3.2.1 Global systems and global governance Flashcards
define globalisation
a process by which national economies and societies have become increasingly integrated and interconnected through the global network of trade, communications, transport and immigration
what are the different elements of globalisation?
-economic
-cultural/social
-political
what are the economic elements of globalisation caused by?
-increase in free trade
-growth of TNCs (EU, UN)
-faster, cheaper transport
-global marketing
what are the economic elements of globalisation characterised by?
long distance flows of goods, capital and services, information and market exchanges
what are the cultural/social elements of globalisation caused by?
-migration
global communication networks
-impact of western culture through media
what are the cultural/social elements of globalisation characterised by?
spread of ideas, information and images
what are the political elements of globalisation caused by?
-growth of western democracies and their influence on less economically developed countries
-decline of communist economies
what are the political elements of globalisation characterised by?
the diffusion of government policy and development of market economies in former communist states
how can we measure globalisation?
using the KOF index
when was the KOF index introduced?
2002
what three aspects does the KOF index look at to measure how globalised a country is?
economic, social and political
what percentage of the KOF index is economic aspects?
36%
what percentage of the KOF index is social aspects?
38%
what percentage of the KOF index is political aspects?
26%
how can the economic aspects of the KOF index be calculated?
through economic flows (trade/finance)
how can the social aspects of the KOF index be calculated?
through personal contacts (phone minutes, remittances), information flows (internet use, radios per thousand) and cultural proximity ( number of McDonalds and IKEAs)
how can the political aspects of the KOF index be calculated?
through number of UN peacekeeping missions
what does it mean by dimensions of globalisation?
the characteristics of globalisation
what are the dimensions of globalisation?
-flow of capital, labour, products, services, information
-global marketing
-patterns of production, distribution and consumption
what is the flow of capital?
includes all money that moves between countries
what is the name of the model that traditional flows are shown in?
core-periphery model
what countries are the core countries?
HICs
what countries are the semi-periphery countries?
NEEs
what countries are the periphery countries?
LICs
what do the periphery countries provide the core countries with?
cheap labour and raw materials
what do the core countries provide the periphery countries with?
high profit consumption goods
is labour as free flowing as capital?
no, labour is not as free flowing as capital
what are the flows of labour characterised by?
-rise in international migrants e.g. mainly short distance movements between countries
-people travel further to get to the richer areas e.g. europe attracts migrants from furthest afield
-inter continental migrants tend not to be the poorest or least educated
-
what are the trends in international migration?
-largest flow in the world is between south asia and west asia
- the general trend over the last 25 years to move from Asia to North America and Europe, but also increasingly to the gulf states
where do most of latin americas migrants go to?
north america
where is most of africas migration?
internally
where is most of asias migration?
the largest flows of migration are interregional flows between south and west asia
what is the international movement of products facilitated by?
by the reduction in costs of trade
what things have reduced the costs of trade?
-transaction costs have been reduced by the improvements in flows of data and the ease with which capital can be transferred
-transport and time costs have been reduced by the process of containerisation which has enabled more complex and long distance flows of products
-tariffs which with the encouragement of the World Trade Organisation have generally been reduced in global trade
what are the different levels of services?
high level services and low level services
what are high level services?
they are services to a business such as finance, investment and advertising
what are low level services>
services to consumers such as banking, travel and tourism, customer call centres of communication centres
what are information flows governed by?
the movement of people through migration and by the speed of data and communication transfers
how have flows of information changed in the past few decades?
digitalisation and satellite technology have transformed these flows of inofrmation
what are digital information flows supported by?
-improvements to global telephone networks
-mobile telecommunication technology
-email and the internet
-live media coverage available on a global scale
why are information flows so important?
due to their contribution to the expansion of knowledge intensive goods and services
what happens when a company becomes a global marketeer?
-it views the world as one single market and creates products that fit the various regional market places
-it will usually develop a recognisable brand
what is the ultimate goal of a global marketeer?
to sell the same product, the same way, everywhere which generates economies of scale
how has globalisation influenced labour?
it has created a new international division of labour with two main recognisable groups
what are the two recognisable groups of labour?
-the highly skilled, highly paid, decision making, research and managerial occupations which are largely concentrated in more developed countries
-the unskilled, poorly paid assembly occupations, which have become increasingly located in newly industrialising countries which have lower labour costs
what has happened to manufacturing over the last 40 years?
manufacturing has become decentralised, moving away from the highly developed economies of Western Europe, North America and Japan
what has the global shift in patterns of production from the HDEs to lower wage economies been driven by?
-lower land and labour costs
-incentives offered by governments in the form of tax breaks or special economic zones, have encouraged TNCs to invest and relocate the production side of their business abroad
-the transfer of technology by TNCs has enabled countries in the developing world to increase their productivity
what factors influence the locational decisions made by entrepreneurs of large manufacturing companies?
-the availability of a skilled and educated workforce
-the opportunity to build new plants with the latest and most productive technology
-access to large markets without tariff barriers
-availability of infrastructure including power supply, roads, ports
what is one of the main consequences in this global shift in patterns of production?
deindustrialisation in richer HDEs and a subsequent loss of jobs- outdates production methods and lack of investment have also contributed to the decline of manufacturing
what strategies have governments in HDEs created to attempt to reverse the decline of industry?
-encouraging foreign TNCs to invest in deindustrialised regions by offering incentives such as tax breaks
-encouraging investment in skills and technology to upgrade manufacturing and industry
-adopting more protectionist policies, such as import tariffs, to protect domestic production
what has the global shift in production patterns also caused?
it has caused a political reaction against globalisation, the rise in populist and nationalist movements in developed economies is partially attributed to the decline in standards of living in areas suffering from deindustrialisation
where is product consumption predominantly?
product consumption still lies predominantly in the richer countries of the developed world- products manufactured in emerging NIC economies are largely exported and sold to countries in Europe, North America and Japan
how is the pattern of product consumption changing?
as emerging NICs develop, their populations are becoming more affluent and are starting to demand similar products to those being exported from their own countries
how are different patterns of distribution and consumption likely to appear in the future?
with a marked transition from west to east as the centre of gravity economically shifts
what do forecasts suggest will happen to the pattern of distribution and consumption?
-the USA, Western Europe, Japan and China will continue to be the best destination for exporters
-as Asia becomes more competitive a growing share of the regions exports will be to other countries in Asia
-Chinas ‘Belt and Road Initiative’ will open up access and diversify its exports to emerging markets
-finance corporations from HDEs have the potential to benefit from the expansion in financial services in the Asia-Pacific region, but will face increasing competition from Chinese, Singaporean, and Korean banks and insurance companies
what company is the worlds biggest retailer and the worlds largest company by revenue?
Walmart
who was Walmart founded by?
Sam Walton
what was the founding concept at the core of Walmart?
‘low price always’
when and where did the first Walmart store open?
in 1962 in Rogers, Arkansas
how many Walmart stores are there worldwide?
over 11,000 stores
when did Walmart become an international company?
in 1991
how many Walmart stores are there outside the USA?
over 6000 stores in 26 countries
how has Walmart been able to thrive overseas?
it has adapted to local conditions
how have the Walmart’s in China had to change?
-chinese customers require leafy vegetables so the vegetable section is double the size of that in American walmarts
-in the Shenzen Walmartian province it is possible to purchase chicken feet and stewed pork ribs, products not normally found in American Walmart’s
where are Chinese Walmart’s products sourced from? why?
many products have to be sourced locally partly because of government regulation, about 85% of products sold in Walmart China come from some 14,000 Chinese suppliers
how do German Walmarts differ from American Walmarts?
-in the USA, Walmart customers are met by friendly ‘greeters’ in an attempt to personalise the shopping experience
-this did not go down well in Germany where the greeters were regarded as superficial- some stores removed them altogether
-one new development that took place in Germany was the introduction of ‘singles’ shopping nights on Fridays which increased profits by 25%
Who is credited with the development of the modern shipping container?
Malcolm McLean
McLean was an American truck driver who sought to improve efficiency in cargo transport.
What was one of the primary impacts of containerisation on international trade?
Reduced expenses and increased speed of trade
Containerisation allowed for faster loading/unloading and more efficient transport of goods.
What does TEU stand for?
Twenty Foot Equivalent Unit
TEU is a standard measurement used to describe the capacity of container ships.
What significant change did Malcolm McLean introduce in 1956?
The first container vessel, Ideal X
This vessel transported 58 containers from Newark, New Jersey to Houston, Texas.
Fill in the blank: The liberalisation of world trade was facilitated by the formation of the _______.
World Trade Organisation
What effect did containerisation have on port cities?
Changed port infrastructure and reduced dock labor needs
Many dock workers had to find new employment as containerisation reduced the number of workers needed.
True or False: Felixstowe is the largest container port in the UK by volume.
True
Felixstowe handles over 2 million containers a year.
What is the maximum capacity of the largest container ships known as ULCVs?
Over 15,000 TEUs
The largest ships can carry even more, such as Maersk Lines’ ‘Triple E’ vessels.
What are Post-Panamax ships?
Ships too large to transit the Panama Canal
These ships exceed the canal’s size restrictions, which were expanded in 2016.
How has globalisation been impacted by containerisation?
Facilitated international trade and supply chain development
Containerisation enabled quicker and more reliable shipping, influencing global trade dynamics.
List the top three busiest container ports in the world as of 2018.
- Shanghai
- Singapore
- Shenzhen
What is a significant environmental concern related to container ships?
Greenhouse gas emissions from bunker fuel
Bunker fuel is highly polluting and contributes to climate change.
Fill in the blank: The world’s merchant fleet contributes to _______ emissions.
greenhouse gas
What was the estimated volume of container traffic originating from China in 2017?
213 million TEUs
This accounted for nearly a third of all container traffic.
What is the significance of the London Gateway port?
It provides a multi-modal hub for international trade
Opened in 2013, it has excellent accessibility and significant capacity.
What are logistic parks, and why have they developed?
Areas close to container ports for efficient supply chain management
They were developed to accommodate the growing complexity of international supply chains.
True or False: The shipping container has only affected the economy and not other aspects like culture and politics.
False
Globalisation has affected economies, environments, politics, and cultures.
What is London Gateway known for?
A multi-modal hub for international trade
London Gateway has been developed with warehouses, new roads, and railways to enhance accessibility.
What percentage of London Gateway port traffic is expected to go by rail?
More than 30%
This highlights the significance of rail transport in the logistics operations at London Gateway.
What is the size of London Gateway’s logistics park?
9 million square feet
It is noted as Europe’s largest consumer market logistics park.
What major development has recently occurred at Liverpool’s container port?
Expansion called Liverpool2
This expansion allows the port to accommodate ships up to 13,500 TEU capacity.
How many shipping containers are estimated to be in the world?
Around 17 million
This statistic reflects the scale of global shipping operations.
How many containers are lost at sea each year?
About 1,400
This indicates the risks associated with maritime transport.
How many trips do containers make each year?
Over 200 million
This number emphasizes the high volume of container shipping worldwide.
How many ocean-going cargo ships are there approximately?
90,000
This figure illustrates the extensive fleet involved in global shipping.
What is the expected operational schedule for a typical cargo ship?
24 hours a day for about 280 days a year
This highlights the continuous nature of shipping operations.
What is the horsepower of the world’s biggest container ships?
109,000 horsepower
This showcases the immense power required for large-scale shipping.
What percentage of the world’s nitrogen oxide (NOx) pollution is attributed to shipping?
18-30%
This statistic highlights shipping’s significant role in air pollution.
What is the contribution of shipping to global sulphur oxide (SOx) pollution?
9%
This reflects the environmental impact of the shipping industry.
How much sulphur oxide (SOx) pollution can one large ship generate in a year?
About 5,000 tonnes
This figure underscores the pollution potential of large vessels.
What percentage of ship emissions occur within 400km of land?
70%
This statistic indicates the proximity of shipping pollution to populated areas.
In which hemisphere is 85% of all ship pollution found?
Northern hemisphere
This points to the geographical focus of shipping emissions.
What is the contribution of shipping to overall climate change emissions?
3.5% to 4%
This highlights the shipping sector’s role in climate change.
What is a flag of convenience?
Registering ships in a country different from that of the owners
This practice is often used to reduce costs and evade regulations.
Which countries have the largest merchant fleets?
Panama, Liberia, and the Marshall Islands
These nations account for nearly 40% of the world’s total merchant fleet.
Why do companies register ships under flags of convenience?
To reduce operating costs or avoid regulations
This can lead to lax environmental standards.
what does it mean by factors of globalisation?
the causes of globalisation
what are the factors of globalisation?
-transport
-communications
-trade agreements
-financial
-security
-management and information systems
how have communications technologies caused globalisation?
there are few barriers to prevent the sharing of information globally
how have links between countries grown significantly due to communications technologies?
as a result of:
-the development of computer technology
-the advent of the internet (enabling speedy 24/7 global communication)
-the use of mobile phones
-computer control and robotics technologies have integrated manufacturing operations
-computerised logistics systems have evolved to support supply chain distribution
how have financial systems caused globalisation?
the world became increasingly financially integrated due to financial deregulation
what are the ways in which financial systems have improved globalisation?
-deregulation made it easier to move finance across borders, making it easier to trade with other countries
-the global financial system provides a framework that facilitates flows of capital
-integration of developing economies into the GFS has helped to reshape international trade
-high speed electronic transmission systems and global exchange connectivity means that transactions between exporters and importers can be completed securely
how have transport systems caused globalisation?
products and commodities can be shipped more quickly and in large quantities as a result of integrating technologies
how have transport systems helped to increase globalisation?
-increased size of aircraft
-growth of low cost airlines
-the use of standardised containers
-handling and distribution efficiencies
-high speed rail networks
when are dry ports used in transport systems?
in some countries where distances to sea terminals are long
how have security systems caused globalisation?
as a result of globalisation there has been reduced barriers and easier travel which improves trade but produces security risks
what are some security threats caused by the change in security systems due to increasing globalisation?
-terrorism
-food imports (ensuring they meet safety standards)
-biosecurity (preventing the spread of harmful organisms)
-cyber crime (preventing breaches of secure information)
-supply chains (ensuring products are authentic, safe)
what are some initiatives in place to decrease security issues caused by globalisation?
-Interpol police work together globally
-counter terrorism agencies
-world customs organisation
how have management and information systems caused globalisation?
globalisation is influenced by how large companies operate and produce and distribute and deliver services worldwide
what have management and information systems lead to?
-higher order business activities (such as research and development) being based at corporate headquarters-lower order activities (such as production and distribution) being located at low production cost locations
-global corporations focusing on key strategic activities
-a rapid growth of the logistics and distribution solutions industry
how have trade agreements caused globalisation?
they are formal agreements between two or more countries that removes trade barriers between those in agreement
what are the advantages to nations grouping together as trade entities?
-improving global peace and reducing conflict
-increasing global trade and economic cooperation
-encouraging social and economic development in lower income countries
what are the advantages of trade group agreements?
-employment
-exchange rates
-social (better healthcare)
-political (promotes human rights)
-technology
-international status
-investment
-economies of scale
what are the disadvantages of trade group agreements?
-dependence
-legislation
-loss of sovereignty
-trade diversion (tariffs)
-loss of financial control
-over exploitation of resources
-competing employment
what is interdependence?
the theory that nations depend on each other economically, politically, socially and environmentally
why are many societies interdependent?
as they rely heavily on the decisions of other countries, meaning they would struggle and be detrimentally affected without them
what are some examples of social interdependence?
-migration has created diasporas that countries are reliant on
-leisure and cultural activities have come from other countries
what are some examples of economic interdependence?
-flows of labour, products and services from elsewhere
-causes economies to grow and the country to develop
what are some examples of political interdependence?
-international issues are tackled by countries working together
-countries intervene where there is political unrest
what are some examples of environmental interdependence?
-international issues are tackled by countries working together
-environmental impacts are global
what are the three categories that make up the human development index?
-health
-wealth
-education
what is the Brandt Line?
The concept of a gap between the Global North and the Global South in terms of development and wealth. Classifying countries. In the 1980s, the Brandt Line was developed as a way of showing the how the world was geographically split into relatively richer and poorer nations.
how can we tell if there’s a significant correlation?
-spearman rank correlation coefficient
-using spearman rank we can determine whether or not the data is statistically significant
what number is used to demonstrate a perfect negative correlation?
-1
what number is used to demonstrate a perfect positive correlation?
+1
what are the issues associated with interdependence?
-unequal flows in global systems
-inequality issues
-geopolitical issues
what are the different unequal flows in global systems?
-effect of globalisation on the international labour market
-outsourcing
what are the different inequality issues in global systems?
-inequalities between countries
-inequalities within countries
what are the positives of the effect globalisation has had on the international market?
-reduced unemployment
-reduced geographical inequality between workers
-addresses important skill and labour shortages
-some workers return to their country of origin with new skills
what are the negatives of the effect globalisation has had on the international market?
-countries find it difficult to retain their best talent
-loss of skilled workers
-causes unemployment in more developed countries
-greater risk of disease pandemics
what is outsourcing?
taking manufacturing or service jobs from high wage economies and having them undertaken by a sub-contracting organisation in a lower wage economy
what can outsourcing often lead to?
it provides jobs and investment in one country but often takes them away from another country
what are the consequences of outsourcing for the original country?
-loss of jobs
-de industrialisation
-structural unemployment (the skill set of the local workers is no longer compatible)
what are the two measures of inequality to consider?
-the difference between richer countries and low income countries
-the inequality incomes that exists within each country
is globalisation reducing or increasing global inequality?
globalisation is reducing global inequality, however it may be increasing inequality within countries as richer members of society cope better
describe the inequalities between countries
as communication increases developing countries are closing the gap with their rich world counterparts
describe the inequalities within countries
-the majority of people live in countries where income disparities are larger than they were a generation ago
-this general increase in inequality doesn’t just apply to developing regions- many countries including Britain have seen a rise in the share of national income taken by the top one per cent
-globally the numbers of wealthy people have increased significantly and this concentration of wealth at the very top is part of a much broader rise in disparities
what are the two explanations for the rise in numbers of wealthy people globally?
-outsourcing (TNCs average wages are 40% higher than wages paid by local firms, unskilled workers tend not to have such opportunities)
-investment
how has globalisation impacted geopolitical issues?
-a sense of the world as one community makes it easier for governments to work together on common goals
-there are many causes of conflict though, and shortages of food, water and energy resources brought about by global growth may lead to conflict between nations in some regions
-some groups may feel a sense of injustice or ideological opposition to the richer nations driving the process, this may give rise to civil conflict
-trade can also be used as a ‘weapon’ in conflict, either between nations or between trade blocs
what is used to represent the level of inequality within a country?
the Gini Index and Lorenz Curve
what does the Lorenz curve show?
the spread of household income plotted on a curve
describe how the Lorenz curve works
-45°= equal
-concave= inequal
describe how the Gini index works
- between 0 and 1
-often written as a percentage - 1 (100%) = very inequal
- 0 (0%)= equal
how do you calculate the Gini Index
area A / area A + area B
draw and label an example of the Lorenz curve and Gini index
see paper flashcard
what percentage of adults in the world today are literate?
80%
What are the main trading entities mentioned?
USA and EU
The USA is part of NAFTA, while China is part of APEC.
What has caused tensions between trading entities?
Desire for the best deals for citizens, workers, and businesses
This often leads to conflict in trade negotiations.
What trade war escalated between the EU and the USA?
Banana trade war
The USA backed its home-based TNCs against the EU.
How has the USA traditionally approached trade agreements?
Protectionist economy
The USA has lagged in entering formal trade agreements.
What are the TTP and TIP agreements seen as a response to?
Emerging threat of China as an economic superpower
These agreements are strategic moves by the USA.
What is the Trans-Pacific Partnership?
A free trade agreement being negotiated by twelve countries
Countries include USA, Australia, Japan, and others.
What criticism has the Trans-Pacific Partnership faced?
Lack of transparency in negotiations
It is expected to be a significant trading agreement globally.
What is the aim of the Transatlantic Trade and Investment Partnership?
Reduce regulatory barriers to trade for big business
Concerns include impacts on food safety, environmental legislation, and more.
What major concern do opponents of TTIP raise?
It may undermine democracy and social provision
Critics argue it could threaten public services and consumer protection.
What is the G20 group?
An international forum for 20 major economies
Established in 1999 to represent developing economies’ interests.
What is the purpose of the Group of 77 and China?
Represent interests of the world’s poorest countries
It aims to help development and reduce poverty and disease.
What is one of China’s motivations in the Group of 77?
Increase its influence in world affairs
China shares a common interest with the poorest countries in reducing poverty.
What has fueled China’s economic growth?
Expansion of manufacturing of consumer goods for western countries
This growth has been significant in recent decades.
How do Chinese entrepreneurs view opportunities in Africa?
As a chance for investing in resource development
This includes helping poorer countries develop infrastructure.
What is China’s role in Africa?
Extracting resources and investing in infrastructure
This dual role aims to benefit both China and African countries.
what are the issues associated with interdependence?
-unequal flows of people
-unequal flows of money
-unequal flows of ideas
-unequal flows of technology
how are the unequal flows of money due to interdependence across the world apparent?
through remittances, loans, FDI, growth of TNCs, leakages and international aid
how are the unequal flows of technology due to interdependence across the world apparent?
through data flows, technology manufacture and technology transfer
define geopolitics
the influence of such factors as geography, economics and demography on the politics, especially the foreign policy of state
what do unequal power relations enable some states to do?
unequal power relations enable some states to drive global systems to their own advantage and to directly influence geopolitical events, while others are only able to respond or resist in a more constrained way
how do countries gain super power status?
through economic, military, cultural and technological dominance over many countries
what are the different types of power that nations can use to gain super power status?
-soft power
-hard power
what is soft power?
cultural influence and diplomacy
what is hard power?
use of military force, economic and trade policies
what does a combination of hard and soft power lead to?
the development of a smart power
who is recognised as todays super power?
the US
what countries are competing with the US for recognition as a super power?
China, Russia, India, Qatar and the European Union
what are some examples of how the interdependence of the worlds countries promoted stability, growth and development for people?
-migrant workers become an important part of the host country as they become intertwined in work forces and take jobs that must be done
-opening factories in LICs increases employment
-aid and remittances help to improve quality of life
-states that are home to large diaspora populations often have strong geopolitical ties with the diaspora’s country origin
-FDI can improve quality of life as it provides an income that is usually higher than employment in LICs
what are some examples of how the interdependence of the worlds countries promoted stability, growth and development for money?
-workers send remittances back to their home country, helping their home economy to grow
-free trade has increased globally due to deregulation, allowing global markets to thrive and decreasing the risk of conflicts
what are some examples of how the interdependence of the worlds countries promoted stability, growth and development for ideas?
-countries with successful strategies can educate low income countries on how to create economic growth, meaning LIC can implement these strategies
-high income countries have introduced ideas of deregulation to developing countries- reducing state ownership has had benefits such as lower prices of products
what are some examples of how the interdependence of the worlds countries promoted stability, growth and development for technology?
-economies of LICs can develop through technology investments and opening up factories
what are some examples of how the interdependence of the worlds countries caused conflicts, inequalities and injustices for people?
-migrant workers are ‘unwanted’ by others
-workers can become dependent on the higher wages, meaning they must subject themselves to dangerous situations
-employees that manufacture consumer technology receive so little compared with what they are sold for
-many countries experiencing large flows of people puts pressure on services such as healthcare
-skilled workers leave to work in HICs, meaning unskilled people are left to keep the economy running
-as many migrants are more desperate for work than nationals they may be vulnerable to exploitation, such as poor working conditions
what are some examples of how the interdependence of the worlds countries caused conflicts, inequalities and injustices for money?
-deregulation is occurring too quickly for low income countries to keep up and this is not allowing the full benefits of the growth of the private sector to be achieved
-companies in LICs operating from HICs can create dependence for workers
-host countries may become dependent on the migrant workers
-companies can pressure governments to alleviate taxes so that TNCs will invest
-the UK entered a recession in 2009, many migrant workers in construction lost their jobs and stopper sending remittances home
-TNCs have been criticised for profiting too much
what are some examples of how the interdependence of the worlds countries caused conflicts, inequalities and injustices for ideas?
-LICs may feel forced to keep up with ideas of wealthier countries, even if the ideas are not the most beneficial to these countries
-deregulation may lead to more relaxed social and environmental laws in LICs, causing social injustice and environmental damage
what are some examples of how the interdependence of the worlds countries caused conflicts, inequalities and injustices for technology?
-a lot of consumer technology is manufactures in lower income countries, only to be distributed to HICs
-HICs have a technological advantage over LICs because they can afford to buy technology, people in LICs cannot afford to buy technology that will advance their economy so are left behind
-companies investing technology into LICs means that HIC manufacturing jobs are often lost
define free trade
trade between countries, free from governmental restrictions or duties
define trade
countries rely on other countries to supply their needs and also to buy their exported products
define tariff
a tax on imports
define import licence
a document issued by a national government authorising the import of certain goods from a specific source
define subsidies
these are grants or allowances usually awarded to domestic producers to reduce their costs and make them more competitive against imported goods
define sanctions
these are restrictions on exports implemented for political reasons by countries and international organisations to maintain international peace and scrutiny
define embargoes
these involve the partial or complete prohibition of commerce and trade with a particular country- they are usually put into practice for political reasons
define regulatory restrictions
these are restrictions placed on imports based on obstacles such as the quality standards of goods, for example the EU attempts to put restrictions on the import of goods knowingly produced using child labour
define comparative advantage
countries specialise in producing and exporting goods that they can produce more efficiently at a lower cost
define proximity
countries are more likely to trade with their neighbours, partly because this reduced transport costs but also for cultural, historic or linguistic reasons
define agglomeration
some industries tend to cluster in geographical areas as sharing of regional skills and specialist information saves costs
define market strength
exporters are drawn to larger, more affluent and growing markets where there is potential to increase volume and value of sales
define geopolitical relationships
political alliances are important in determining which countries co-operate and trade with each other; conversely conflict may lead to sanctions or embargoes
what is the free market?
involves a push to remove existing barriers to international trade
what are trade agreements?
Trade agreements set out the rules for buying and selling goods and services between 2 or more countries
what is the WTO?
the World Trade Organization (WTO) is the only international organization dealing with the global rules of trade, its main goal is to improve the welfare of people around the world by ensuring that trade flows as smoothly and freely as possible
what are the different barriers to trade?
-tariff
-import licence
-subsidies
-sanctions
-embargoes
-regulatory restrictions
what are the factors that influence the volume and patterns of trade?
-comparative advantage
-proximity
-agglomeration
-market strength
-geopolitical relationships
how has international trade changed over the years?
International trade is occurring more than ever before. Globally, the amount of exports has been steadily increasing. The only time trade has decreased was during the Global Financial Crisis. World exports of manufactured goods has increased from US $8 trillion in 2006 to US $11 trillion in 2016.
why has international trade been increasing?
because reaching trade agreements has reduced average trade tariffs on most goods
how did the COVID 19 pandemic impact trade?
it caused a major fall in the volume of trade which made it difficult to predict the recovery rate during the next years
what did the Global Financial Crisis of 2008-2009 mean for international trade?
multinational trade agreements on a global scale have been difficult to achieve
why has the pattern of global trade changed in recent years?
the greater integration of economies- this is partly explained by the increasing complexity of global supply chains for many manufactured products
what continents dominate trade?
mainly North America, Europe and the Asia-Pacific region
what are some general global patterns of trade?
-North America has a trade deficit with all other regions whereas Asia-Pacific has a surplus flow of trade
-intra regional trade is particularly strong within Europe and within the Asia-Pacific region; it is also strong in North America but to a lesser extent
-in Latin America and sub-Saharan Africa, there is less intra regional trade as most trade involves imports and exports coming into or going out of these regions
-Latin America has the strongest trade flows with North America
-inter regional trade is increasing between the Asia Pacific region, sub-Saharan Africa and Latin America
-the Asia Pacific region is the fastest growing trading region and China is now the worlds largest trader, surpassing the US
why why is FDI an important source of funding?
FDI is an important source of funding for development in all countries, especially for the least developed economies wanting to grow- it is difficult to ‘jumpstart’ economic growth without an injection of capital
what are the general global investment patterns?
-developing countries receive almost twice as much investment as they initiate
-investment from North America has slumped
-the Asia Pacific region accounts for 40% of investment flows
-eight of the top 20 recipients of investment were developing economies
-the largest investment investors were Japan, China and France
what are the attractions that pull in investment?
-manufacturing industries
-natural resource development
-financial business services
-large and accessible consumer markets
-lower business taxes
how does natural resource development attract investment?
attracts investment from mining corporations
how do financial business services attract investment?
attract investment in Singapore and Hong Kong
how do large and accessible consumer markets attract investment?
attract both manufacturers and service providers
what are trade blocs?
an arrangement among a group of nations to allow free trade between member countries but to impose tariffs on other countries that may wish to trade with them
what are the different types of trading agreements?
-free trade area
-customs union
-common market
-economic/monetary union
what is a free trade area?
trade barriers between the member countries are eliminated but each member country maintains its own tariffs against non member countries
what is a customs union?
the same as a free trade area but with the addition that member countries impose a common external tariff against non member countries outside the bloc
what is a common market?
the same as a customs union but with additional agreement to allow the free flow of goods, services, capital and eventually labour between the countries without any restrictions
what is an economic/monetary union?
economic union can take different forms, but members will operate as a common market with the additional integration of a common tax system or currency
what’s an example of a free trade area?
North American Free Trade Area (NAFTA)
what’s an example of a customs union?
CARICOM
what’s an example of a common market?
EU
what’s an example of an economic/monetary union?
EU
what does the OPEC stand for and why was it made?
Organisation of the Petroleum Exporting Countries, it was made to control the price of oil
what are the advantages of being in a trading group agreement?
-gives member countries the opportunity to increase production and trade
-economies of scale
-attracts investment
-technology
-international status (can compete on a global level with other trading groups, greater representation in world affairs and greater economic leverage as part of a group to negotiate trade deals with other groups)
-employment
-developing a common currency prevents exchange rate fluctuations
-support for regions and sectors (remote or declining industrial regions and for sectors of the economy)
-raising standards in healthcare and education
-promoting democracy and human rights
-regional cooperation such as pooling resources in response to natural disasters
what are the disadvantages of being in a trading group agreement?
-member countries are forced to purchase from within the group as the price becomes artificially cheaper
-loss of sovereignty
-pressure to adopt central legislation
-freedom of movement of labour increases competition for work
-some loss of financial control to a central authority
-some members of the group become overly dependent on others
-certain sectors of the economy may be damaged by having to share its resources
What is a trade agreement?
A formal agreement between two or more countries to remove trade barriers and promote economic cooperation.
Name four types of trade groupings.
Free trade areas, customs unions, common markets, economic/monetary unions.
What type of union is the European Union (EU)?
An economic and political union; however, not all members are part of its monetary union (Eurozone).
Which country is part of the EU but not the Eurozone?
Denmark.
What is UEMOA, and which larger group is it part of?
UEMOA is a West African trade group that is part of ECOWAS.
What is OPEC’s main focus?
The global trade of oil.
What is APEC known for?
Loose-knit cooperation with potential for future trade agreements.
List three global benefits of trade agreements.
-Improved peace and security
-enhanced trade and economic cooperation
-support for social/economic development in lower-income nations.
What is Brexit?
The UK’s decision to leave the EU following a 2016 referendum.
When did the UK officially leave the EU?
January 2020.
When did the UK’s new trade agreement with the EU take effect?
2021.
define fair trade
a social movement whose goal is to help producers in LDEs achieve better trading conditions- the movement focuses mainly on agricultural based products
why is fair trade a thing?
-fair trade supporters argue that those producing the commodities do not get an equitable deal from the organisations they supply their produce to
-buyers such as TNCs are able to force down the prices of products
why are TNCs able to force down the prices of their products?
because individual suppliers: -have little market influence
-are extremely reliant on the income from their goods
what does the fair trade movement advocate for?
advocates the payment of higher prices to producers, as well as helping them to achieve improved social and environmental standards
how do fair trade organisations work?
they assist producers to form into co-operatives giving them more influence in governing market conditions and the power to negotiate better deals with buyers
what is the main goal of free trade compared to the main goal of fair trade?
-the main goal of free trade is to increase nations economic growth
-the main goal of fair trade is to empower marginalised people and improve their quality of lives
what are the primary benefits of free trade compared to the primary benefits of fair trade?
-the primary benefits of free trade are multinational corporations, powerful business interests
-the primary benefits of fair trade are vulnerable farmers, artisans and workers in less industrialised countries
what are the major actions of free trade compared to the major actions of fair trade?
-the major actions of free trade are countries lower tariffs, quotas, labour and environmental standards
-the major actions of fair trade are businesses offer producers favourable financing, long term relationships, minimum prices and higher labour and environmental standards
what are the drivers of the current pattern of trade?
-comparative advantage
-geopolitical relationships
-agglomeration
-market size and strength
-proximity
what are the factors that affect the volume of international trade?
-technologies
-transport costs
-security
-border controls
-communication systems
-management and information systems
-trading relationships
-trading blocs
-wealth, economic development
-geopolitical relationships
-government policies, protectionism
-global financial stability/recessions
what does it mean by differential access to markets?
countries have different access to markets, access to markets refers to a nation or countries ability to trade within the international market
what are the factors that affect a countries access to markets?
-technologies
-transport costs
-security
-border controls
-communication systems
-management and information systems
-trading relationships
-trading blocs
-wealth, economic development
-geopolitical relationships
-government policies, protectionism
-global financial stability/recessions
-level of development e.g. trade agreements
how can difference in wealth impact access to markets?
wealthier economic generally have better access to markets as:
-they can afford to pay higher tariffs on exported goods
-they can increase access by investing into international markets
-HDEs often group together to form trading blocs to allow free trade with each other but impose barriers on countries outside the union
IN CONTRAST:
-LDEs struggle to pay high tariffs or invest in international markets
-LDEs have difficulties entering trade agreements with more economically developed countries
how can trade agreements impact access to markets?
positives of being in a trade agreement:
-improves access to the markets of other countries within that bloc which is beneficial for LICs that may be able to trade freely at lower prices
-being part of a trading group gives more leverage when trying to gain access to other markets
-agreements between two or more trading groups can open up wider markets, especially for LDEs
negatives of being in a trade agreement:
-it restricts a countries ability to negotiate new deals and expand trade beyond members of that bloc
negatives of being left out of a trade agreement:
-reinforces a position of isolation and having to overcome trade barriers to gain access
what is the economic and social impact of not having access to markets?
-limited revenue from exports and business taxes means lack of money for investment or development
-poor access to markets deters international investment
-balance of payment problems will increase debt and restrict economic growth
-limited investment, growth and development will cause unemployment and poverty
-there is a limited range and a lack of affordability of imported foods for consumers
-a lack of ability to trade can even threaten food or energy security
what can be done to combat differential access to markets?
Special and differential treatment agreements are put in place by the WTO to help specifically developing markets with poor access to markets. These countries receive special treatment such as reduced tariffs and taxes, priority in trading etc. Overall, SDTs aim to develop the least economically developed countries access to markets.
why has special differential treatment caused issues?
-richer nations are concerned that non reciprocal preferential trading agreements cause unfair trade s many emerging economies still have ‘developing country’ status at the WTO, HDEs fear that this will result in cheap imports flooding markets and undermining their own industrial base
-the agreements are difficult to apply in a fair or standardised manner and the lack of reciprocity in the agreements has deterred some developed countries from participation
what is a TNC?
TNCs are companies that operate in at least two countries, with a headquarters based in one country but with business operations usually in a number of others.
why does a TNC operate in more than one country?
- to escape trade tariffs
- to find the lowest cost location for their production
- to take advantage of foreign exchange rates that make exports cheaper
- to reach international markets more effectively
- to exploit mineral or other resources available in other countries
what are the characteristics of TNCs?
-maximising global economies of scale by organising production to reduce costs
-sourcing raw materials or components at the lowest cost
-controlling key supply chains
-control of processing at each stage of production
-branding of products/services so they are easily recognisable
what is spatial organisation in TNCs?
-traditionally the company headquarters are based in a major city in the home country, most TNCs have subsidiary headquarters in each continent, or in countries where their main operations are based
-in order to maintain their position competitively they engage in research and development which are often located near to centres of high education to take advantage of graduate labour market
why are offshoring and outsourcing used by TNCs?
to organise production or support services costs more effectively
what is offshoring?
relocating a part of the organisation to an overseas location to take advantage of lower costs
what is outsourcing?
involve subcontracting part of the business operation to another company usually where costs are lower
describe the production of TNCs in the primary sector
-production will be based wherever there are unexploited resources
-this tends to be in developing countries as reserves in more developed countries have largely been depleted
-however, a combination of rising world prices and new technologies can make access to new reserves of raw materials viable in the home country
describe the production of TNCs in the secondary sector
-production operations have largely been located in the manufacturing regions of developing countries
-these areas attract TNCs because: labour costs are lower, there is investment in education which makes it easier to train workers, the work ethic means workers are willing to work long hours, there may be government incentives such as tax free breaks
