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What are the three advantages of global trade?
Competition: Failure to adopt new technologies and cut costs are replaced by more dynamic firms
Economies of scale: Firms that export World markets face larger demand lowering price per unit of product
Learning and innovation: Firms countries entrepreneurs that trade gain more experience and appropriate tech technologies and practices
What are the two disadvantages of global trade?
The loss of jobs and industry is moving jobs to low cost countries
Interdependencies great risks, domino effects throughout the whole economic system (Supply chain shocks after COVID-19)
What are the five factors affecting globalisation?
Geographical barriers: Transportation costs and communication limits
Social and cultural factors: Consumer behaviour isn’t always priced driven, Influenced by habits, Boycotts, Or preferences for local goods for a global product
Knowledge barriers: Patent rights restrict technology transfer
Political barriers: Trade restrictions and migration laws
Capital controls: Governments may restrict foreign capital inflow or outflow to protect domestic assets and economic stability
What is protectionism? What kind of forms are there 3, and what does the government do?
Protectionism involves government policies to restrict international trade and protect domestic industries.
Forms of protectionism: Tariffs quantity restrictions (quota, embargo’s) Quality restrictions(technical norms and safety standards)
Government support: Subsidies, tax shelters and similar measures can distort markets without targeting for a competition.
What are the three ways trade was integrated in the first global economy?
Transportation costs lowered
vats network of railroads
Shipping (steam)
Canals opened (suez and panama)
Communication technology
telegraph network
Tariffs
tariffs were lowered
The Cobden chevalier agreement between France and England
What was the gold standard?
The monetary institution that gave international economy its necessary predictability stability. Britain was the first country that adhere to a gold standard promising that the pound sterling was at any point and by any bank convertible Into a fixed quantity of gold. It meant that each country that participated to the convertibility of gold and therefore allowed to express current exchanges in a fixed way reducing the risk of trade.
What were pull factors and push factors?
Pull factors= Opportunities to work, Higher wages, Access to land, Open the religion/word views
Push factors= Destitution in the home economy, Prosecution, War, Lack of Opportunity, Lack of social mobility
How did more and financial instability affect international trade during the interwar period?
Both world wars desrupted Trade, And while trade assumed briefly in the 1920s the global meltdown after 1929 cost financial instability with delayed restoration the gold standard and increased competition eroding comparative advantages
What was the impact of the 1929 crisis on global trade?
After the 1929 financial crisis deflation and protectionism surged. The US impose the Smoot Hawley tariff act In 1930 triggering retaliatory tariffs and contracting global trade in a downward spiral on World War II
How did global trade change after 1914?
Before 1914 global trade was larger inter industry (England exporting manufacturers, importing raw materials) But post 1914 industrialisation spread leading to increase competition, loss of comparative advantages and the rise of protectionist policies.
What role did the Smoot-hawley tariff act playing global trade?
The 1930 act imposed high US tariffs prompting retaliatory measures from other countries, deepening global protectionism and accelerating the contraction of world trade during the Great depression
What did John M. Keynes think about self sufficiency?
John M. Keynes believed that self-sufficiency could lead to economic inefficiencies and stifle growth. He argued that economies are more productive and innovative when they engage in international trade and collaboration. Keynes emphasized the importance of interdependence among nations, suggesting that mutual trade relationships can help stimulate economies, create jobs, and balance trade deficits. He maintained that reliance on domestic resources alone limits a country's potential for growth and restricts access to diverse markets and goods that can come from trade.
What were the two reasons for the Marshall plan?
Restoration of export trade markets of the US
West European countries would be prosperous and not fall in the hands of communism
What was the General Agreement on Tariffs and Trade (GATT)?
The General Agreement on Tariffs and Trade (GATT) was a legal agreement aimed at promoting international trade by reducing or eliminating trade barriers such as tariffs and subsidies. Established in 1947, it served as a framework for negotiating trade agreements and was the precursor to the World Trade Organization (WTO).
What four barriers was post for globalisation hindered by?
Political barriers: The Cold War divided the world into blocked limiting East West trade due to embargo and security concerns. The colonisation also led to inward looking trade policies and economic disintegration.
Economic challenge: Developing countries pursued import substitution strategies neglecting export lead growth. Tariffs in non-OECD countries rose dramatically restricting global trade.
Financial stability: The Bretton woods system (1944) Established the IMF and World Bank, Stabilising finances by limiting international capital mobility. Financial globalisation remain low until the 1970s despite strong economic growth.
Migration: From 1950 to 1973 Europe attracted millions of migrant workers from Mediterranean regions to meet Labour demands in heavy industries
How did legalisation influence trade policies in developing countries?
Many countries adopted inward looking policies, imposing high tariffs and focusing on import substitution which hindered export growth and global trade integration.
What is neoliberal globalization?
Neoliberal globalization refers to the economic paradigm that emphasizes free-market capitalism, deregulation of industries, reduction of government intervention, and the expansion of international trade and investment. It advocates for the reduction of tariffs and trade barriers, promoting the idea that open markets lead to economic growth and increased efficiency. Proponents argue that by allowing businesses to operate with minimal government restrictions, it encourages entrepreneurship, innovation, and competition. However, critics contend that neoliberal policies can lead to greater income inequality, undermine public services, and prioritize corporate interests over social welfare. Neoliberal globalization has been characterized by the rise of multinational corporations, financial deregulation, and the globalization of supply chains, impacting local economies and labor markets around the world.
Explain financial deregulation in the 1970s
The 1970s saw the abandonment of the gold standard enabling free capital flow. Do regulation began with the New York Stock Exchange In 1975 followed by London’s Big Bang in 1986 introducing electronic trading and ending traditional trade practices. Financial innovations like derivatives and securityzation transformed banking and investment while hedge funds gained prominence
Explain neoliberal globalisation
Neoliberalism, Driven by the regulation and free trade expanded with political changes like the fall of the Berlin wall and the USSR collapse. Eastern Europe transitioned to market economies often chaotic while China adopted social market economy. The establishment of the WTO in 1995 solidified global trade rules with agreements like the TRIPS standardising intellectual property protections.
Talk about immigration in neoliberalism
High income countries experienced large scale migration contributing significantly to workforce growth in the US and Europe however migration often occurs via unregulated channels with managed labour migration forming only a small fraction of movements
