and services across different countries. Therefore, the expansion of IT has been a major factor enabling globalisation.

Ans: Liberalisation of foreign trade means removing barriers or restrictions set by the government on foreign trade and foreign investment. With liberalisation, businesses are allowed to make decisions freely about what they wish to import or export. The government imposes much fewer restrictions than before and is therefore said to be more liberal.

In India, liberalisation began around 1991, when the government decided that Indian producers should compete with producers around the globe. Barriers on foreign trade and foreign investment were removed to a large extent, allowing goods to be imported and exported easily and foreign companies to set up factories and offices in India.

Ans: Quotas as trade barriers using the example of Chinese toys:

Suppose the Indian government places a quota on the import of Chinese toys, allowing only a limited number of toys to be imported each year. This would:

• Reduce the number of Chinese toys available in Indian markets.
• Increase the price of Chinese toys due to limited supply.
• Allow Indian toy makers to sell more toys and prosper.

Thus, quotas restrict the quantity of imports and act as a trade barrier.

Should this be used? Discuss:

Arguments in favour:

• It protects domestic producers from unfair foreign competition.
• It helps small industries and workers in the country.

Arguments against:

• It reduces choice for consumers and may increase prices.
• It may lead to retaliation by other countries.
• It goes against the spirit of free trade promoted by the WTO.

Therefore, quotas should be used only when necessary to protect domestic producers, and gradually removed as they become competitive.

Ans: WTO was started at the initiative of developed countries. The aim of the WTO is to liberalise international trade. WTO establishes rules regarding international trade for all countries, and sees that these rules are obeyed. In practice, trade between countries is not free and fair. Developing countries like India have removed trade barriers, whereas developed countries, in many cases, have continued to provide protection to their producers.

Ans: To make trade between countries more fair, the following steps can be taken:

• Developed countries should remove their trade barriers and stop giving massive subsidies to their farmers and producers.
• WTO rules should be applied equally to all countries, both developed and developing.
• Developing countries should be given special treatment to protect their small producers and farmers.
• There should be transparency in international trade negotiations.
• Developing countries should unite and negotiate together for fairer rules.
• People's organisations and campaigns should be encouraged to influence trade decisions.

Ans: Government support to producers can be fair or unfair depending on the purpose and effect:

Unfair:

• When developed countries give massive subsidies to their farmers, they can sell farm products at abnormally low prices in other countries.
• This harms farmers in developing countries who cannot compete with these low prices.
• It also goes against the rules of free and fair trade promoted by the WTO.

Fair:

• When governments support production of environmentally friendly goods, it benefits society as a whole.
• Such support can help promote sustainable development and protect the environment.
• It can also help small producers adopt better technologies and practices.

Therefore, government support is fair when it promotes social and environmental goals, but unfair when it distorts trade and harms producers in other countries.

Ans: Competition has benefited people in India in the following ways:

• Consumers have a greater choice of goods and services.
• They enjoy improved quality and lower prices for several products.
• Well-off sections in urban areas have access to international brands and better products.
• New jobs have been created in industries such as cell phones, automobiles, electronics, soft drinks, fast food and banking.
• Local companies supplying raw materials to these industries have also prospered.
• Some Indian companies have improved their technology and production standards to compete.
• Indian companies like Tata Motors, Infosys, Ranbaxy and Asian Paints have emerged as multinationals.

Ans: Yes, more Indian companies should emerge as MNCs because it would benefit the people in the following ways:

• It would create more employment opportunities in India and abroad.
• It would bring more foreign exchange into the country through exports and foreign investments.
• It would increase India's influence in the global economy.
• It would lead to transfer of technology and better production methods.
• It would provide better quality goods and services to Indian consumers.
• It would help Indian companies compete better in international markets.
• It would contribute to the overall economic development of the country.

Ans: Governments try to attract more foreign investment because:

• It brings additional capital into the country.
• It creates new jobs for the people.
• It brings new technology and better production methods.
• It helps in the development of infrastructure and industries.
• It increases foreign exchange reserves through exports.
• It promotes economic growth and development.
• It helps local companies improve their performance through competition.

Governments, therefore, set up Special Economic Zones (SEZs) and offer tax benefits and flexibility in labour laws to attract foreign investment.

Ans: The people who oppose the setting up of Special Economic Zones (SEZs) are mainly:

• Farmers and landowners whose land is acquired for the SEZs.
• Tribal people who depend on forests and land for their livelihood.
• Small producers and workers who may lose their jobs or businesses.
• Local residents who may face displacement and loss of homes.

They oppose SEZs because:

• Their land is acquired at low prices, and they lose their source of livelihood.
• They are often not given adequate compensation or rehabilitation.
• The SEZs may cause environmental damage.
• They may not get the benefits of the new industries set up in the SEZs.
• They feel that development for some is leading to destruction for them.

Ans: Ravi’s small production unit was affected by rising competition in the following ways:

• His main clients, the television companies, preferred to buy capacitors at half the price from imports.
• He now produces less than half the capacitors that he produced in the year 2000.
• He has only seven workers working for him now, compared to 20 earlier.
• Many of his friends in the same business in Hyderabad and Chennai have closed their units.
• His struggle started when the government removed restrictions on imports of capacitors in 2001.

Ans: No, producers like Ravi should not stop production. Instead, they should try to:

• Improve technology and modernise their production methods.
• Reduce costs by using better raw materials and efficient processes.
• Get timely credit at reasonable interest rates to invest in their business.
• Take help from the government for better infrastructure like roads, power and water.
• Collaborate with other small producers to compete better.

If producers stop production, it will lead to loss of jobs and income. It is better to improve and compete rather than shut down. The government should also support small producers to become competitive.

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(a) How these three things would help Indian producers:

• Better infrastructure and networks: Good roads, power, water, raw materials and marketing networks reduce the cost of production and make it easier to sell goods.
• Modernisation of technology: Better technology improves quality, increases production and reduces costs, helping producers compete with foreign goods.
• Timely credit at reasonable rates: Cheap credit helps producers buy raw materials, machines and other inputs without falling into debt traps.

(b) Will MNCs be interested in investing in these? Why?

MNCs may not be interested in investing in these facilities because they primarily invest to earn profits. They may invest in SEZs and industries that benefit them directly, but may not invest in public infrastructure or credit facilities for small producers. However, if the government creates a favourable environment, MNCs may invest in production units that benefit from these facilities.

(c) Does the government have a role in making these facilities available? Why?

Yes, the government has a major role because:

• Building infrastructure like roads, power and water is the responsibility of the government.
• Providing credit at reasonable rates to small producers requires government support through banks and cooperatives.
• Promoting modern technology and training requires government initiatives.
• Protecting small producers from unfair competition is the duty of the government.

(d) Other steps the government could take:

• Provide training and skill development for small producers.
• Set up marketing cooperatives to help small producers sell their goods.
• Use trade barriers where necessary to protect domestic producers.
• Negotiate at the WTO for fairer rules for developing countries.
• Encourage people's organisations to participate in trade decisions.

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(a) Government:

• Ensure that labour laws are properly implemented and workers get their rights.
• Support small producers to improve their performance.
• Use trade and investment barriers if necessary.
• Negotiate at the WTO for fairer rules.
• Align with other developing countries to fight against domination of developed countries.

(b) Employers at the exporting factories:

• Pay fair wages to workers.
• Provide permanent employment instead of temporary work.
• Give benefits like health insurance, provident fund and overtime pay.
• Ensure safe working conditions.
• Follow labour laws properly.

(c) MNCs:

• Pay fair prices to Indian exporters so that they can pay fair wages to workers.
• Ensure that their suppliers follow labour laws and provide good working conditions.
• Share a part of their profits with workers.
• Do not always look for the cheapest goods at the cost of workers' welfare.

(d) Workers:

• Organise themselves into unions to demand their rights.
• Raise their voice against exploitation.
• Improve their skills through training to get better jobs.
• Support campaigns for fair globalisation.

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Point of view of employers:

• Flexible employment helps companies reduce the cost of labour.
• They can hire workers only when there is pressure of work and not pay them for the whole year.
• It helps them compete with other companies and make more profits.
• They can adjust their workforce according to the demand for their products.

Point of view of workers:

• Flexible employment means no job security.
• Workers can be asked to leave without any reason.
• They do not get benefits like health insurance, provident fund or overtime pay.
• Wages are low and they are forced to work long hours.
• Their standard of living does not improve even though they work hard.

Therefore, while employers support flexible employment policies, workers oppose them and demand secure jobs with fair wages and benefits.