4.1.3 Factors Contributing To Increased Globalisation Flashcards
Define globalisation
Process by which the world is becoming increasingly interconnected as a result of increased trade and cultural exchange.
What are MNC’s?
Multinational corporations - biggest companies with subsidiaries in many countries.
Define trade liberalisation
Process by which international trade is made easier through relaxation of tariffs and barriers
What is GATT?
General agreement on tariffs and trade created in 1947
Benefits of GATT
- New jobs for unskilled workers
- Low labour costs creates a comparative advantage
What is WTO?
World Trade Organisation- created by GATT in 1994 and exists to reduce barriers to trade
What is the role of WTO?
Ensure countries keep to the agreements they’ve made
Encourages trade liberalisation by a system of trade rules
Why are tariffs imposed?
To slow the rate of imports coming into a country, which will compete with state monopolies.
Benefits of trade liberalisation
- Lowers prices
- Broadens the range of goods available because they’re now allowed to buy imported goods
Drawbacks of trade liberalisation
- Increased competition which squeezes profit margins
- Jobs may be temporary/menial
- Increased trade can cause pollution in order to keep up with demand
How does trade liberalisation benefit a business?
Diversifies risk and channels resources to where returns on investments are highest.
Trade openness means competition, investment, productivity all increases.
How does political change increase globalisation of markets?
Politics happen on a global scale now, rather than individual countries. This has lead to open trade between nations.
What are the G7 countries?
Major advanced economies (must have high net national wealth and HDI)
Canada, France, Germany, Italy, Japan, UK, USA
How have costs of transport and communication been reduced?
- Transporting goods long distances between countries has become cheaper due to cargo containers.
- Increases EOS as a business can ship quantities at once.
- Cheaper flights for business meetings.
- Use of internet = instant
- Less isolated countries
How does increased investment flows increase globalisation?
Businesses outside important market trading blocs will invest/set up a production inside the trading bloc to avoid tariffs.
This increases jobs, GDP, income = multiplier effect
How does migration increase globalisation?
Many countries maintain extensive legal barriers to prevent foreigners seeking work or residency from entering their national borders.
But in the EU there is free movement of people between nations to work.
Immigration provides a source of low income, able bodied workers.
How does growth of global labour force increase globalisation?
People are free to seek better jobs in other countries.
This causes resentment from host nations, where citizens feel that their jobs are being taken by immigrants.
How does structural change increase globalisation?
- As a country develops it moves from agriculture to manufacture as it becomes industrialised.
- It can then develop into a knowledge economy.
- The economy grows as there’s more productivity in the secondary sector.
