Factors Affecting Globalisation

Question 1

What is the GFS?

Answer 1

The Global Financial System - investors, banks and other companies that engage in transnational business

Question 2

What does the GFS do?

Answer 2

Governs the flow of capital between countries

Question 3

How did the financial system become more global in the 80’s?

Answer 3

• Information technology, such as the Internet, allowed investors to access greater information
• Investment banks made new financial products that made foreign investment less risky
• Governments deregulated the banks meaning they could invest in a greater range of businesses, also allowing a greater range of companies to get involved in finance, such as commercial banks
• Financial deregulation also involved removing barriers to capital coming in and out of a country, making it easier for investment banks to buy and sell shares and other products across the world, as well as exchange currencies

Question 4

How do financial systems promote globalisation

Answer 4

They have allowed economies to become more interconnected, encouraging greater FDI, which has led to investors on one side of the world being able to affect markets on the other side

Question 5

How do management and information systems increase companies’ efficiency

Answer 5

They allow TNC’s to create global supply lines in order to minimise costs by utilising specialised work forces (cheap labour in LDE’s, R&D in HDE’s) and operating at economies of scale

Question 6

Give 2 management systems that increase TNC’s efficiency

Answer 6

1. JIT
2. Outsourcing

Question 7

What is JIT?

Answer 7

Just In Time production - pulled through by customer orders rather than pushed through by stock

Question 8

Name 3 transport systems that improve global business

Answer 8

1. Containerisation
2. High speed rail
3. Larger and faster ships

Question 9

Name 3 communication systems that improve global business

Answer 9

1. Satellites allow people in remote areas to stay connected
2. Optic fiber cables allow almost instant communication between any two devices
3. Internet software like email, and messaging services allow for free communication

Question 10

How do transport and communication systems improve global business?

Answer 10

They make the world more economically connected by allowing people from around the world to conduct business, by communicating and sending goods more easily

Question 11

Give 3 ways natoins have worked together to increase peace and security

Answer 11

1. Interpol
2. Counter-Terrorism
3. NATO - Clause 5

Question 12

Give 4 types of trade agreements

Answer 12

1. Free trade areas - tariffs are removed against member states
2. Customs unions - a common external trade policy is adopted
3. Common markets - free flow of goods, services, capital and labour
4. Economic or monetary unions - same currency/tax system is adopted

Question 12

How has globalisation promoted peace

Answer 12

Countries becoming dependent on one another for global supply lines, and as a trading partner reduces the likelihood of war

Question 12

Give 3 threats posed by globalisation

Answer 12

1. Terrorism
2. Cybercrime
3. Biological threats from imported goods

Question 13

Give 5 advantages of trade agreements

Answer 13

1. Trade Creation - allows countries to increase production and export more
2. Economies of Scale - mass production for a larger market reduces average costs of production
3. Investment - attracts FDI because of larger market size
4. Regional Co-operation - pooling resources in response to natural disasters, terrorism threats, pandemics etc.
5. Support for declining regions and sectors - e.g. EU regional fund/EU Fishing and Agricultural subsidies

Question 13

Give 4 disadvantages of trade agreements

Answer 13

1. Trade diversion - in a customs union tariffs placed on external goods make them more expensive forcing members to cut ties
2. Loss of Sovereignty - decisions become centralised at a supra-national level e.g. loss of freedom to negotiate separate trade agreements when in a customs union
3. Finance - in a monetary union, members lose the ability to influence monetary policy e.g. ECB oversees all Eurozone monetary policy
4. Dependence - increased interdependence can make some members overly dependent on others

Question 14

Give 3 advantages of NAFTA

Answer 14

1. Trade between the US, Mexico and Canada had 4x
2. FDI more than 3x in Mexico
3. Consumer prices in the US were lowered

Question 15

What was the issue with NAFTA

Answer 15

There were losers in differing industries in every country

Question 16

Give 2 examples of losers from NAFTA

Answer 16

1. Blue collar workers in the US - wages were suppressed and jobs were lost especially in the automotive industry to the maquiladora plant in Mexico due to the cheaper labour available in Mexico
2. Mexican farmers went out of business as they couldn’t compete with agribusiness, and state subsidised food surpluses being ‘dumped’ in Mexico

Question 17

What did the new USMCA deal change

Answer 17

1. Country of origin rules - cars must have at least 75% of their components manufactured in their country of origin to qualify for 0 tarrifs
2. Labour laws - 40-45% of vehicle parts must be made by workers who earn at least $16 dollars/hour
3. Sunset clause - the terms of the agreement expire after 16 years, after which they will be re-negotiated

Question 18

What have been the main driving factors behind globalisation?

Answer 18

Development of new systems, technology and relationships in a range of sectors including finance, transport and management

Question 19

Give 2 systems that have helped promote globalisation

Answer 19

1. Management and information systems (JIT)
2. Financial systems (de-regulation)

Question 20

Give 2 technologies that have helped promote globalisation

Answer 20

1. Communication (the internet/satellites/fiber optics)
2. Transport (planes/trains)

Question 21

Give 2 ways that relationships have helped promote globalisation

Answer 21

1. Trade Agreements (USMCA)
2. Security threats have been mitigated (Interpol)