Pros & Cons of National Specialisation
Pros
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Cons
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Greater competition may increase productivity. Higher productivity lowers cost / unit for firms, which makes their goods more competitive internationally (exports)
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International trade is beneficial for the firms that can compete globally. However, some industries will be unable to compete & will go out of business
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Increased exports can result in economic growth for the nation
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Many firms in an entire industry may close leading to structural unemployment
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Economic growth usually leads to higher income and a better standard of living
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Specialisation may create over-dependency on other countries' resources. This may cause problems if conflict arises (For example, Europe's reliance on Russian natural gas during the Ukraine crisis)
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Income gained from exports can be used to purchase other goods from around the world (imports). This increases the variety of goods available in a country
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Specialisation using a country's own resources will lead to resource depletion over time. Specialisation will increase the rate of resource depletion
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Global efficiency in the use of scarce resources improves as resources are extracted by nations who have the competitive advantage
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As multinational firms grow in size & increase market power, they can dictate prices & output in many regions. They are also able to wield their power to influence governments & gain access to raw materials through bribery & corruption
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With an increase in specialisation & output, it is possible to generate significant economies of scale which further lower production costs
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Start-up firms in developing countries (infant industries) find it harder to compete due to global competition - the ones that survive often have government support. Global monopolies also exert large amounts of pressure on developing countries
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Over-specialisation in developing economies often occurs as they lack the finance to develop a diversified product base & end up over-specialising in commodity products. This makes the country's GDP very dependent on the commodity prices
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