globalisation and trade

what is globalisation

the process of nation economies, societies, and cultures becoming increasingly integrated through the global network of trade, communication, transport, and immigration

what causes globalisation

the movement of information, capital, products, services, and labour between countries

what is a flow of labour

movement of people who participate in the workforce

eg latin america to north america

caribbean and west indies to UK in 1950s due to labour shortage

information on mexican immigrants in US

the largest group of immigrants in the US

23% of all foreign born residents (2023)

what are flows of products and services

manufacturing used to be based in developed countries and were sold where they were made

now, it is more common that manufacturing is in developing countries

UK stats for changes in flows of products

1990 £200bn imported goods

2008 £550 bn imported goods

what are flows of capital

capital is money that is invested to produce income or profit

examples include FDI, improvements in ICT, etc

what are flows of information

the spread of any information eg news, financial data

becoming more interconnected with email, internet, and social media

what are flows of services

services are economic activities not based around production of a good

eg banking

low level services eg customer service are being relocated to developing countries

what are low and high level services

high level- services to businesses- finance, investment, advertising

low level- consumer based- call centres, travel

what does it mean that service industries tend to be footloose

they aren't tied to a specific location by resources, markets, or transportation

leads to formation or conglomerates and decentralisation eg moving call centres to India

how is globalisation impacting marketing

becoming more global, products and services sold all over the world

global marketing leads to economies of scale as it is cheaper to have one global marketing campaign than different ones per country

how does globalisation lead to interdependence

economic- rely on each other for economic growth eg oil is produced by one group of countries and consumed by another

political- to solve issues that cannot be addressed by just one country eg europe supporting refugees from Syria 2015-16

social- connections between countries eg due to migration (2015 244 million migrants worldwide)

environmental- all dependant on each other to look after the environment

how can interdependence be negative

it creates inequality both

between and within countries as it brings benefits to those who are already rich (people and countries)

this is because flows are unequal

examples of unequal flows of people as beneficial

movement from countries with few jobs to countries with plenty

immigrants can create economic growth through work

migrants can send remittances back to families increasing capital into less developed countries

examples of unequal flows of people as problematic

less developed countries suffer from brain drain as skilled people leave and take knowledge with them

low skilled migrants will work for less money leading to reduced wages for local people

migrant workers are forced to work in dangerous conditions eg in Qatar 2022 FIFA world cup

examples of flows of money

remittances, foreign aid, FDI, income from trade

how can unequal flows money be problematic

foreign aid can create dependency and force out local businesses

foreign aid may end up funding conflicts through funding armed groups

FDI can increase conflict between foreign companies and local people

companies may pressure governments of LICs to pass laws to make investment cheaper or easier

how is the world dominated by developed countries

control ideas about how the world works eg increasing free trade (neo liberal ideas)

most technology is owned by developed countries

why are systems and international political corporations needed to support global interdependence

to encourage cooperation, conflict resolution, and rule setting to address shared challenges and reduce conflict and instability

also ensure world issues are addressed eg climate change, pandemics

what is the role of the IMF (international monetary fund)

monitors the global economy and advises governments to improve economic situation

gives loans to countries with economic problems

what is the role of the world bank

provides loans to less developed countries- comes from payments from member countries

aims to reduce number of people living on less than $1.90 to less than 3% by 2030

what are the differences between the IMF and World Bank

the IMF supports countries in crisis, most often short term, while the World Bank supports development and poverty reduction

what is the role of the WTO (world trade organisation)

to promote international commerce and provide a forum for negotiations to reduce barriers and set rules for trade

aim for free trade eg the Doha round- agricultural free trade

why have the world bank, IMF , and WTO been criticised

IMF- forcing cuts on education and welfare as conditions for assistance

world bank- loans may not be effective, top down approach but have made changes claiming to support bottom up since 1990s

WTO- may push agenda driven by businesses

has globalisation reduced global inequality

yes- rapid development of BRIC and MINT countries and even sub saharan countries growth rate of ethopias GDP 2014-19 9.3% compared to UK 1.9%

no- inequalities within countries may be increased

what is the gini coefficient

gives a score 0-1

0= completely equal distribution of wealth

1= all wealth to 1 person

over 0.4 seen as destabilising

examples of gini coefficients

china 0.465

7 generations to move from bottom 10% to mean income, 2 new billionaires weekly

Denmark 0.3- 1-2 generations to move from bottom 10% to mean income

highest is south africa-0.63 due to apartheid

what is comparative advantage theory

countries specialise in goods and services they excel at producing

they trade these for things they are not as good at producing

example of protectionism against comparative advantage

18th century

india had comparative advantage in textiles, UK wanted to strengthen cotton manufacturing

put in protectionist policy to stop imports of indian textiles

what is protectionism

protection from foreign competition through duties or quotas imposed on imports

what are the types of barriers to trade

import licence- authorises import of goods from certain source

import quotas- set a physical limit to imports of a commodity

subsidies- grants or allowances to reduce costs for domestic producers eg EU agricultural policy

sanctions- restriction on exports for political reasons eg in russia

embargos- partial or complete prohibition of commerce and trade usually for political reasons eg US and Cuba

regulatory or technical restrictions- placed based on standard of goods or method of production eg EU restricts child labour

what influences volumes and patterns of trade

comparative advantage

proximity- more likely to trade with neighbours

agglomeration- clustering of certain industries

geopolitical relationships- political alliances determine trade/ embargos

how has FDI changed

risen dramatically from $400bn in 1996 to $1500 bn in 2016

where are the greatest recipients of FDI and why

China India Brazil Mexico- emerging economies

but these emerging economies also invest eg Chinas investment in Africa

examples of Chinas expansive international policy- FDI in Africa

objective to extract raw materials to aid china's industry

project in ethiopia to build HEP dam

development of port in Kenya with $14bn road and bridge link to Nairobu and oil fields in sudan

over $20 bn pledged in nigeria in return for oil

why do developed economies have better access to international markets

afford to pay higher tariffs

FDI to gain access to countries

part of trading blocs

what are trading blocs

associations between governments which promote and manage trade, they remove barriers between members and keep common barriers to countries outside of the bloc

examples of trading blocs

EU

AU (african union)

NAFTA (north american free trade agreement) but replaced by USMCA (united states mexico canada agreement)

Mercosur

benefits of trading blocs

cheaper goods and better access due to free trade agreement

improves access within the bloc

gives greater leverage as a bloc to negotiate deals

disadvantages of trading blocs

customs union prevents making deals outside of the bloc eg EU all have same tariff to US

what are Special and Differential treatments (SDTs)

formed by WTO for the least developed countries to bypass tariffs

eg the EBA (everything but arms) agreement

all imports form Least Developed Countries are quota free except srms