Globalisation Flashcards
Causes of globalisation
Trade liberalisation - reduction or removal of tariffs
Global supply shift.
More international specialisation
Benefits of globalisation
Trade encourages countries to specialise in good or services where they have a comparative advantage in leading to improved efficiencies and allocation of resources
Producers can lower prices which may cause lower prices for consumers too
Greater choice of goods/services
improvements in standard of living
Increase competition led to lower prices for consumers
Cons of globalisation
Economic Dependency on other countries which can lead to economic instability.
Some countries have large current account deficit.
Overreliance on a few industries by an economy
Indivuduals firms can get outcompetetd by foreign firms and go out of business
MNCs postives
FDI creates new jobs and brings new skills and wealth into an economy
Economies of scale making them more efficient
MNCs buy local goods and services leading to inflows of foreign currency
Raise living standard by increasing employment
MNCs negatives
Exploitation of workers
Local firms go out of business
If they relocate can cause massive unemployment
Governments may feel forced to lower corporate tax to attract or keep MNCs in their country
Consequences of globalisation for developing countries/emerging countries
Most profits return to home countries, which doesnt help tackle poverty and increase inequality
Skilled workers often leave developing countries to more developed countries reducing productive potential of economic growth
MNCs more efficient production methods and technology to developing countries, having positive effects on productivity
Consequences of globalisation for developed countries
Cheap overseas production causing structural unemployment. For example cheap clothes from Banglasdesh caused collapse of textile industry in UK.
Increase level of imports affect BoT
Lower production costs for firms causing lower prices for consumers
Advantages of trade
Countries cant produce everything they want and need, international trade gives them access to products they would be able to produce themselves eg. tea, rice.
Increased competition causing lower prices for consumers and more product innovation increasing standard of living
Expose firms to new ideas and skills, eg. MNCs bringing new manufacturing skills to a developing economy
Why might governements want to use protectionist policies
To protect jobs
To protect infant industries
To ban certain goods
To avoid overdependance
TO protection against dumping
To correct imbalances of BOP
Policies to protect domestic industries
Tariffs
Quotas
Embargoes (bans) - usually political or enforcing laws
Subsidies to domestic industries
Issues with protectionism
Reduces specalisation, reducing allocative and productive efficiency
Prices tend to be higher for consumers and producers
If price of everyday goods inceease, it will have a bigger effect on the poor causing inequality
TRADE WARS
