Chapter 8: Globalisation Flashcards
Define International Trade
Exchange of G&S across national boundaries
Define CA
Produce the good at a lower OC than another country
Law of CA
Trade can benefit all countries if each country were to specialise in producing the goods in which they have a CA in and exchange some of the goods in which they have a CD in
Illustration of S&T
6 Assumptions
Table
Explanation
TOT Definition
Rate at which one unit of a good can be exchanged for another
Trade will be beneficial if TOT lies between OC
Sources of CA
Static CA (Natural resources, Human resources, Capital stock, Technological capabilities) Dynamic CA (Capital, Skills, Tech)
Limitations of CA Theory
Increasing OC Factor Immobility Transport Costs Protectionism Strategic Reasons
Patterns of Trade
Commodity and Geographical composition of trade
Economic Reasons for SG POT
Inter-industry - Small developed economy, stong technological base and highly skilled workforce, etc
Intra - Differences in T&P and Gains from internal economies of scale
Others - Globalisation&FTA, Protectionism, Transport Costs
Benefits of Trade
Higher consumption possibilities Wider consumer choice and greater product variety Lower prices for domestic consumers Trade as an engine of growth Technological transfer
Costs of Trade
Unfair Competition and Dumping
Over-reliance on Foreign countries (Susceptible to externally-induced cyclical unemployment and imported inflation)
Structural Unemployment
Worsening BOT
Widening Income Disparities within a country
Environmental degradation / Pollution
Define Protectionism
Measures that restrict the movement of G&S between countries, sheltering domestic industries from foreign competition
Tools of Protectionism
Tariffs Quotas Explain what they are: VER Currency Manipulation Administrative Measures Subsidies to domestic producers
Tariffs
Graph Explanation Implications on efficiency Macroeconomic Impact Limitations (2) and Unintended Consequences
Quotas
Graph and explanation
Reasons for Protectionism and CAs
Infant Industries
Unfair Trade Practices
Trade Imbalances and Unemployment
Declining Industries
Protection of Strategic Industries / Against bads/ Achieve political objectives
Define Economic Integration
Process whereby neighbouring countries integrate as one economic unit to take advantage of extended market and bring about better allocation of resources
Types of Economic Integration
FTAs (Define, SG)
Customs Union
Common Market
Trade Creation and Diversion
Define, table, explanation
Define globalisation
Integration or inter-connectedness of national economies through trade of G&S, FDI, capital flows, spread of technology, labour migration
Features of Globalisation
Openness to Trade (Engine of growth, Trade Liberalisation, Outsourcing)
Openness to International Capital Mobility (Offshoring, International Supply Chain, Financial Flows)
Openness to International Labour Mobility
Economic factors affecting G
CA, Engine of Growth, Proliferation of Free Trade Groupings, Economic Crises
Technological factors affecting G
Distance and high transport costs
ICT
Tech advances
Political factors affecting G
Communism fall
China
Trade barriers for votes tm
Benefits of G
Access to Raw materials and Inputs
FDI
Foreign technology
Foreign labour
Costs of G
Economic Instability Brain Drain Structural Unemployment and Income Inequality Social Costs of Increased Immigration Environmental Degradation
Globalisation and SG’s POT
Impact on Commodity and Geographical Composition
Policies to enhance SG X and as a destination of FDI
SSP to lower Px, improve X quality, attract FDI, promote exports/FDI and accessibility to M
Policies to mitigate negative effects of G and Rise of Deglobalisation
SSP to reduce economic instability and build resiliency, prevent structural unemployment and reduce income inequality, manage labour movements
