4.1.3 Factors contributing to increased globalisation

Question 1

What are the factors that contribute to increased globalisation?

Answer 1

• reduction of international trade barriers
• political change
• reduced costs of transport/communication
• increased significance of global companies
• increased fdi
• migration of workers
• growth of the global labour force
• structural change

Question 2

Trade liberalisation

Answer 2

-Trade liberalisation is the process by which international trade is made easier through a relaxation of the rules which govern it

Question 3

Rationale for trade liberalisation

Answer 3

• Makes markets more competitive
• Creates opportunities for business
• Consumers benefit through lower prices and wider range of quality goods and services
• Companies benefit as it can help diversify risks and allocate resources more efficiently (where returns are greatest)
• With domestic policies, trade openness facilitates competition, investment and increases in productivity

Question 4

Why are there tariffs?

Answer 4

• governments want to protect their domestic businesses so they use tariffs, quotas to slow the rate of imports coming into a country
• tariffs are important sources of income for poor countries

Question 5

Benefits of trade liberalisation

Answer 5

• allows a business to diversify and spread risk across channels
• results in competition, investment and increases productivity
• provides access for opportunities

Question 6

Drawbacks of trade liberalisation

Answer 6

• competition can become intense - profit margins are squeezed
• employment made lower trade barriers may only be temporary
• developing nations become too dependant
• pollution and over-cultuvation

Question 7

Political change

Answer 7

• happens in a global scale with regular meetings
• led to fewer protectionist policies and more open trade barriers between countries
• created trade blocs - EU, ASEAN, NAFTA
• G7,G20

Question 8

Reduced cost of transport/communication

Answer 8

-Fallen transport costs since the 1970s
-Low fuel costs, oil scores grow
-Lower transport costs have contributed to global trade.
-New technologies have also helped to keep transport
cost down
-The increase in air travel has also allowed for more
goods to be transported globally.

Question 9

How has reduced costs of transport impacted globalisation?

Answer 9

-Internet allows for easier comparison for cheaper alternatives
-Allows cheaper outsourcing to foreign countries
-Technology advancements leads to easier
communication
-Contributed to an increase in world trade
-Changed the way many business services are
bought and sold e.g. offshoring of call centres

Question 10

Increased significance of global companies

Answer 10

• Cultural diffusion as world culture becoming culturally assimilated
• Capital transferred between economies through repatriation
• Increase in global supply chains
• MNC’s headquarters
• Transport costs usually discourage trade due to their high costs but the recent lower transports costs have encouraged trade further

Question 11

How has the increased significance of global companies impacted globalisation?

Answer 11

-Increased spread of cultures
-Westernisation
-global flows
• Transfer of skilled workers with MNCs
-TNC’s monopolise the market
-Without the improved technology, they would not have been an interdependence between economies and countries which would have made transnational companies near to impossible to exist – this is because of a lack of global communication

Question 12

Increase FDI

Answer 12

• As a country grows it appears more lucrative as an investment opportunity therefore attracts greater FDI
• FDI may affect growth positively because FDI, which moves in general from capital-rich countries to capital-scarce economies, lowers the costs of borrowing and increases production by enhancing labour productivity and introducing new technology embedded in the capital

Question 13

How has the increased FDI impacted globalisation?

Answer 13

-Better technology
-Lower prices for consumers
-Develops human capital
-Increased risk of a global financial crisis as
globalised financial markets have increased the risk of global financial crises, originating in one country and spreading internationally
- An increase in FDI will increase the demand for the currency of the receiving country, and raise its exchange rate

Question 14

Migration of workers

Answer 14

• More movement of people due to trade liberalisation
• Social acceptance of women working growing globally
• Trade Blocs create labour opportunities to move to

Question 15

How has the migration of workers impacted globalisation?

Answer 15

• Cultural diffusion -Increased income for worker
• Impact negatively on domestic situation if leaving the home/moving the family
• Greater pool of skilled labour; impact on wages

Question 16

Growth of the global labour force

Answer 16

• Reduced cost of transport
• More movement
• Growth in global labour force
• greater pool of workers

Question 17

How has the growth of the global labour force impacted globalisation?

Answer 17

-Positive multiplier for local economy
-Business can select higher skilled employees
from abroad

Question 18

Structural change

Answer 18

• Economic condition that occurs when an industry changes the way it operates
• As a country develops it moves away from primary sector to manufacturing as it industrialises
• It can then develop into a knowledge economy which specialises in tertiary sector businesses

Question 19

How has structural change impacted globalisation?

Answer 19

• This move away from primary sector reliance can help pull a country out of poverty
• As an economy grows there is more secondary sector activity/productivity therefore manufacturing increases and net incomes rise