4.1.1: Globalisation

Question 1

What is globalisation?

Answer 1

• The growing interdependence of countries around the world
• The increasing integration of the world’s local, regional and national economies into a single international market.

Question 2

What is international trade?

Answer 2

• The flow of goods and services between countries, eg importing and exporting

Question 3

What are the contributing factors to globalisation?

Answer 3

• Improvements in transport infrastructure and operations
• Improvements in IT and communication
• Trade liberalisation and reduced protectionism
• International Financial Markets
• TNCs(large companies operating around the world)

Question 4

How does improvement in transport infrastructure and operations contribute to globalisation?

Answer 4

• Can facilitate trade expansion
• Can attract direct foreign investment
• Speeds up industrialisation process
• Can facilitate regional integration

Question 5

Examples of improvement in transport infrastructure affect globalisation

Answer 5

• 1970s: Through containerisation (bulk ocean shipping)
• Produce in other countries e.g China and transport in other large amounts

Question 6

How do improvements to IT and communication contribute to globalisation?

Answer 6

• allows easier connection across the globe
• during times of adversity eg COVID 19, helps companies still be able to operate at a certain level (Zoom)

Question 7

What is trade liberalisation?

Answer 7

• Refers to reducing barriers to trade so that countries become closer to free trade

Question 8

How does trade liberalisation contribute to globalisation?

Answer 8

• makes it cheaper and more feasible to trade

Question 9

When did trade liberalisation start occurring?

Answer 9

• Since 1945
• The breakdown of the soviet bloc and the opening of China has shown a whole near area to expand to in terms of business

Question 10

How do international financial markets contribute to globalisation?

Answer 10

• They have provided the ability to raise money and move money around the world, which is necessary for international trade

Question 11

What are TNCs?

Answer 11

• Transactional Corporation
• They are multi- business companies that operate in more than one country

Question 12

What are the two main ways to regulate trade?

Answer 12

• Free trade: encourages trade between countries
• Protectionist policies: restricts trade between countries

Question 13

How tax incentives affect globalisation?

Answer 13

• Tax incentives to bring foreign direct investment (investment from business abroad)

Question 14

What are the impacts of globalisation on consumers?

Answer 14

• Consumers have more choice, as they have a wider range of goods
• It can lead to lower prices as firms take advantage of comparative advantage and countries produce with lower costs, eg low labour costs
• In other cases, it is a leading to a rise in prices since incomes are rising and so there are higher demands for goods and services.
• Many consumers may lose of culture

Question 15

What are the impacts of globalisation on workers?

Answer 15

• Some have gained jobs, others have lost; there have large scale job losses in the western world in manufacturing sectors as these jobs have been transferred to countries such as China and Poland.
• Lower wages due to increased migration
• An increase in the number jobs as migrants can also provide important skills and an increase in AD
• TNCs lend to provide training for workers and create new jobs
• ## Increasing inequality; the wages for high skilled workers increase due to a higher demand for their work

Question 16

What are the impacts of globalisation on producers?

Answer 16

• Reduced risk: firms are able to source products from more countries and sell them in more countries, a collapse of the market in one country will have smaller impact on the business.
• Increased profits: They are able to employ low skilled workers much cheaper in developing countries, causing them to exploit comparative advanatge and have larger markets.

Question 17

What are the impacts of globalisation on the government?

Answer 17

• More money for gov expenditure: They government may be able to receive higher taxes, since TNCs pay tax and so do the people they employ.
• However, the government could lose out due to tax avoidance
• Increased corruption: TNCs also have the power to bribe and lobby governments
• Maximised gains and minimised losses, only if the government uses the correct policies.

Question 18

What are the impacts of globalisation on the environment?

Answer 18

• Depleated environment/ resources: The increase in world production has led to increased demand for raw materials.
• More carbon emissions due to increased trade and production
• However, globablisation means the world can work together to tackle climate change and share ideas and technology
• The United Nations Framework Convention on Climate Change (UNFCCC) created in 1992 has 195 in the agreement (known as the convention)

Question 19

What are the impacts of globalisation on economic growth?

Answer 19

• Higher injections into the economy: globalisation increases investment within countries with investment of TNCs being an injection into the economy, which will have a larger impact on the multiplier effect
• Higer supply-side growth: higher investment incentives countries to make supply side improvements to encourage TNCs to operate in their countries.
• Increase to economic growth: TNCs may bring world class management techniques and technology, imporoving efficiency with productiuon, increasing the rate of economic growth.
• Increase in output: increase in trade will cause this as it allows exploitation of comparative advantage.
• However, the power of TNCs can cause political instability as they may support regimes which are unpopular and undemocratic but that benefit them or could hinder regimes which don’t support them.