Trade barriers encourage firms to disperse their productive activities

QUESTION

Trade barriers encourage firms to disperse their productive activities—design, production, and assembly—to foreign nations.

Indicate whether the statement is true or false.

ANSWER

FALSE
It may make sense for a firm to design and engineer its product in one country, to manufacture components in another, to perform final assembly operations in yet another country, and then export the finished product to the rest of the world. However, trade barriers constrain a firm’s ability to disperse its productive activities in such a manner.