Global systems and global governance - Case studies

Question 1

Example of a TNC relocating

Answer 1

1994, Ford and GM relocated their assembly to Mexico to take advantage of cheaper production costs and the non-tariff barriers (NAFTA)

Question 2

Example of a loss of jobs in the manufacturing sector

Answer 2

Manufacturing jobs fell by 30% between 1983 to 2013, the decline has now steadied and is rising again

Question 3

What is NAFTA and who’s involved?

Answer 3

North American Free Trade Agreement

• America
• Mexico
• Canada

Question 4

Name the main drivers for the NAFTA agreement

Answer 4

• Mexico got into debt between 1970 and 1980

- Challenged presented from external trade blocs

Question 5

NAFTA’s main aims are:

Answer 5

• Gradual elimination of all trade barriers
• Promotion of economic competition between members
• Increased investment opportunities
• Improved co-operation between members

Question 6

Supporters of NAFTA pointed out that:

Answer 6

• Manufacturing grew in USA, increasing employment
• Mexico received increased FDI from TNC’s planning to establish plants in Mexico to gain access to NAFTA partners
• Mexican workers receive higher wages

Question 7

Opponents of NAFTA pointed out that:

Answer 7

• US firms have moved to Mexico causing a loss of American jobs
• Canadian companies have closed due to competition from lower-cost US firms
• Mexico could be exploited due to its natural resources and less strict pollution laws

Question 8

What is JIT and how does it work?

Answer 8

‘Just In Time’

Supplies components when in demand, arrive simultaneously to the whole assembly process

Question 9

Government support schemes (globalisation)

Answer 9

• UKTI (UK Trade and Investment department), offer advice and support on trade to encourage businesses to trade overseas
• Dry ports, Pakistan, seaport directly connected by rail:
  Relieve congestion in cities
  Shift volumes of goods to more energy efficient modes of transport

Question 10

High speed electronic trading

Answer 10

Algorithmic trading

Question 11

Transport company

Answer 11

Eddie Stobart

• Logistics and supply chain
• 3,800 trailers
• 24 distribution centres

Question 12

Examples of bottom-up strategies

Answer 12

• WaterAid; installing wells in Africa

- MicroHydro scheme, Peru; produces electricity using natural flows of water

Question 13

Examples of top-down strategies

Answer 13

• Vision Mumbai; aimed to improve quality of life of slum dwellers, many think it only benefits the rich
• Three Gorges Dam, China

Question 14

Examples of security methods which have aided globalisation

Answer 14

• World Customs Organisation (WCO)

- EU ‘secure operator’ quality label awarded to operators meeting EU standards of security

Question 15

Examples of global production networks

Answer 15

• Fashion industry, relies on fast transport from a number of suppliers
• Computer manufacturers rely on outside supplies for various components
• Automotive industry relies on sub-assembled parts arriving simultaneously for final assembly

Question 16

Example of outsourcing

Answer 16

• 300,000 jobs lost annually due to outsourcing in the US

Question 17

Who accounts for majority of global trade?

Answer 17

25% USA, Germany and Japan

50% with the other G7 countries

Question 18

Countries who receive the most FDI

Answer 18

USA
China
Belgium

Question 19

Countries known for natural resource development:

Answer 19

Liberia, Dem. Rep. of the Congo

Attracted investments from large mining resources

Question 20

Countries known for financial services:

Answer 20

Singapore, Hong Kong

Question 21

Examples of existing and emerging trade blocks:

Answer 21

Existing:
- NAFTA 
- EU
Emerging:
- ASEAN

Question 22

Examples of trade preference schemes:

Answer 22

• EU’s EBA (Everything But Arms/Ammunition)

- US extends duty -free treatment to 2000 products from qualifying African countries

Question 23

TNC relocating to gain access to market

Answer 23

Kia Motors had factories in Slovakia and USA to gain access to EU and NAFTA markets

Question 24

Example of vertical integration

Answer 24

BP Oil and Gas

• Negotiated exploration and production rights in over 40 countries
• 16 refineries globally
• Exploration focuses in Angola, Azerbaijan and the Gulf of Mexico
• Production focused in Egypt, Argentina and the UAE

Question 25

How bananas are produced?

Answer 25

• Grown in hot, rainy, tropical regions

- Bananas are susceptible to diseases and so are treated with chemicals

Question 26

Where are bananas produced?

Answer 26

• India is the biggest producer of bananas with major exports to the Middle East
• Africa produce large quantities but are mainly for own consumption
• Production mainly concentrated in central America and the Caribbean

Question 27

Largest exporters of bananas:

Answer 27

Dominated by central American and Caribbean groups, who account for 80% of the export market

Question 28

Largest producers of bananas:

Answer 28

• ACP group (African, Caribbean and Pacific)

- Central American republic (Ecuador, Columbia, Costa Rica)

Question 29

Largets importers of bananas:

Answer 29

EU and USA

In 2013 they consumed 27% of the total exported bananas

Question 30

TNC’s in the banana trade:

Answer 30

Previously dominated by four large TNS (Dole, Del Monte)
They integrated vertically
Now own or contract their one plantations, have their own over sea transport and ripening facilities and their own distribution networks

Question 31

Where does the profit made from bananas go?

Answer 31

• TNC’s repatriate profit back to there home countries

Question 32

How are supermarkets dominating the bananas industry?

Answer 32

Producers are being forced to accept lower prices from supermarket as they risk being taken from the supply list
Supermarkets are trying to overrule TNC’s

Question 33

Banana trade wars:

Answer 33

EU countries negotiated a trade agreement with former European colonies
This special treatment (SDT) removed tariffs allowing the countries to develop independently without using oversea aid
The aim was to protect smaller farms from oversea competition
The US TNC, who provided 75% of the EU market, filed a complaint to WTO about the unfair trade
A compromise was reached in Geneva, 2009, where the EU agreed to gradually reduce tariffs on Latin American bananas

Question 34

Why are TNC’s in the banana industry relocating?

Answer 34

Due to low prices being paid to suppliers from supermarkets TNC’s are relocating to West Africa where labour is cheaper and social and environmental legislation is weaker

Question 35

Fair trade and organic bananas:

Answer 35

Steady growth in fair trade and organic produce

Growing market of ethical consumers in richer countries who are willing to pay higher prices for a certified product

Question 36

Importance of bananas

Answer 36

• 4th most imported food in LDC’s
• Contains a large quantity of energy; stable food for 400 million people
• Provides the daily adult potassium content

Question 37

How do bananas impact the environment?

Answer 37

• Bananas as susceptible to disease and so are treated with chemicals, contaminating the soils
• Plantations are monocultural which reduces the number of species which can be supported in the ecosystem
• Land is deforested to clear space for plantations; two tonnes of land for every tonne of bananas

Question 38

Give some economic impacts bananas cause

Answer 38

• 42% of the profit of the profits are taken by the retailer (e.g. supermarkets and TNC’s)
• Low wages are causing TNC’s to relocate in search of cheaper labour costs and weaker legislation

Question 39

Example of NGO’s:

Answer 39

Amnesty International
Greenpeace
Oxfam

Question 40

How has the Agenda 21 helped environmentally?

Answer 40

In the UK each local authority has a Local Agenda 21 (LA21). Resulting in recycling in most areas of the UK.