Globalisation

Question 1

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globalisation

Answer 1

the process by which the world is becoming increasingly integrated and interdependent through trade and other links

Question 2

causes of globalisation

hint: capital, labour, trade

Answer 2

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Liberalisation of trade - lower barriers due to understanding comparative adv. and WTO
Trading blocs - promote free trade, migration and FDI
MNCs - better tech and labour and capital mobility increases access to global markets to increase profits
Mobility - labour (migration) and capital (FDI) can move faster and cheaper due to tech, labour market dereg, and tax incentives
Tech - better digital and transport connectivity increases efficiency of trade, FDI and migration
* Transport costs - tech and privatisation has reduced costs, increased speed - capital, trade and labour

Question 3

pros of globalisation

MUST link to economic efficiency - allo, productive, dynamic

Answer 3

1. better AL. efficiency due to exploiting comparative advantage
2. larger EOS - larger markets!
3. global competition keeps prices low and quality high - static and dynamic eff.
4. increased choice for consumers and firms - improves consumer material and non-material SOL (TOT diagram), allows firms to source cheaper raw materials and increase SNP
5. faster GDP growth from (X-M) - employment, output, incomes
6. tech transfers - efficiency
7. inward migration - unique skills that fill vacancies, increase productivity and and tax rev
8. might reduce income inequality BETWEEN countries - MNC can increase productivity and wages

1- e.g. Apple designs in US where skilled labour exists then manufactures in China where labour costs lower
2 - e.g. Coca Cola - technical EOS by mass production and global distribution to 200 countries
3 - e.g.

Question 4

globalisation cons

Answer 4

1. income inequality WITHIN country - paradox of glob
2. structural unemployment - e.g. deindustrialisation in the UK
3. MNCs too powerful - environment, deregulation, tax avoidance - e.g. Coca Cola is worst plastic polluter in the world
4. over-specialisation - e.g. Somalia has 50% of GDP from agriculture
5. brain drain of migration - e.g. 1.6m Indians gave up citizenship, largest diaspora
6. countries more vulnerable to demand and supply side shocks e.g. Russia/Ukraine, India; risk of capital flight
7. constrains govt policy and meeting macro objectives

Question 5

globalisation eval

Answer 5

1. winners and losers! SEE ECONOMICS HELP
2. will not work if barriers esp. subsidy and non-tariff barriers exist
3. issue is not globalisation but rather how govts manage its impacts: It is possible that globalisation can play a key role in improving living standards for the poor, but left to market forces, it is no guarantee. redistribution, environment, education and retraining for those who have lost jobs, infrastructure
4. crucial that govt encourages diversification to break resource curse in LEDCs by moving into greater value addd manufacturing
5. job losses depend on mobility of labour

https://www.economicshelp.org/blog/142760/economics/winners-and-losers-from-globalisation/

Question 6

how globalisation can be measured

can mention briefly at start of essay to pick up knowledge points

Answer 6

1. world trade to world output ratio
2. exports to GDP ratio of different countries
3. FDI to GDP ratio
4. flows of migrants workers

Question 7

trading blocs

Answer 7

regional group of countries that have entered into agreements that promote trade between themselves

Question 8

free trade area

Answer 8

trade bloc where a regional group of countries trade freely between themselves but are also free to trade with non-members on their own terms

e.g. NAFTA - Mexico, USA, Canada

Question 9

customs union

Answer 9

free trade between member nations and a common external tariff on imports from non-members

e.g. EU and ASEAN

Question 10

monetary union

Answer 10

a customs union with common fiscal policy, regulation, free movement of FOP and also the same currency and monetary policy

e.g. Eurozone

Question 11

full economic union

Answer 11

free trade between members, a common external tariff, same currency and all political power is held by a common governing body

e.g. the UK - England, Wales, Scotland and NI use the pound, governed by UK Parliament

Question 12

trade creation

Answer 12

high cost domestic producers are replaced by more efficiently produced imports from within a customs union

is an argument FOR joining a customs union

use UK (outside EU) and France (inside EU) for contextual analysis

basically, if the UK lacks the comparative advantage in producing cars, i.e. is more costly to do so, can join the EU and import cars without a tariff from an EU member country that DOES have the advantage

Question 13

trade diversion

Answer 13

trade with a low-cost country outside a customs unions is replaced by higher-cost products supplied from within the customs union

is an argument AGAINST joining a customs union

if the UK (outside the EU) freely imports textiles from Thailand, who has CA, but then UK joins the EU, it will have to impose CET. Then, the supply curve for Thailand shifts up and the price of imports much higher. Now, EU producers are naturally less efficient than Thailand but because thai prices have increased, their costs are relatively lower so the UK begins importing from other EU members. Artificial CA gained

Question 14

pros of joining customs union

Answer 14

1. trade creation argument
2. generic benefits of free trade

Question 15

cons of joining customs union

Answer 15

1. trade diversion argument
2. generic arguments against using tariffs