4.1.3 - Factors contributing to increased globalisation Flashcards
1
Q
What is globalisation
A
- Global markets are international markets created by firms exporting importing or offshoring.
- The biggest companies are no longer national firms but multinational corporations (MNCs) with subsidiaries in many countries.
2
Q
What is trade liberalisation
A
Trade liberalisation is the process by which international trade is made easier through relaxation of tariffs and barriers
3
Q
What is GATT (General Agreement on Tariffs and Trade)
A
- 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
4
Q
What are the Benefits of GATT
A
- 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
5
Q
What is the World trade organisation (WTO)
A
- WTO was created by GATT in 1994 and exists to reduce barriers to trade and to ensure that countries keep to the agreements they have made
- The organisation also deals with complaints between members, organising negotiations and, if necessary, making judgements against a country
- It encourages trade liberalisation by operating a system of trade rules and by providing a forum for the negotiation of trade disputes
6
Q
What are tariffs imposed
A
- 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
7
Q
What are the benefits of trade liberalisation
A
- 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
8
Q
What are the benefits to business of trade liberalisation
A
- 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
9
Q
What are the Drawbacks of trade liberalisation
A
- 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
10
Q
How has political change led to increased globalisation
A
- 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 head 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.
11
Q
Who are the G7 countries
A
- The Group of 7 (G7) is a group consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.
- These countries are the seven major advanced economies as reported by the International Monetary Fund: the G7 countries represent more than 64% of the net global wealth ($263 trillion).
- A very high net national wealth and a very high Human Development Index (HDI) are the main requirements to be a member of this group.
12
Q
How has Globalisation been caused by – reduced cost of transport
A
- 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
13
Q
How has Globalisation been caused by reduced cost of communication
A
- 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
- Far flung countries are no longer isolated from the global marketplace
14
Q
How has Globalisation been caused by increased significance of MNCs
A
- 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)
15
Q
How has Globalisation been caused by FDI
A
- 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.
