global systems and global governance

what is a global village?

a ‘flat world’ where free reign is given to economic and information flows

what is a world economy?

when prices, supply and demand are affected by global events

how has trade of manufactured goods grown?

$100 billion in 1956

$19 trillion in 2013

what 3 economic relationships have been impacted by globalisation?

1. international trade

2. foreign direct investment

3. international capital flows

what are factors of production?

productive resources that have to be combined in order to produce goods and services

what are the 4 factors of production?

1. land

2. labour

3. capital

4. enterprise

what are the 3 dimensions of globalisation?

1. economic

2. cultural/social

3. political

what is capital in terms of international capital flows?

money that moves between countries which is used for investment

why were investment companies no longer confined within national boundaries in the late 20th century?

deregulation of world financial markets

what is the core in the core-periphery model?

relatively small block of developed nations where global power is concentrated

what is the periphery in the core-periphery model?

countries that are less developed and have been exploited and suffered from a lack of investment, leakages, and out-migration

why is the core-periphery outdated now?

rapid growth of economies such as BRIC and MINT meaning there is now a continuum of development - more of the world can be seen as ‘core’

5 flows between economies

1. FDI

2. repatriation of profits

3. aid

4. migration

5. remittances

who makes foreign direct investments?

TNCs or occasionally governments

give an example of how TNCs do FDI

setting up a subsidiary company overseas

what is the repatriation of profits?

leakage - TNCs taking profit back to the home country

what are the 2 types of aid?

1. multilateral

2. bilateral (one government to another)

what is the destination of most migrants?

short distances - neighbouring regions

what areas attract migrants from furthest away?

North America, Europe, and oil-rich Gulf countries in western Asia

what % of Somalians rely on remittances for their basic needs?

40%

what % of all investment in Somalia is remittances?

80%

when did many US and UK banks stop transferring remittances?

2012

why did many US and UK banks stop transferring remittances in 2012?

concerns that some money was falling into the hands of terrorist groups

what did the withdrawal of banks from remittances services cause?

devastating effects in Somalia, leading to protests

what is the situation of most economic migrants?

not the poorest but those with some education and financial means

where is the largest flow of labour?

Asia

how many moved from south to west Asia and when?

5 million between 2005 and 2010

what 3 things have made the flow of products cheaper?

reduction in:

1. transaction costs

2. transport and time costs

3. tariffs

why have transaction costs been reduced?

improvements in flows of data and the transfer of capital

why have transport and time costs been reduced?

containerisation and air transport

who has reduced tariffs?

WTO - World Trade Organisation

what are services?

economic activities traded without the production of material goods

what can services be divided into?

1. high-level e.g. finance

2. low-level e.g. customer call centres

what are conglomerates?

collection of different companies which all report to one parent company (most TNCs are conglomerates)

what has the improvement of information flows led to?

the expansion of knowledge-intensive goods and services e.g. computer technology

what is the ultimate goal of a brand?

sell the same product, the same way, everywhere

what does global marketing generate?

economies of scale

what are economies of scale?

the cost advantages resulting from the larger scale or output of an operation

what are the BRIC countries?

Brazil, Russia, India, China

what are the MINT countries?

Mexico, Indonesia, Nigeria, Turkey

what is containerisation?

standardised transport system with containers that can be transferred between ships, trains and lorries

what is protectionism?

policy by governments to impose restrictions on the trade in goods and services with other countries

what is the intention of protectionism?

protecting home-based industries from foreign competition

what is a tariff?

tax or duty placed on imported goods

what is the intention of tariffs?

making goods more expensive so they don’t sell at a lower price than home-based goods

what is globalisation?

process by which national economies, societies and cultures have become increasingly integrated through the global network of trade, communication, transportation and migration

what is labour?

the aggregate of all human physical and mental effort used to create goods or services

how important are bananas as a food product in the least developed countries?

fourth most important food product

one banana provides…

…more than an adult’s daily potassium requirement

where are bananas grown?

hot, rainy lowlands of tropical regions

what country is the largest banana producer?

India

where are the main banana exporters?

Central America and Caribbean

how many kg of active ingredients do commercial TNC plantations apply?

30 kg per hectare per year

what are active ingredients?

e.g. fungicides, insecticides, herbicides

for every tonne of bananas produced how many tonnes of waste are there?

2

what two groups dominate world banana trade?

ACP and ‘dollar producers’ of Central American republics

what is the ACP group?

Africa, Caribbean, Pacific

what traditional pattern does the trade of bananas follow?

developing regions exporting a low-value primary product to more developed countries

what % of bananas are consumed by the EU and US?

27% each

what % of the price paid by the end consumer never reaches the producer?

90%

who takes the biggest slice of profits?

retailers

in 2002 what % of the banana trade was dominated by 5 TNCs?

60%

give an example of a TNC that dominated the banana trade

Chiquita (US)

what national producer is important in the banana trade?

Noboa (Ecuador)

what does the TNC chain allow?

significant economies of scale gains to sell at a very low price, and they repatriate profits

what kinds of plantation are bananas grown on?

mostly monoculture and the rest on family farms e.g. in Caribbean

what % of banana trade is now dominated by the 5 big companies?

45%

what has the recent shift in the banana supply change been?

increasing number of national companies sell their produce to TNCs or retailers like Tesco

how long did the banana trade dispute last?

20 years from 1992 to 2009

with what agreement did the banana trade dispute end?

2009 Geneva Banana Agreement, coming into effect 2012

when did the banana trade dispute start?

1975 - Lomé Convention

what was the Lomé Convention?

EU countries negotiated trade agreement with former European colonies (71 ACP countries)

what did the Lomé Convention consist of?

the countries were given Spatial and differential Treatment with tariff-free import quotas

what was the aim behind the Lomé Convention?

enable these former colonies to develop independently without overseas aid

what % of the EU market was being supplied by US TNCs at the time of the Lomé Convention?

75%

when did TNCs file a complaint to the WTO about the Lomé Convention?

1992

what did the TNCs claim in 1992?

the EU practice was unfair trade

what did the WTO do in 1997?

ruled against EU and ordered them to stop

why was the dispute not resolved?

the EU proposals did not satisfy the larger producers

what happened as a result of the dispute?

the US govt retaliated under pressure from TNCs, imposing WTO-approved sanctions on EU products

what compromise was reached in Geneva in 2009?

EU to gradually reduce tariffs on Latin American bananas

why are many of the larger companies relocating to West Africa?

‘race to the bottom’

what is a ‘race to the bottom’?

searching for lower labour costs and weaker legislation in order to stay competitive

what two things come under ‘sustainable’ bananas?

fair trade and organic produce

what market segment is growing in richer nations?

ethical consumers becoming aware of the shortcomings in the supply chain, willing to pay a higher price for a certified product

what does the trade dispute show about the WTO?

they support free trade against protectionism, even if the protection may be to help development

what does the trade dispute show about retailers?

supermarket price wars may ultimately decide where and how food is produced

why do TNCs carry out business operations in a number of other countries? Give an example

escape trade tariffs e.g. Nissan in Sunderland to gain access to EU market

why do TNCs often locate their R&D near centres of higher education?

take advantage of graduate labour market and uni research facilities

why can the primary sector activities sometimes move back to developed countries?

new tech making new material reserves accessible e.g. fracking revitalising oil and gas in N America

where do TNCs base their tertiary activities?

where there is low labour and good education e.g. India (many English speakers)

what is vertical integration?

supply chain of a company is owned entirely by that company

advantage and example of vertical integration

more control and reduces costs through economies of scale e.g. BP

what is horizontal integration?

company diversifies its operations by a merger/takeover to give broader capability at each production stage

example of horizontal integration

Kraft’s takeover of Cadbury in 2010 to give them more diversity in the confectionary market

4 global commons

1. Antarctica

2. high seas

3. atmosphere

4. outer space

what does global common mean?

resource domains are outside the political reach of any one nation state

what is another potential global common?

cyberspace - the world wide web

why would cyberspace need to be protected/regulated?

major driver of globalisation and is often used for propaganda/spreading false info

what does common heritage mean?

protecting the global commons and why we need to