4.1 - globalisation Flashcards
GDP
- gross domestic product
- total amount of goods and services produced by all businesses in an economy in a year
economy
state of a region or country in terms of production and consumption of goods and services and the supply of money
BRIC economies
brazil
russia
india
china
south africa
importance of BRIC economies
- global influence and power
- growing economic influence
- china is the biggest economy
- cultural influence
- geopolitical influence
MINT economies
mexico
indonesia
nigeria
turkey
importance of MINT economies
- rapid economic growth attracts investors
- incomes increasing
- middle classes expanding
- increasing consumer spending on domestic goods and imports
- risky markets in terms of political stability
implications of economic growth for individuals
- rising incomes
- rising consumption and standard of living
- greater choice of products and services
- greater employment opportunities
- improvements in health and education long term ( due to paying more tax )
implications of economic growth for businesses
- rising demand/consumption = higher revenue and profit for domestic producers
- competition increases and overseas investors attracted
indicators of growth
- GDP
- literacy
- health
- human development index (HDI)
imports
bringing in goods from other countries
benefits of imports
- wider range of goods
- increases competition = drives down prices
- necessities such as energy and food
- components in production for UK businesses
risks of imports
- illegal goods
- competition for domestic businesses
- pollution
- tariffs
- transport
- over-reliance
- money flowing out of country
exports
countries trading with eachother
benefits of exports
- increases sales revenue for uk businesses
- increases employment for uk businesses
- increases gdp and incomes
- improves business competitiveness
- potential for economies of scale
- diversification of consumer markets
- enhanced innovation and acquisition of new skills
- boosting the business profile and brand
risks of exports
- taxes and tariffs
- impacts of exchange rates
- packaging and transport
- copyright
- payment methods
- legislation compliance
specialisation
when a business concentrates on a product or task and in many cases means producing only a small number of products
competitive advantage
a sustainable advantage over the competitors in the long term, gained by offering consumers greater value
benefits of specialisation
- increased productivity and output
- increased economies of scale
- improved competitive advantage
- increased sales and exports
disadvantages of specialisation
- lack of diversification
- does not spread risk
- competition from lower cost countries
- diseconomies of scale
foreign direct investment (FDI)
investing by setting up operations or buying assets in businesses in another country
globalisation
the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange
advantages of globalisation
- access to new markets
- spread of knowledge and technology
- promotes economic growth
disadvantages of globalisation
- increased competition
- exploitation of labour and resources
- imbalanced trade
- domestic job loss
trade liberalisation
the process by which international trade is made easier through the relaxation of tariffs and barriers
tariffs
taxes charged on the import of goods from foreign countries
trade barriers
something that slows down or stops a business from exporting to an overseas market
GATT
- 1947
- general agreement on tariffs and trade
- raised living standards = allowed developing countries to export goods to more indutrialised ones
WTO
- world trade organisation
- replaced GATT in 1994
- reduces barriers to trade and to ensure countries keep to agreements they’ve made
why might tariffs be imposed?
- governments want to protect domestic businesses
- stop imports that compete with state monopolies
advantages of trade liberalisation
- bigger markets
- increased competition
- wider range and better quality goods and services
- more employment
- higher incomes
disadvantages of trade liberalisation
- small firms suffer
- employment may be temporary
- environmental issues
G7
- seven major advanced economies
canada, france, germany, italy, japan, uk and usa - make global decisions on trade
- discuss global issues such as climate change, health issues and trade
how has changing communication caused an increase in globalisation
- access to markets and suppliers is easier and quicker
- communication and trade via the internet
how does FDi contribute to increased globalisation?
businesses outside of important market trading blocs will invest in a business or set up production in the trading bloc to get around tariffs
advantages of tariffs
- produce revenue on goods brought into the country
- opening point for negotiations between countries
- support a nation’s political goals
disadvantages of tariffs
- antagonizes existing issues between governments
- triggers escalating trade conflicts
- can lead to shortages by discouraging a country from exporting
import quota
time-bound restrictions governments impose on trade
why are quotas imposed?
- designed to keep prices from getting too high or too low
- limit production of goods
advantages of quotas
- encourages new businesses to start up in the industry
- easy to change
- reduces unemployment levels
disadvantages of quotas
- limits the supply of products
- generates tension between trading partners
- domestic firms can become more inefficient
government legislation
set of rules and regulations imposed by the government that a business has to follow
advantages of government legislation
- able to keep employees safe within the workplace
- keeps employees paid a fair wage for their jobs
- means employees can be correctly trained
disadvantages of government legislation
- extra costs for the business (minimum wage)
- health and safety training is an extra cost
- prosecution if laws are not followed
domestic subsidies
payments to encourage domestic production by lowering their production costs and improve competitiveness
advantages of domestic subsidies
- promotes growth
- creates and sustains growth
- provides essential services and goods
- address market failures
disadvantages of domestic subsidies
- can strain government budgets
- industries can become reliant on government subsidies
methods of protectionism
- import licensing = governments grant importers the license to import goods
- exchange controls = limiting currencies that can move between countries
- intellectual property laws = protecting domestic products and ideas
- technical barriers to trade = increase compliance costs and impose monitoring costs on export agencies
trade bloc
group of nations that have reached a set of special agreements regarding their economic relationships with each other
free trade area (FTA)
no tariffs or quotas on trade in goods between member countries but each country can set its own tariffs or quotas on goods from non-members
customs union (CU)
no tariffs on goods between members but there is a common external tariff which means that all members impose the same level of tariffs on non-member countries
common (or single) market
- involves a custom union and free trade in services
- a common set of regulations and standards
- free movement of labor and capital amongst member countries
monetary (or currency) union
- two or more countries share the same currency
ASEAN (association of southeast asian nation)
- started in 1967 by thailand, malaysia and singapore
- expanded several times
- negotiated a free trade agreement among member states
- customs union = common external tariff
- working towards a common market
- 600 million people in the joint marketplace
countries in ASEAN
thailand, phillipennes, myanmar, vietnam, indonesia, malaysia, laos, cambodia, brunei, singapore
regional comprehensive economic partnership
- made up of 10 southeast asian countries and australia, new zealand, china, japan and south korea
- largest trading block
- account for 29% of global gross domestic product
- india was initially part of it but has since pulled out
- one of the first multiliteral trade agreements signed by china
USMC (previously NAFTA) trading bloc
- united states, mexico, canada agreement
- founded in 1992
- new agreement 1st of july 2020
- no import tariffs = less expensive products
- some external tariffs set which are common
expansion of trading blocs
the process of more countries joining an existing trading bloc
benefits to businesses of expanding trading blocs
- freedom to trade
- enlarged market
- protectionism from international competition outside of the bloc
- freedom of movement of people and capital-
drawbacks to businesses of expanding trading blocs
- increase in competition
- dominance of developed countries in global trading
- can kill off smaller domestic businesses in developing nations
- reduced national soveirgnity
