globalisation Flashcards
What is globalisation?
Rapid integration of the world’s economic systems in 1990s , opening up world trade to TNCs
The focus of globalisation has been primarily on economic relationships such as international trade, foreign direct investment, and international capital flows.
But also…
Globalisation has since been expanded to encompass a wider range of dimensions including cultural, social, technological, political, environmental and also health related factors
McPig- increasing transfer of money, culture, people, information and goods across the globe
Professor Giddens quote
Professor Giddens - globalisation is the intensification of worldwide social relations’
Aspects of globalisation process (econ, social etc..)
Economic- e.g. trade and aid, TNCS, capital flows etc
Social – exchange of ideas, migration, social networks, growing uniformity
Political- global institutions , trading groups, NGOs, action of climate change or COVID
Health – medical advances, pandemic control, pharmaceutical
Environmental – impacts/degradation, green campaigns, linked by global commons global governance – COPs
Technological – technology boosts productivity needed for important industries, communication, green technology
Cultural – spread/ exposure of different cultures, can lead to a global culture. Westernisation, cultural diffusion, globalisation
Marshall McLuhan
predicted ‘global village’ where free rein is given to economic and information flows, and the beginning of making planet wide decisions.
Time Space Convergence
This process concerns the changing relationship between time and space, and notably the impacts of transportation improvements on such a relationship.
It is closely related to the concept of speed, which indicates how much space can be traveled over a specific amount of time.
Friction of distance
as the distance from a place increases, the interactions with that place decrease, usually because the time and cost involved increase with distance.
Thomas Friedman
Thomas Friedman has said that today globalisation is ‘farther, faster, cheaper, and deeper’
o Farther- lengthened in distance over time – product sourced form faraway places.
o Deeper- sense of being globally connected e.g. social media, food
o Faster- internet, real time e.g. Zoom, messenger
He also said that ‘the world is flat’ in 2005- it was an apt metaphor for globalisation: goods, ideas and people sliding smoothly across borders.
Kofi Annan- former secretary - General of the UN
It has been said that arguing against globalisation is like arguing against the laws of gravity
Disadvantages of an integrated world economy
e.g. 2008 financial crisis started in USA but effected world trade, other setbacks such as trade wars, international conflicts and falling commodity prices
Brief timeline of globalisation
- Middle ages – the Silk Road
- 17th century took 30 years for French fashion to reach England
- 1944- world bank set up
- 1945- UN set up
- 1948- Empire Windrush
- 1953- took 5 days for news of Edmund Hillary reaching Mt Everest to reach London
- 1975- UK joins the EU
- 1996- internet available in homes
- 2000-UN launches Millenium development goals
- 2001- 9/11- attack on world trade centre
- 2004- Facebook starts
- Soon – with advanced supersonic aircraft- 80 minutes to go from NYC to London
when was the world bank set up?
1944
When internet becomes available in homes?
1996
in the 17th century, it took X years for french fashion to reach england
30
What are the dimensions of globalisation?
flows of capital, labour, products, services and information; global marketing; patterns of production, distribution and consumption.
What does capital mean?
All money transferred between countries- investment, FDI, trade or production
What increased flows of capital?
deregulation of the financial markets meant banks, insurance,investments companies were no longer confined within national boundaries (age of neoliberalism)- known as the BIG BANG in the UK - 1986 Thatcher
Big Bang
1986- Thatcher
- The Big Bang refers to the day the London Stock Exchange (LSE) was deregulated on October 27, 1986.
-After deregulation, the volume of shares traded on the LSE and its market capitalization increased.
-achievement of the Conservative government led by Margaret Thatcher.
- Deregulation eliminated fixed commissions, authorized firms to represent investors, opened the London Stock Exchange to foreign firms, and implemented an electronic platform.
Neoliberalism
a political approach that favours free-market capitalism, deregulation, and reduction in government spending
In 2022, value of trade in goods and services?
$31 trillion
Amount of transactions a day in 2022
- 6 trillion
Wallerstein model
1974->explains the emergence of a core, periphery and semi-periphery in terms of economic and political connections first established at the beginning of exploration in the late 15th century. Built upon the dependency theory
Frank’s Dependency theory
Dependency theory proposed that the poverty and backwardness of poor countries are caused by their peripheral position in the international division of Labour.
Core countries
strong economies with large economic productivity, and higher per capita GDP- HICS. Global power is concentrated here
Semi-periphery
NICs , median standards of living (Chile, Brazil, India, China etc..). Offer citizens diverse economic opportunities,s but extreme gaps between rich and poor
Periphery countries
low level economic productivity, low per capita GDP, low standards of living, Africa (not South Africa), part of S America and Asia- which have been exploited and have suffered from a lack of investment, leakages and out-migration.
Foreign Direct Investment
is an ownership stake in a foreign company or project made by an investor, company, or government from another country. (via share, merger or joint venture or subsidiary company)
Who gets the most FDI? (2020)
USA- 4626 billion
Repatriation of profits/ economic leakage
o TNCs investing in overseas production will normally take any profit made from that investment back to their home-country. This is known as an economic leakage as the income is ‘leaked’ from the country that received the investment. The majority of these flows return to companies based in richer countries
Aid
Multilateral (Official development assistance) or bilateral – often comes with conditions
- important source of support for poor countries
Migration
Poorer to richer countries
Can exaggerate disparities by sending away skilled labourers who pay taxes and spend earnings in rich country
Yet do pay remittances
Remittances and Stats on them
These are transfers of money made by foreign workers to family in their home country
-India is the top recipient in 2023- $125 billion – update
- USA largest source of remittances
- Nepal relies on remittances for more than 25% of GDP
Benefits
* Stable and increasing as a source of income
* Goes directly to families so it alleviates poverty
Disadvantages
* High transfer charges. can be as high as 15-18%. SDG goal is to make it 3% by 20230
Beginning to encourage works to invest in diaspora bonds to finance development
Now? Can you apply core and periphery?
- Now difficult to distinguish between core and periphery due to BRICSs and MINTs
-The rapid growth of large and medium emerging economies such as the BRIC and, more recently, MINT countries means there is now more of a continuum of development - China now a core country
- Most countries’ economies are still dependent on flows of investment to and from other countries.
BRIC
BRIC – An acronym used to identify a group of four countries – Brazil, Russia, India and China – whose economies have advanced rapidly since the 1990s. Sometimes South Africa is added to this list so the acronym becomes BRICS
MINT
MINT – An acronym referring to the more recently emerging economies of Mexico, Indonesia, Nigeria and Turkey are all important manufacturing hubs.
o Nigeria is additionally a major exporter of oil and also trades globally in low-budget films (the “Nollywood” film industry
Tiger economy
A tiger economy is the economy of a country which undergoes rapid economic growth, usually accompanied by an increase in the standard of living.
Flow of labour
Flows of labour are the movement of people who move to work in another
country (Migration)
This includes specialised workers, for example, who move between different units/ companies of a TNC on a short term basis and unskilled migrant workers using a range of transport modes
Migration stats - LEARN A COUPLE
- Europe and Asia each hosted around 87 and 86 million international migrants respectively (61% of all international migrants)
- 3-4% of the population are international migrants
- 14.1% of high income countries made up of international migrants
- 1.6% of LIC populations are made up of migrants
o Germany and Luxembourg have the largest number of total immigrants and the highest rate of immigration in 2021 in Europe
Trend? Flows of Labour
- Increasing to due increase in transport (high-speed rail; airports and containerisation)
- Yet not as free flowing as flows of capital
o Restrictions on immigration - Overall trend
o S Asia, Africa, Latin America to North America and Europe and Gulf countries
o Latin America and Caribbean to North America is the largest flow from one continent to another
EXAMPLE- labour
Example- Nepal relies on remittances for more than 25% of GDP (in 2014, 16 000 left each month) to gulf/middle east
Types of labourers
- Skilled and unskilled – both go to higher-income countries searching for better job prospects
- Many countries rely on the flow of highly skilled workers as they utilise their skills – interdependence – e.g. NHS, only 63.4% of the doctors are trained here – many migrated
- Unskilled usually work in lower economic-value jobs that reduces the shortage of workers in the UK- but are often unpaid
Europe and Asia each hosted X million and Y million integration migrants respectively (Z% of al migrants)
87,86,61
Flow of products and globalisation
- Product flows are the movement of produced goods from area of production to area of consumption.
- Increased globalisation has caused product flows to become international, meaning products are produced by a country and then transported to another country.
Past - flow of products
PAST
- Manufacturing in HICs due to access to resources (factories) and ability to buy materials and products sold where they were made
Recently- flow of products
- GLOBAL SHIFT
- Now international trade has created major product flows- ¼ of all products are exported , between LICs and HICs
- Production now in LICS (better transport and communication) – low labour costs , offshoring- then transported to HICs to be sol
- Cause a decline in manufacturing industry in HICs
- EMPLOYMENT IN THE MANUFACTURING BUSINESS IN THE UK HAS DECREASED BY OVER 3.4 MILLION JOBS SINCE 1985
Post 2010
Post 2010?
- Between 1950 and 2010, world trade grew exponentially, but since 2010 it has decreased and plateaued (despite increasing population)
- It was in 2010, when China surpassed US as the largest manufacturing country in the world ( and has been ever since)
COVID
Limitations
- COVID decreased global trade by 20% and exposed the risks of supply chain
2024
- China is the largest manufacturing country (31.6% share of Global Manufacturing), with the US second (15.87%)
Future ?
- Product flows are changing due to emerging economies and growing middle class and increasing demand for materials and manufactured prdycts – growing ocnusmerism
o E.g. apple shop first opened in China in 2008, now 40 stoes
Why has the flow of products increased? (link to factors of globalisation)
- Increased due to
o Increased demand
o Low production costs – mass production and low wage economies – e.g. China and S E Asia
o Trade blocs and removal of barriers to trade like tariffs
o Reduced transaction costs due to ease of flow of data
o Reduced transport costs and increased speed – due to containerisation
What fraction of total global production is exported?
1/4 (in 1870- less than 1/10)
employment in the manufacturing business in the UK has decreased by over X million jobs since 1985
3.4
Flow of services- explanation
- Service is an economic activity without goods
- Service industries can flow due to the ability to transfer information in the globalised world. Services can be transferred on phone calls or via the internet, meaning there is no longer a need for the industry to be tied down to a location
o E.G. Banking, advertising and insurance demand on flow of information and communication and are able to be located anywhere due to advanced technology which leads to outsourcing - It comes after previous flows are dependent on them
High Level Services
– services to business- finance, investment and advertising (HICS and NEEs in global hubs)
Low level services
services to consumers- banking, travel , insurance, tourism, customer call centres or comms (offshore in LICs where labour are low)
INDIA EXAMPLE
- Interestingly, Indian call centre workers on average are more qualified than call centre workers in England (many having graduate or postgraduate degrees). However, there is a lack of high level service job opportunity in India for those who possess relevant qualifications
- Trends- decentralisation of low level services from developed to developing
E.g. call centres moved from UK to India
o India has 20% lower labour costs
o This has given India great economic success
o India has a large proportion of English speakers so ideal for this
India has X% lower labour costs
20%
- Emergences of transnational service conglomerates examples
o HSBC- banking
o AXA- insurance
o WPP group UK- advertising
o TUI group Germany – travel and tourism
Flows of information and globalisation
- Global information flows have grown rapidly since the 90s.
- The development of internet use, social media platforms and entertainment services have allowed information to be transferred globally with ease.
- Purpose?- The expansion of information helps intensive goods and services and R and D industries such as pharmaceuticals, international law, engineers, computer technology etc.. to flourish
o - because it transfers ideas, languages, industrial tech, design and business management support
types of info flows and how they foster globalisation
o Fast Broadband and connections- news and finance info – current events
o Social media – experience other cultures, interconnected.
o Real-time data and data transfers- contribute to the ‘knowledge economy’ quaternary industry.
Knowledge drives innovation- stock markets, high-tech products, the education sector and many other areas of society
o Large databases and archives – used for research and education- seek better employment opportunities- more global connections and allowing online work-from-home jobs
What is marketing?
- Marketing involves promoting, advertising and selling
Global marketing
- TNCs either standardise products and marketing (Coca cola) or standardise products but adapt marketing campaigns (Apple) or glocalise (McDonalds)
o TNCs view the world as a single market , develop a recognisable brand and employ one marketing strategy and specialise in just one product (don’t adapt it significantly- e.g. Coca Cola only alters size of can due to different regulations, but uses same formula) which leads to economies of scale which reduced costs
Apple Marketing
o Apple – keep products and bran the same, but alter marketing campaigns – e.g. China they use celebrities to promote product
Mclocalisation
o McDonalds – ‘Mclocalisation’
Adapt goods and campaigns to the region due to different languages, consumer behaviour and preferences
So no pork in Muslim countries, no beef in Hindu, kosher food in Jewish, McCafe’s in the USA to adapt to the coffee cultures and McRice in Indonesia and Asterix as company logo in France
Patterns of Production - PAST
1954, 95% of production was in the industrialised counties in West Europe, North America and Japan
Patterns of Production NOW
Over last 40 years , manufacturing has become decentralised from HICs.
There has been a global/Asian shift -production moving from HDEs to developing countries in Asia such as China
Patterns of Production - FUTURE
US- back to HICS?- MAGA campaign . USMCA
China is investing in Africa?
What is distrubtion?
Distribution refers to the way something is spread out or arranged over a geographic area- it refers to where products and services are sold globally.
Primark distribution and impact
E.G. Primark
HQ in Dublin Ireland
300 stores, most in UK and Spain (consumers)
Manufactured in China and Bangladesh, they have 928 contracted factories
Impact?
-2013 building collapsed in Salvor, Bangladesh and 1100 died
-Rumours of child labour and very low pay for long hours
Patterns of consumption - PAST
developed counties consumed the most , NEEs exported to HDEs
Patterns of consumption - PRESENT and EXAMPLE
NEES becoming more affluent, have their own middle class so increased internal demand
For example, Dyson UK saw a 75% growth in demand for its products in the Asian market in 2017 and just a 1/5 increase in Europe
Moved manufacturing to Malaysia in 2002
Moved headquarters to Singapore in 2019 (reflecting increase consumption in Asia)
Future patterns of consumption
W Europe, USA , Japan and China will continue being the highest consumers
Asia will increase consumption , especially due to Belt and Road initiative
Expansion of consumption of financial services in Asia-Pacific – lead to competition between HDEs and NEEs financial corporations
Why was there a global shift?
o Lower costs
Due to low land and labour costs
Incentives form governments in the form of tax breaks and special economic zones
Transfer of technology has increased productivity
o Due to FDI from TNCs , many emerging economies have developed competitive manufacturing industries
o China Open Door Policy 1990s
- TNCs also consider when moving
o Availability of skilled, educated work force
o Opportunity for expansion – new plants etc
o No tariff barriers
o Available infrastructure such as power supply, roads and ports – will often invest in these if other conditions are favourable
Consequences of the global shift
- Deindustrialization in the HDEs and the subsequent decline in jobs due to lack of investment
o In UK manufacturing industry has declined by 60% since the 1970s
- Deindustrialization in the HDEs and the subsequent decline in jobs due to lack of investment
- Government reactions
- Political reactions
- International Division of Labour
- Emergences of Tiger and BRIC countries
Government reactions
- Started to invest in deindustrialised regions and offered incentives such as tax breaks
- Invested in skills and tech to upgrade manufacturing and recently in the UK there has been an increase in technology manufacturing
- Put in place protectionist policies ot protect domestic production
o Could be counter productive by making these domestic industries less competitive globally
Political reactions
- The decline in standard of living in these deindustrialisation has led to the rise of populist and nationalist movements which were import in the 2016 Brexit vote and the trump election
International division of labour
- The highly skilled, highly paid, decision-making, research and managerial occupation which, on a global scale, are largely concentrated in more developed countries
- The unskilled, poorly paid assembly occupations, which are increasingly located in NIC’s, which have lower labour costs
Emergence of the Tiger and BRIC economies
- Many LICs have become NEEs and developed their own industrial and commercial bases and made markest for their own goods and services
- This started with the 4 Asian tiger economies (Hong Kong, Singapore, South Korea and Tawain), followed by BRIC (Brazil, Russia, India, China)
- Many TNCS have emrged from these countries , extending their global influence
- Thus new cores have been created
Trigger for globalisation
- Information technology revolution
- 1990s – communist blocs opening up and countries being added to the market economy
- Deregulation of the Financial markets in the 1980s (neoliberal policies)- Big Bang 1986 – Thatcher
Financial systems
Financial systems
- Global financial systems – used by TNCs, consumers, investors, financial institutions and regulated by the IMF . It provides framework for and facilitates the flow of capital
- Created after deregulation of financial markets in 1980 (BIG BANG) which made it easier to transfer money abroad
Why is it a trigger?
- Now financial services and business can access a wider range of financial products and services
- Easier for companies to access capital and for investors to diversify portfolio
- Began to integrate developing countries into the GFS and this has helped shape international trade
- Fewer concerns about exchange rates
- Secure online fast payments
Disadvantages
- Each area supplied by the same company/business – placelessness
- Increased financial volatility – interconnected so event in one part of the world has ripple effect – e.g. 2008 financial crisis – US house prices collapsed
How has GFS paved a way for globalisation?
However, transport is not the only factor which is responsible for globalisation. The deregulation of the global financial system has also paved a way for globalisation. Deregulation made it easier to move finance across borders, making it easier to trade with and invest in other countries. This allows more sales to occur in more places which can create a sense of ‘placelessness’ in which every area is supplied by the same company/business. The development of the global financial system (GFS) has helped shape international trade. Furthermore, the use of advanced communication/ electronic transmission systems means that transactions can be completed securely with fewer concerns about exchange rates so even more sales can take place.
Transport systems
- Improved transport has increased movement of people and goods and in larger quantities in a smaller amount of time
- How?
o Integrated air traffic network
o Growth of low-cost airlines
o High speed rail – HS2
o International airport hubs – Dubai has overtaken Heathrow as world busiest airport
o Containerisation – by sea, rail, road, and air
o Comms have improved logistic and management
o Growth of dry ports in less development countries
Where distances to sea ports are too long so make a dry inland port close to businesses – saves exporter time and transport cost as all shipments arrangement and documentation completed locally before goods shipped to a seaport
E.g. Pakistan – 6 inland dry port that go to Karachi for export
o New technologies – larger size of aircraft, - now movements of goods is quicker, TNCs can access to new markets , consumers have a wider range of products to choose
o For example, the trade of Coca Cola across the world has led it to become the second most recognised word worldwide, this would never be possible without transport needed to get it into the hands of consumers. - increase tourism as low cost – spreads ideas and closens ties
- when transporting products, also transports a new culture and ideas – globalise world
Disadvantages - increased spread of diseases – COVID
Importance of transport in globalisation
Transport could be seen as the most important factor of globalisation because it has made the world ever more accessible and vulnerable to spread of ’foreign’ ideas and products. This global transport network allows the movement of people and goods across vast distances. Products and commodities can be shipped more quickly because of containerisation (the use of standardised containers), increased aircraft size, growth of low cost airlines and air freight companies, high speed rail networks and management and distribution efficiencies. Furthermore, the use of dry inland ports provides local hubs of global connectivity. All these factors allow for faster transportation around the globe. This ability to quickly and easily move goods from one country to another has allowed businesses (TNC’s) to access new markets and customers, and it has also made it easier for consumers to access a wide range of products around the world. This not only has a ‘shrinking’ world effect as distant places are now readily accessible, but also causes a flow of information and culture as its products are used by consumers around the world.
For example, the trade of Coca Cola across the world has led it to become the second most recognised word worldwide, this would never be possible without transport needed to get it into the hands of consumers. Clearly, transportation is vital in trading products which in turn are important to spreading new cultures and ideas which lead to a more globalised and homogenised world.
SECURITY SYSTEMS
Introduction of security systems
Problems
- over reliance of comes/info systems led to threat of cybersecurity – high profile leaks of sensitive info
o average cost of the most severe online security breaches for big corporation in the UK cost £1.5 million
- globalisation has led to terrorism threats
- due to the world interconnectedness, we need stability or one of the process may come down and others follow (e.g. global energy market collapse, so does financial so doe political)
Security systems..
- given countries confidence when expanding.
o More security, means more confidence when trading and sending information s, so greater international relations and thus globalisation
- gives TNCs economic security
How do Security system work?
How?
- Screen and monitor movements of terrorism by security forces
- Growth of counter terrorism agencies
- Interpol organises police in different countries to work together to fight transnational crime
- Ensure imported products meet required safety standards
- Prevent the introduction and spread o harmful organisms /biochemical substance – biosecurity
- To secure supply chain , they ensure products are authentic, safe and can travel through borders freely
- To ensure economic/trade security – the world custom organization introduced ‘Authorized Economic Operators’ – AEO is awarded to exporters and importers who meet standard criteria
- Political security due to Bretton world institutions – such as IMF and WB – they ensure economic security and so political security
- UN, EU and NATO promote world security
How has comms tech triggered social globalisation?
Closer social ties
- Growth of technology (internet, mobile phones, satellite communications 1960s) means information is shared easily with few barriers to sharing data globally
- Stats
o 5 billion Facebook likes a day
o January 2023- 5.16 billion internet users worldwide, 64.4% of population
- Technology and comms make distance places seem closer (link to changing places)
o responsible for the shrinking world effect/ time space convergence
- It has created a global culture/community
o Global sense of place- Doreen Massey
How has Comms Tech triggered economic globalisation?
Closer economic ties
- Helps TNCs, global institutions etc..
o Internet, cloud computing and data analysis has facilitated the collection, storage, and analysis of data, allowing business to make more informed decision and respond quickly to changes in the market
- Brings security
o Enabled countries to share intelligence and law enforcement information -and work together to counter threats like terrorism and transnational crime
- Improve efficiency of transport
o Comms needed in transportation industry – logistics and distribution systems
- Improves manufacturing industries
o Robotic technologies have improved manufacturing operations
o Comms regarding design and production of new tech, infrastructure and transport (increased brain power to invent – the inventions then further globalisation)
- Global financial systems relies on it
o – development of internet and online payment systems – electronic payment replaced cash and checks
- Trade blocs
o Need comms to run efficiently , members need to communicate
Disadvantages of comms and tech
- Easier for terrorists and criminals to move across borders due to deregulation of borders
- Spread of misinformation has become a major concern
- Most media owned by a few large corporations – concerns over media bias and erosion of diverse viewpoints
- Increased potential for cyber attacks
Importance of Comms
Finally, the advancement of communication could be seen as a more significant factor of globalisation because of its pivotal role in the spreading information across the globe. Information today can now be shared easily and cheaply with a click of a button because there are few barriers to prevent the sharing of information and flow of data globally. There are 5.16 billion internet users worldwide- this quick flow of information clearly has a domino effect in the expansion of the globe and is a factor which the GFS, trade agreements and also transport rely on. For example, communication systems are responsible for the success of the global financial system due to the new age of online payment systems. Without this communication technology the GFS would be far less efficient and globalisation would not increase as rapidly because less trade would occur.
Similarly, communications allow information regarding design and production of new technologies, infrastructure and transport to be spread around the world, increasing the brain power to invent new technologies which in turn facilitate globalisation. Finally, communications are also vital in the transportation industry, providing improved logistic and distribution systems of world trade- for example computerised logistic systems have evolved to support supply chain distribution. Trading blocs would also be far less successful and very hard to run efficiently without advanced communication technology that allows members to connect each other instantly. Evidently, communications are vital in ‘shrinking’ effect of the world, perhaps more important than the physical transport infrastructure itself.
Management of information systems
- Better management and distribution of transport has reduced transport times
- Increased number of economies scale/ growth of supply chain means there is high volume production, management is needed to ensure that sales keep in pace with increased production
o For example, companies may use enterprise resource planning (ERP) systems to track and manage inventory, orders and production in real time
o Or customer relationship management – tack and mage customer interactions and data - JIT- just in time systems – boost efficiency of supply chain
o It ensures the correct quantities of materials, components and assembled good are available on time, in the right location at each stage of production
o This reduces cost by have fewer goods and material in stock
o So principle is that production pulled through by customer orders, rather than pushed through to build up stock
o Lower cost means more trade so more globalisation
Managing chains can be done remote which has been enabled by information systems which bring telecommunications and video conference, integrated ICT management systems
These management systems also boost globalisation by allowing - High order business actives (R and D, design and engineers, marketing and advertising) based at headquarters and strategic hubs
- Lower order activities (production and assembly) at low production cost location or near to large markets for finished goods
MIS led to growth of logistics and distribution industry
Disadvantages - Increase MIS like JIT has made supply chains vulnerable to disruption – COVID – shortage of goods
- Need to ensure data security and privacy
Types of trade agreements and examples
General Economic Cooperation- More loose knit and contains members with an interest in cooperation and development of trade, but no formal trade agreement APEC
Preferential trade Areas- When countries within a geographical region agree to reduce and or eliminate tariff barriers on selected goods imported from other members of the area
Free Trade Area Eliminates internal barriers but each member maintains independent external barriers ASEAN
Customs Union Eliminates internal barriers , one common external barrier
This means members negotiate as a single block within third parties CARICOM
Common Market
The same as a customs union, but with free movement of goods, services, capital and labour without any restrictions
-for a common market to be successful there must also be a significant level of harmonisation of micro economic policies and common rules regarding monopoly power and other anti-competitive practises
- there may also be common policies affecting key industries such as the common agricultural policy cap and common fisheries policy CFP of the European single market ESM
EU single market
Economic/ Monetary Union Operate as a common market with the additional integration of a common tax system or currency EU Eurozone
Overlaps of trading groups
- Denmark is a member of EU single market but not the Eurozone
- Subgroups of larger groups – e.g. UEMOA in West Africa a subgroup of ECOWAS
Always regional?
- Not all trade agreements are regionally based
o E.g. OPEC is made up of mainly Middle East countries but also S America and S Africa
o E.g. EU and Japan- Feb 209 – economic partnership- removes tariffs to encourage trade
o Transpacific Partnership
Advantages of trading blocs- GLOBAL
- Improve global peace and security, reduce conflict
o E.g. NAFTA – head of states met more regularly - Increase global trade and economic cooperation.
- Encourage socioeconomic development in middle and lower income countries
Advantages of trading blocs - national
- Economic migrants and remittances due to free movement of labour ( fill shortage of workers)
- Members are encouraged to specialise , knowing they have free access to each other’s markets, this allows comparative advantage
- Trade creation- increase in production and trade (high cost domestic porducers replaced by lower and more efficient porducers)
o E.g. NAFTA- trade quadrupled - Domestic industries protected from cheap imports – e.g. EU shoe industry from cheap imports from China and Vietnam
- Creates economies of scale – mass production for a large market reduces average cost of production
o E.g. NAFTA- manufacturing grew in the US- create d5 million jobs and increased economic output – helped them compete with Asian tigers - International status
o Can compete on a global level with other trading groups/ greater economic leverage in negotiations
NAFTA- more competitive bidding for government contracts reduced costs
o Attracts local and FDI because of a larger market size
E.g. NAFTA- FDI more than tripled. Mexico especially – TNCs produced there to gain access to markets (US and Canada)- maquiladoras
o Greater representation in world affairs - Faster transfer of technology
- Employment
- In monetary unions – common currency prevents exchange rate fluctuations and simplifies transactions
- Provide support for certain sectors (Agriculture in the EU) or regions – e.g. declining industrial regions (EU Regional Fund)
- Raise standards of living (healthcare and education)
- Promotes democracy and human rights
- Regional cooperation in emergencies – pooling resources in response to natural disaster, terrorism threats, pandemics
- The advantages of largest of the largest trade blocs are increased further as any similar trade agreement with LDEs are weaker and achieve limited advantages
Disadvantages of trade blocs
- Restrict the development of a global economy.
- Offer unfair advantages to members
- Blocs distort world trade and reduce the benefits of specialisation and comparative advantage
- Inefficient producer within the bloc protected from more efficient ones on the outside
o E.g. European farmers protected
o This creates trade diversion when trade is diverted away from efficient producers- forced to buy form within the group at artificially low prices - Leads to trade disputes
o Recent Boeing US/Airbus EU dispute – research
o US and EU have a long history of trade disputes
US Steel tariffs declared illegal by WTO in 2005
US applied 60 million tariffs on EU beef in response to EU ban on US hormone treated beef - Loss of sovereignty
o Decisions become centralised at a supra national level – for example, in the EU, the loss of freedom to negotiate separate trade agreements
o Pressure to adopt central legislation
E.g. European Court of Justice has ultimate legal power on issues like human rights
Some say that it is less democratic and more bureaucratic
o Loss of financial control – especially those in a monetary union –
E.g. UEMOA has to adopt a overvalued common currency which damages exports - Freedom of movement of labour increases competition for work and can depress workers wages- may cause unemployment
o E.g. NAFTA – job migration suppressed wages in US factories . Jobs stolen by cheap labour. - Increased interdependence can mean that some members of the group become overly dependent on others
- Over exploitation of shared resources- e.g. UK sharing its traditional fishing grounds with other EU nations, such as Spain and France
- Contributes to environmental problems- air pollution and CC
o E.g. NAFTA
US and Canadian mining companies degraded the Mexican environments – taking advantage of its natural resources and lax pollution laws - Loss of blue collar jobs in the most developed country in the block as manufacturer relocated to lower costs countries (e.g. Mexican maquiladora plants near the border)
USMCA
- During 2018- Trump renegotiated NAFTA, ratified in 2020
- Trumps goal was to reduce size of the US trade deficit that had built up with both Mexico and Canda
BREXIT
- 2016 referendum – 17.4 m to 16.1 m – OUT
- Left on the 31st January 202 , then entered transition period with the EU
Greece and the EU
- Major economic crisis in 2015- 4 billion euros in debt, and almost left the EU
- Stemmed from overspending on an inefficient public sector, combined with the 2088 financial crisis.
- Bailouts from IMF and EU
- Also struggling with a migrant influx in 2015
- GREXIT
o Economy autonomy
o Trade flexibility, regional trading opportunities - REMAIN
o Staying provided stability , access to European free markets and eased import reliance
Interdependence
Interdependence – each country depends on others and so what happens in one place will increasingly have impacts on others
Economic interdependence
social, economic and political impacts)
‘When America sneezes we’ll catch a cold’
- USA is a major economy that uses global systems to drive home its advantages over the rest of the world- unequal relationship
- Other countries where resources are more limited may only be able to respond to global events in a more limited way (recipients of change)
Economic
- Trade – countries rely on other countries to supply their needs and also to buy their exported products.
o Dangers- e.g. Russia’s policies on gas supply affects energy costs in Europe
- Tech
o Competing (or cooperating) with foreign business may bring new innovation , which can increase quality of products and services and make them affordable for consumers
- Employment- jobs lost in one place and gained in another
o For example, a UK manufacturing company might relocate to Malaysia, where they hire more workers at lower cost- more jobs in Malaysia, job losses in the UK
- International economic migration
o 2019- migrants accounted for more than 20% of the total population in 48 countries
o 20% of the UAE workforce are from the Philippines
o Provides much needed workers in some sectors of the economy, and the Philippines relies on remittances sent back
- TNCs and investment
o Work across countries, interdependence between HIC and LIC. LICs rely on HICs for investment and HICs on LICs for the goods
o May form joint ventures with local companies
- Supply Chains
o Different components span across many countries before being assembled
- Industrialisation
o Industrialisation is some places (BRICS) and is some places deindustrialisation and structural unemployment
Political interdependence
Political
- Countries rely on one another in intergovernmental organisations
o Provide stability, dialogue and consensus among nations
o IMF, WB facilitate capital flows
o WTO overseas trade
o UN
- Work together on common goals (e.g. COPs)
- Some argue that wars won’t happen because of interdependence
o Thomas Friedman 1999- ‘Golden Arches’ Theory where no 2 countries that both had McDonalds had fought each other since each got its McDonalds because their economies and cultures are so interlinked
o Disproved several times since
Social interdependence
Social
- Health – WHO took the lead in combating COVID- national governments relied on this advice
- Education
o Foreign exchange programmes (such as Erasmus on the EU)
o Study Abroad years – beneficial for students and institutions involved
- Cultural
o Migration – stronger social ties – for example – large Indian diaspora settle din the UK deepened its relationship with India
Environmental interdependence
- Global climate change – international summits , UNFCCC and UNEP – encourage all nations to work towards the shared goals of CC mitigation and biodiversity protection
- Global Commons- interdependent in sharing resources (oceans and atmosphere) – governed by the same international legislation
- Unsustainable practices – challenge environmental interdependence
o E.g. air pollution, acid rain deposition and deforestation (may happen in Amazon or S E Asia but impacts on a global scale may be irreversible)
Unequal flows of people
Promote stability, growth and development
Promote stability, growth and development
For developed countries
- Reduced unemployment – addresses important skill and labour shortage in places (e.g. NHS)
- Migrant workers increase workforce, pay taxes, spend money – promote growth and reduces dependency in HDEs with ageing populations
For less developed countries
- Reduces some inequality as foreign workers earn higher wages in HDEs
- Remittances sent back to developing countries provide stability and opportunity for growth
- Workers return to their country of origin equipped with new skills and ideas
- Reduce population pressure on resources, such as food and water, and services, e.g. Healthcare, in developing countries
Unequal flows of people
Cause inequalities, conflicts and injustices
Cause inequalities, conflicts and injustices
For developed countries
- Migrants and their families put pressure on health and education services in HDEs – and may be treated differently in the systems (inequality)
- If only workers are allowed to settle, families may be separated – which is unjust
- Migrants may be segregated formally or informally into certain areas
- Resentment towards migrants – ethnic and cultural conflict
- Some states , like Qatar and Singapore, depend on migrant labour for their prosperity
- Outsourcing of production, causes unemployment
For developing countries
- Lose younger, more talented workers attracted by higher wages – brain drain reinforces inequality and dependency
o Loss of these workers impacts on productivity , growth and development
- Overdependent on remittances
- Unfair working conditions – exploitation – e.g. 1400 dead in Qatar in World Cup Fifa
Unequal flow of money
Promote stability, growth and development
Promote stability, growth and development
For developed countries
- Profits from outsourcing or nearshoring or offshoring
- Stability from increased trade as trade encourages cooperation
- Economic growth – multiplier effect
- Increase in HDI
For developing countries
- Remittances – important source of income
- Borrow from the WB to fund projects (e.g. improving transport connectivity or for health and education programmes)- this can increase standards, access and inclusion
o Loans have to be paid back and this can only be done if the money has been invested effectively, which is more difficult if the loan is used for social rather than economic development projects
- FDI from TNCs or governments in Europe, Japan and the US raised average incomes and reduced poverty
o It is thought that over 1 billion people have escaped poverty in Asia for the last 30 years
o Stability from increased trade as trade encourages cooperation
o Economic growth – multiplier effect
o Increase HDI
Danger- this can create a dependency
- Foreign aid will help low income countries in times of need
Unequal flow of money
Cause inequalities, conflicts and injustices
For developed countries
- Deindustrialisation – loss of jobs
- Disputes over tariffs/ trade wars (unequal flow)- see earlier – US vs EU
For developing countries
- Workers dependent on higher wages may be subject to poorer working conditions
- Can become dependent on FDI from developed countries
- TNCs may pressure host governments to alleviate taxes or relax social and environmental laws
- Loss of profits – repatriation of profits by TNCs to their home country undermine benefits gained from investment in developing countries
o There may be limited ‘trickle-down’ from the FDI into the developing economy and this may exacerbate global inequalities in wealth.
- Foreign aid can reduced incentives for governments to help their own countries
- Increased internal inequalities – Gini Index - TNCs employ skilled workers and pay higher wages (40% higher than local firms)
- Low wages, modern slavery, child labour- poor working conditions
Nigeria example
EXAMPLE – NIGERIA
Promote stability, growth and development
- oil reserves of around 36 billion barrels and natural gas reserves of over 2800 billion cubic metres
- a single product economy- oil and gas account for more than 80% of its national income
- member of OPEC
o this aided its economic growth but it led to a dramatic decline in the traditional industries of agricultural manufacturing
Cause inequalities, conflicts and injustices
- rural to urban migration increased – rural poverty and overcrowding in cities such as Lagos and Abuja
- foreign oil companies develop its reserves as Nigeria does not have the tech or the skills – scant regard for local environment and the indigenous people
- oil spills are commonplace in Niger Delta and land rights of local people have been abused
- DUTCH DISEASE- the high income that is generated from oil result sin the Nigerian currency being significantly overvalue making imported consumer goods cheap – which makes domestic goods too expensive and unable to be exported – leads to deindustrialised which again makes Nigeria less internationally competitive and increased its reliance on imports (positive feedback)
Unequal flows of ideas
Promote stability, growth and development
Unequal flows of ideas
Ideas generally flow from wealthier HDEs to developing countries that want to emulate the success enjoyed by richer nations. Many of these ideas are associated with global capitalism.
Promote stability, growth and development
- Privatization: Dismantling state ownership of corporations can benefit consumers in LDEs by lowering prices
- Deregulation: Reducing government regulation and intervention can encourage enterprise (growth and development)
- Free Trade: Free trade allows global markets to develop and thrive and may help some LDEs to attract investment
- Multi-culturalism: multi-culturalism enables developing countries to integrate into the global economy and to access markets
Unequal flows of ideas
Cause inequalities, conflicts and injustices
- Privatisation: Profits are retained (rather than re-invested as is the case for nationalised industries), causing greater inequality and potentially inhibiting economic growth
- Deregulation: Deregulation can lead to more relaxed social and environmental laws in LDEs, causing social injustices and environmental degradation
- Free trade: Free trade may not always be beneficial to some LDEs; they may be disadvantaged.
o LDE (infant) domestic industries may be outcompeted by free trade so some protection may be needed - Multi-culturalism: Citizens may see it as a dilution of their culture and even a threat to their national sovereignty and identity
Unequal flows of technology
Promote stability, growth and development
Unequal flows of technology
Promote stability, growth and development
- Access to mobile and internet services is transforming people’s lives in less developed countries
o E.g. UGANDA VILLAGE PHONE
Microfinance project supported by the WB
Loans for smartphone that link to an improving network of telephone masks
Enables access to internet in remote rural area – improving quality of life
Enables small business, based on information provision, to be established, for example, providing information to local farmer on prices
- Transfer of labour-saving technologies from HDEs to developing countries can promote growth
- Can support education
Unequal flows of technology
Cause inequalities, conflicts and injustices
Cause inequalities, conflicts and injustices
- Access to technology is limited as unaffordable to many – unjust given the assembly of product in often based in developing countries (they receive very low wages compared to selling price of the goods)
- Labour saving technology can put people out of work, leading to high employment and poverty
o Occurred in agriculture and textile industries
- China limits access to the internet with its firewall – censorship and via fines, arrests, lawsuits etc…- unjust
- Only 30% of Sub Saharan have access to the Internet, 91.52% North America
- South Sudan – 7% internet access
Uganda example
UGANDA – unequal flows of people, money, ideas and technology
Promote stability, growth and development
- Mobile phones
o farmers pay access to the internet to gain information about the price they might pay for seeds at market or information on new farming techniques
Cause inequalities, conflicts and injustices
- Part of the British empire – IEAC strongly influenced the country’s exports
o Low value products – cash crops of coffee , tea and cotton dominate Uganda still today
o Unsustainable fishing industry introduced by the British – near extinction – fish factories have closed – knock on effects of the economy
Inequalities between and within countries
- Indicators suggest that globalisation is reducing global inequality through the transfer of capital and income from richer to poorer economies.
o The development continuum is becoming more condensed - Paradoxically,
o The Gini index/ Lorenz Curve indicates that, over the past 25 years, income inequality has increased within most developing countries, suggesting that globalisation has had a negative effect on income distribution.
o for example, South Africa has one of the highest scores with 0.63.
o Why?
TNCs employ skilled workers and pay higher wages (40% higher than local firms) - An increase in inequality also applies within highly developed economies. Many countries, including the UK, Canada and even traditionally egalitarian Sweden, have seen a rise in income inequality.
Unequal power relations
- Wealthier developed countries wield more power , enabling them to steer global system to their advantages
o How?
Have more wealth, advanced tech, military power to use on a global scale
Provide aid , investment and transfers of tech and medical knowledge to developing countries in return for geopolitical support
Wealthier countries work together and have close relations – G7,G20 and OECD- use these intergovernmental economic groups to be more influential in driving global economic and political systems – Security Council UN – allies
More influence in global governances (in the UN, IMF, WB, WTO)- due to post WW2 nature of the organisations - This can provide stability and development but also powerful nations whose vested interest can use their influence to heir own advantage
- Stats- OECD- Today, OECD member countries account for three-fifths of world GDP, three-quarters of world trade, over 90 percent of global official development assistance, half of the world’s energy consumption, and 18 percent of the world’s population
Unable to respond or resist - Less influence or power to intervene so depend on decisions made on wealthier countries – constrained in the way they respond to geopolitical issue- need support from allies
Unequal power relations - CC
Climate change
HICs ‘Drive global systems to their own advantage
- contribute most to emissions
- US pulled out of Paris Agreement
LICs-‘unable to respond or resist’
- Impacted the most by CC yet contribute little
unequal power relations- China - Investment in Africa
China expansive foreign policy
- 2 foreign polices to expand its wealth and influence (investment in Africa and the ‘Belt and Road’ initiative
Example – Investment in Africa
- Increased demand for metal, frontiers of metal exploitation have shifted from north to South – particularly apparent in Africa
Drive global systems to their own advantage
- Wants to extract raw materials to support industrial expansion in China
o To do this, trying to gain political support and stability by investing in poorer African countries to develop housing, healthcare and education
- China has invested in Africa, created new trade routes – political implication of increased African Asia cooperation
o Investments
Joint venture with Ethiopia to build the Grand Renaissance Dam to provide HEP
Develop port Mombasa in Kenya – road and bridge link to Nairobi and to South Sudan oil field ($14 billion)
Modernise Benguela railway – linking DRC to Anglolan port of Lobito
o Nearly 1.5 million Chinese now live in Africa
Unable to respond or resist
- China argues there are no strings attached for this development but critics point to the unfulfilled Chinese promises of development assistances, flooding of cheap Chinese manufactured goods into African local markets, and its working practises are unsafe an unethical
- E.g. 2011, Collum Coal Mine, Zambia – Chinese operation managers shot 11 African workers for protesting against poor working conditions
o Following year, a Chinese manager killed during a pay dispute
o Year later the Zambian government seized the mine
BRI- drive systems to their own advantage
Drive global systems to their own advantage
- Belt and Road
o Launched in 2013 to boost trade across Asia into Europe and Africa – ‘modern silk road’- ‘chinese marshall plan’
o Overland routes (belts) and maritime (roads)
o Includes 71 countries (account for half the world’s population and a quarter of global GDP)
o $1 trillion
o China- Pakistan corridor - $46 million - gives China direct access to imported commodities from Africa and oil from Iran
Unable to respond or resist (constrained)
- Concerns it is a form of economic imperialism, giving China too much leverage over other countries
- BRI
o In the BRI, China will except some repayment from the countries from which it is investing – poorer countries, especially those in central Asia, will not be able to afford to repay these debts
The affected nations – Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan and Tajikistan – are among the poorest in their respective regions and will owe more than half of all their foreign debt to China.
Critics worry China could use “debt-trap diplomacy” to extract strategic concessions – such as over territorial disputes in the South China Sea or silence on human rights violations.
E.g In 2011, China wrote off an undisclosed debt owed by Tajikistan in exchange for 1,158 sq km (447 sq miles) of disputed territory.
o China’s dominance comes at the expense of local contractors in partner countries
o Also government risks (corruption and procurement), stranded infrastructure, environmental and social risks
Example - China vs Europe, US and Mexico
Drive global systems to their own advantage
Example - China vs Europe, US and Mexico
Drive global systems to their own advantage
- Steel dumped during the Chinese construction boom faltered in 2015 when demand for steel in the country fell and tried to sell it to the international market instead
o Chinese steel is state subsidized and made its price very competitive - G20 argued too competitive
o Sold even below cost to produce it
Unable to respond or resist
- Steel plant closures across Europe, US and Mexico
- Tata Steel, UK, 2016
o UK nearly in conflict with China , but UK needed Chinese investment in 18 billion nuclear plant, Hinkley Point
EU did respond by imposing anti dumping duties for six months on selected steel imports from China and Taiwan (but in a constrained way)
Geopolitical conflicts
- Conflicts may be based on resource shortages, strategic territorial claims, exploration rights, supporting political allies or minority groups within countries
o E.g. For example, the US permanent position on the UN Security Council may have shielded Israel from wider UN criticism for policies disadvantaging Palestinians. (able to influence geopolitical events)
Russia annexation of Crimea 2014
Russia annexation of Crimea 2014
Background
- Crimea was once part of Russia before USSR, ceded to Ukraine during the soviet era
- Russia continued to use Sevastopol (warm water naval port- ice free all year round) on Crimea’s black sea coast
- 2014- revolution in Ukraine (large Russian population) when the ‘Euromaidan’ political movement demanded closer ties with the EU and eventually overthrew the pro-Russian government
o Geopolitical shift to the west, prompted Russia to take action
Directly influence geopolitical events
- Putin took military control of Crimean Peninsula, strengthen its Black Sea Fleet and supported Russian separatist groups in eastern Ukraine
o The Crimean Supreme Council had voted to accede to Russia – gave some authority to Russian claim
Unable to respond or resist (constrained)
- 114 UN member states do not recognise the annexation , 17 pro Russian states do
- Ukraine lacks the leverage to restore sovereignty over Crimea- not a member of EU or NATO - so had no military assistance from the west
- G8 membership suspended- became G7
- EU and USA imposed trade sanctions
- Yet, EU constrained as it was dependant on Russia for energy supplies – link to 2022 invasion
- US increased its maritime presence in the Black Sea, along with NATO partners
