Factors contributing to increased globalisation 4.1.3

Question 1

What is trade liberalisation?

Answer 1

The removal or reduction of barriers to trade between different countries such as tariffs and quotas. Increased liberalisation has led to an increase in international trade and globalisation.

Question 2

Advantages of trade liberalisation

Answer 2

• raw materials that are imported will become cheaper - this will lower costs which could make a firm more competitive as they can reduce prices
• exporting goods will become easier and cheaper so more markets to expand into
• consumer choice is increased

Question 3

Disadvantages of trade liberalisation

Answer 3

• domestic firms might be forced out if they cannot compete
• some industries may be subject to dumping as businesses abroad may sell excess products at unfairly low prices

Question 4

Political change

Answer 4

Changes in the government of a country can influence the country’s attitude to trade

Question 5

Reduced cost of transportation and communication

Answer 5

• Innovation in containerisation on large ships has reduced business costs
• Technological advancements due to the internet/mobile technology have improved made it easier for buyers and sellers to connect with one another

Question 6

Increased significance of transnational companies

Answer 6

A transnational company is a business that operates in more than one country. With increasing numbers of transnational companies operating globally, there is an increased pressure by countries to engage in free trade

Question 7

Increased investment flows (FDI)

Answer 7

Governments that want increased trade encourage FDI by offering financial incentives. This makes it more cost effective for firms to invest overseas which therefore increases globalisation

Question 8

Migration

Answer 8

Migration is the movement of people from one location to another. It has led to increased globalisation as better transportation and deregulation have allowed workers to have more flexibility when looking for work

Question 9

Growth of the global labour force

Answer 9

The world’s population is growing and more people are able to work so the global labour force is rising. Firms therefore have the freedom to set up operations wherever they want

Question 10

Structural change

Answer 10

This occurs when a country, industry or market change which sector they operate in