Factors contributing to increased globalisation Flashcards
Trade liberalisation, the reduction of trade barriers and the role of the WTO
Trade liberalisation- the removal of rules and regulations that restrict free trade.
World Trade Organisation - an international organisation that promotes free trade by persuading countries to abolish tariffs and trade barriers.
Main activities of WTO:
Trade negotiations- encourages countries to draw up trading agreements on matters such as;
anti-dumping- when a foreign company is selling an item significantly below the price at which it is being produced
subsidies- money given by government to help keep prices low
Product standards
Implementation and monitoring- employs many councils and committees to monitor the application of WTO’s rules for trades in goods/services/ IP rights.
Settling trade disputes- countries bring disputes to WTO if they believe their rights under agreement have been broken. The WTO appoints experts to make judgements.
Building membership- they encourage countries to sign up
Political change
Some radical changes in the political regimes of certain nations have helped to increase globalisation.
Power devolved to governments such as the EU and the WTO.
Reduced cost of transport and communication
Cost of flying has fallen and number of flights/ destinations have increased.
People can travel to business meeting easily
Goods can be transported more cheaply
Makes it easier for firms to operate all over the world
Increased significance of global (multinational) corporations
MNCs play a large role in the world economy.
They make significant contributions to the world GDP and represent 2/3s of global exports
They make huge global investments in research and development
Increased investment flows
FDI spreads business activity, job creation and wealth all over the world. It makes a huge contribution to globalisation.
It also allow businesses to enter markets where trade barriers exist.
Many governments offer incentives to business to attract FDI
Migration within and between economies
Migrants often import their cultures into their new environment/ importation of goods from home country.
Migrants often provide a supply of low-cost labour to a country, enabling businesses to lower their costs/ gain a competitive advantage.
Contribute to national income- especially skilled migrants such as lawyers, doctors etc.. fill in ‘skill gaps’
However immigration tends to be blamed for causing overcrowding, high unemployment rates etc..
Growth of the global labour force
A bigger global market helps to influence global demand, because people in employment earn. more money which can be spent on goods and services provided by MNCs
More people working has helped to force wages down since there is a rising supply labour/ helps keep costs down
Some people might decide to open their ow business once they have work experience and even expand internationally, hence contributing to globalisation
Structural change
An economic condition that occurs when an industry changes the way it operates.
As a country develops, it moves away from primary sector business and employment to manufacture, as it becomes industrialised.
It can further develop into the tertiary business
Impact on businesses of globalisation
Access to huge markets - global markets are bigger than domestic markets/ access to millions of customers/ higher sales and revenue
Lower costs- as firms grow they can exploit economies of scale
Access to labour- free movement of labour/ people can move around countries looking for employment/ business will have larger pool of labour/ important for growing businesses/ helps prevent wages from rising
Reduced taxation- global businesses can reduce the tax they pay by locating their head offices in countries with low business taxes
Possible threats
Competition- domestic businesses may face strong competition from foreign businesses trying to enter their market
The power of MNCs globalisation- allows large MNCs to become very powerful/ can produce very cheaply/ can dominate global markets/ makes it difficult for smaller firms to survive
Interdependence- an event in one country could have an impact on business based in another country
Exploitation- business often move operations to countries with under-developed legal system/ child labour/ may lead to exploitation
