GG - Access to Markets and TNCs

Question 1

What is access to markets?

Answer 1

How easy it is for countries and companies to trade with one another

Question 2

What impacts access to markets?

Answer 2

• Developed countries can put higher tariffs on goods imported from less developed countries (to protect domestic industries)
• Developed countries can increase access to markets by opening countries in less developed countries –> lowering the barriers to trade they face there
• Access to markets can increase by being part of a trade bloc (puts LICs at a disadvantage as they may not be able to afford to pay the high tariffs to access the markets in these countries)

Question 3

What are special and differential treatment (SDT) agreements?

Answer 3

Agreements put in place by the World Trade Organisation to help developing nations with poor access to markets. They receive special treatment such as reduced tariffs, taxes and priority in trading

Question 4

What is a criticism of SDTs?

Answer 4

• They may have a negative impact on developed countries by allowing cheap imports into the country ( meaning there is more competition against domestic industries)
• Not all counties listed as LDCs (least developed countries) are members of the World Trade Organisation so the time taken for applications can be long
• Some LDCs are not fully aware of SDT so do not use them effectively

Question 5

What are the economic impacts of differential access to markets?

Answer 5

• Hard for countries with poor access to markets to establish new industries (may be undercut in domestic markets by TNCs and high tariffs prevent selling abroad)
• Means countries are dependent on selling low-value primary goods which fluctuate in value
• Countries with high access to markets tend to experience more economic growth as they can trade more

Question 6

What are the social issues of differential access to markets?

Answer 6

• People living in countries with better market access tend to have higher-paid jobs, giving them more disposable income which increases their standard of living
• Countries with less market access have less money for education and healthcare (due to lower tax income for the positive multiplier effect) so quality of life is generally lower —> lack of education may mean that access to jobs for women and ethnic minorities is also less prominent so these groups have less power
• Poorly paid wok is usually very dangerous e.g sweatshops are crowded and risky environments which sometimes employ children

Question 7

How many trade and access to markets impact your life?

Answer 7

• Trade benefits developed countries more than less developed countries (due to directional movement oof primary and secondary products) which means wages are higher there
• Trade and high market access in more developed countries mean that more goods are available in developed countries which improves the standard of living there
• Trade creates interdependence between countries e.g in the 2008 economic crisis many countries were affected with unemployment and lower wages

Question 8

What are transnational corporations (TNCs)?

Answer 8

Companies which operate in more than one country
—> Play an important role in the global economy

Question 9

Why do TNCs have a global impact on the economy?

Answer 9

• Bring investment into countries and can spread new technologies there e.g McDonalds which creates more jobs
• Spatial organisation can link countries together —> global supply chain
• Main driving force of globalisation due to economic, social and political interactions between the countries they operate in

Question 10

What is the country of origin?

Answer 10

Country where the company originated / was initiated

Question 11

What is the host country?

Answer 11

National in which a company has its manufacturing

Question 12

What is the general rue for where TNCs base their operations?

Answer 12

Headquarters in the country of origin (in developed countries in big cities where there are good transport and communication systems with a highly skilled workforce)
Research and development where there is a high supply of educated people e.g near a university or science park , usually in the country of origin to be near the headquarters
Production / manufacturing in the host country (where costs are lower for labour, materials and land e.g a LIC or NEE)

Question 13

What is a merger?

Answer 13

When two companies (usually of a similar size) agree to combine and create one bigger company —> can help form links between the two countries where the two countries operate

Question 14

What is an acquisition?

Answer 14

Where one company buys another (usually smaller) company

Question 15

What are the two ways TNCs can gain control over markets?

Answer 15

Horizontal and vertical integration

Question 16

What is horizontal integration?

Answer 16

Where a TNC diversifies its operations by expansion, a merger or takeover
Creates less competition
The TNC gains an increased customer base
E.g Disney taking over PIXAR studios

Question 17

What is vertical integration?

Answer 17

Where the company owns or controls multiple / all stages in the production and distribution stages of a product
Means that the company has full control of the product —> can mean they have economic advantages over competitors
E.g Shell now owns every part of its supply chain from refining the oil to selling to consumers

Question 18

What is the benefit of TNCs having a global supply chain?

Answer 18

Gives them economies of scale
Allows a greater access to foreign consumer markets

Provides the ability to exploit:
- Costs of labour
- Access to skilled workers
- Cost / availability of raw materials
- Availability of tax incentives and subsidies
- Avoiding trade barriers
- Environment and labour regulations
Etc

Question 19

How do TNCs cause issues and benefits to the host country?

Answer 19

Benefits
- Increases employment
- Foreign currency brought in (more stable)
- Transfer of technology
- Improves levels of skill and expertise

Issues:
- Many jobs are low skill in LICs
- Majority of profits send back to thee country of origin
- poor working environments

Question 20

How d TNCs cause issues and benefits in the country of origin?

Answer 20

Benefits:
- Development of high-order jobs e.g manager and research positions
- Overseas investment adds to income of the whole country

Issues:
- Loss of manufacturing jobs can cause major unemployment
- As a result of loopholes, companies may not pay taxes fully

Question 21

What is the importance of Apple in the global economy?

Answer 21

2nd largest smartphone manufacturer in the world
Over 500 retail stores across the world

Question 22

What is the spatial organisation of the company of Apple/

Answer 22

Headquarters - America , European headquarters in Cork, Ireland
Research and development - Silicon Valley, California
Manufacturing - Foxconn City, Shenzen in China
Retail - Over 270 in the USA, 100 Europe + Middle East and 50 in China

Question 23

Why are Apple’s mainstream products produced in China?

Answer 23

Shenzen (where the Foxconn City business park is located) is China’s first ad most successful Special Economic Zone (SEZ) meaning it has incentives e.g less labour and environmental regulations to attract foreign companies)
Large sources of highly skilled but low paid workers (China is an NEE)

Question 24

What is the impact of Apple on Cork, Ireland?

Answer 24

Base of Apple’s European headquarters

Benefits:
- Directly employs 5500 workers
- Attracted other high-tech firms to the area
- Contributed to infrastructural improvements in the city

Issues:
- 40% of workers a foreign nationals so insufficient work for local people

Question 25

What is the impact of Apple on China?

Answer 25

Where Apple’s manufacturing is based

Issues:
- By 2010, 14 suicides had taken place in the Foxconn factories due to the poor working conditions
- Greenpeace criticised Apple on its use of toxic chemicals in their manufacturing process, use of non-renewable energy and pollutants damaging public health
- In 2006 it was reported that 200,000 workers in the Shenzen factory were working >60 hours per week for around $100 per month
—> Not below minimum wage in China, actually more than hat other companies offer

Question 26

How has Apple responded to the issues in China?

Answer 26

75% renewable energy is now used at Apple
Suicide-prevention netting installed around the Foxconn buildings too prevent more deaths

Question 27

What is the importance of bananas in world trade?

Answer 27

4th most important food product within least developed countries - staple for 400 million people
Greatest volume of fruit produced in the world

Question 28

Give some facts about the banana industry

Answer 28

Grown in predominantly hot, rainy lowlands of tropical regions - average temperature of 27°C and annual rainfall of 2000-2500mm
Main commercial producing regions in Central America and the Caribbean
After cotton, is the largest agrochemical product in the world due to the chemicals used throughout the production as bananas are susceptible to disease and the disinfectant used to wash the fruit

Question 29

World trade of bananas is dominated by 2 groups of producers called

Answer 29

The ACP Group - Africa, Caribbean and the Pacific
‘Dollar producers’ of the Central American republics - Ecuador and Colombia (controlled by large US TNCs)

Question 30

What is the pattern of trade of bananas?

Answer 30

Dominated by TNCs - in 2022 biggest 5 exporters accounted for 60% of all international sales e.g Dole Food Company in the US
Largest importers of bananas are the EU and the USA
Almost all commodities produced in developing nations e.g Ecuador but consumed in rich countries e.g USA with 90% of the price paid by the customer never reaching the producer

Question 31

Describe the banana trade wars

Answer 31

In 1975 EU countries negotiated a trade agreement with former European colonies e.g the Windward Islands to help them develop without FDI and overseas aid
Countries concentrated in Africa and the Caribbean were given special and differential treatment (SDT) with tariff free imports and quotas to EU markets
Although at the time the Latin American crops were supplying 75% of the market in 1992 the TNCs filed a complain to the WTO saying that unfair trade was taking place
A compromise was eventually reached in 2009 in Geneva where the EU agreed to reduce the tariffs on Latin American bananas

Question 32

What is the issues with the trade of bananas?

Answer 32

Trade wars
Race to the bottom
Fair trade

Question 33

What is race to the bottom?

Answer 33

Companies search for lower labour costs and weaker legislation and so relocate their plantations to areas such as West Africa
This is called pursuing race to the bottom in terms of social and environmental standards

Question 34

What is fair trade?

Answer 34

Fair trade aims to pay farmers a guaranteed minimum price for their products, offer fair terms of trade and pay an additional premium to reinvest into the local community
Originally a movement of NGOs

Question 35

How has fair trade occurred in bananas?

Answer 35

Growing market of fair trade and ethically produced bananas in developed nations as people are becoming aware of the shortcomings of the supply chain and so are willing to pay a higher price
In 2013 1 in 3 bananas sold were fair trade

The El Guabo Association of Small Banana Producers created in 1997 is one of the worlds largest producers of fair trade bananas

Question 36

What are the benefits of free trade?

Answer 36

Lower price for consumers
Greater choice of products
Access to larger, wealthy markets for TNCs
Greater economies of scale
Access to cheaper raw materials for TNCs

Question 37

What are the issues with free trade?

Answer 37

Do not give sufficient ‘protection’ to emerging industries in developing countries so they cannot compete
Domestic industries do not survive against the competition with international TNCs
Unjust exploitation of workers and poor working conditions

Question 38

What is the risk of economic interdependence?

Answer 38

A negative economic shock in one country can quickly spread to other countries e.g 2008 financial crisis

Question 39

What is glocalisation?

Answer 39

Term used to describe products and services that are distributed locally but which are fashioned to appeal to customers in a local market

Products and services are more likely to be successful when they are customised for the local market e.g McDonalds with their menus

Question 40

What are environmental impacts of globalisation?

Answer 40

More transportation increases greenhouse gas emissions
TNCs outsourcing production to countries where environmental standards are less strict
Waste from packaging
IMF-enforced spending cuts reducing many nations’ spending on the environment
Greater movement giving a high risk of invasive species being introduced

Question 41

What are the benefits of globalisation on developing economies?

Answer 41

Creating more jobs means that the tax being paid increases —> positive multiplier effect
Higher value exports (not just low value primary exports)
Investment brings improvements in infrastructure and living standards

Question 42

What are the costs of globalisation on developing economies?

Answer 42

TNC profits taken from the country (leakage)
Tax avoidance by TNCs
Low wages paid by TNCs
Inequalities in incomes increase
Over-specialisation in one commodity or industry means vulnerable to changes in global demand
Too reliant on TNC investment