4.1.3 Factors Contributing To Increased Globalisation Flashcards
What is Globalisation?
• Globalisation is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange.
What is trade liberalisation?
Trade liberalisation is the process by which international trade is made easier through relaxation of tariffs and barriers
What is GATT?
• In 1947 General Agreement on Tariffs and Trade (GATT) was created
• The world felt the benefits of many rounds of multilateral trade liberalisation
• It raised living standards around the world as it allowed developing nations to export their goods to more industrialised ones, without having to pay huge tariffs
Benefits of GATT?
• GATT meant new jobs for unskilled workers
• Countries enjoyed trade benefits of between $250 and $680 billion dollars income a year *
• Labour intensive production manufacturers in developing nations, enjoyed comparative advantage because of low labour costs
Why are tariffs are imposed ?
• Governments want to protect their domestic businesses so they use; tariffs, quotas and legal regulations to slow the rate of imports coming into a country
• They might want to stop imports which will compete with state monopolies
• Tariffs also generate important sources of income for poorer countries
• Liberalisation is the easing or dropping of these measures
Benefits of trade liberalisation?
• Trade liberalisation is the process of taking down the barriers to trade between nations, removing quotas and tariffs
• Consumers ultimately benefit because liberalised trade can help to lower prices and broaden the range of quality goods and services available – because they are now allowed to buy imported goods
Benefits to business of trade liberalisation
• Companies can benefit because liberalised trade diversifies risks and channels resources to where returns on investment are highest
• Trade openness also means; competition, investment and increases in productivity
• The main industries in Uganda that have benefitted: Sugar , beverages, tobacco , cotton textiles, cement and steel production
Drawbacks of trade liberalisation
• Competition can intensify between businesses, between nations and profit margins can end up being squeezed
• Employment that has been created by lower trade barriers, may only be temporary or menial
• Increased trade can mean pollution or over-cultivation of land to keep up with new demand
• Developing nations can become economically dependent on industrialised ones
How political change has led to increased globalisation of markets
• Politics used to be only carried out by individual governments who wanted to protect the interests of their country.
• Politics now happens on a global scale with regular meetings between heads of state, summits, where power devolved to governments in trading blocs such as the EU and organisations such as the WTO.
• This has led to less protectionist policies (tariffs quotas etc) and more open trade between nations. The planet is now one market.
Who are the G7 countries?
• The Group of 7 (G7) is a group consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
What is structural change?
• Structural change is an economic condition that occurs when an industry changes the way it operates
• As a country develops it moves away from primary sector business and employment (agriculture) to manufacture as it becomes industrialised
• It can further develop into a knowledge economy – such as the UK – which specialises in tertiary businesses such as; banking, IT services and insurance
Globalisation caused by – reduced cost of transport?
• Cost of transporting goods long distances between countries has been reduced by cargo containers
• Can gain a business EOS as they can ship huge quantities at once
• There are also cheaper air flights for business people needing to attend meetings in other countries
Globalisation caused by – reduced cost of communication?
• Communication and trade via the Internet has meant an explosion in globalisation and has been a huge catalyst for change
• Messages can be sent instantly and for free via telecommunications systems such as e-mail or Skype
Globalisation caused by – increased significance of MNCs?
• Globalisation has been caused by some large companies setting up or buying existing businesses in other countries
• These businesses that operate in other countries are called MNCs and are from the developed countries (G7)
Globalisation caused by - FDI?
• Businesses outside of important market trading blocs will invest in a business or set up production inside the trading bloc to get round tariffs, e.g. Honda, Nissan and Toyota manufacturing in the UK.
• This has lead to globalisation, more companies in more countries.
• Can give a country income generation, jobs, GDP growth, skills transfer, and the local businesses will experience the multiplier effect etc.
