Globalisation And International Trade Flashcards

Question

Causes of globalisation- trade liberalisation and gradual removal of bariers to trade

Answer 1

Dismantaling tarrifs on iimports Quotas-limits q of imports Complex customs procedure- eu none- tmelyu Comm technology systems- us diff catalytic convrtgor

Answer 2

Vompanies with oepration in more than one coutry Eg macdonalds, toyota, alphabet

Answer 3

Firm expands by takeover or merger Bmw mini, Jl tartar over landrover Mars over hotel chocolate

Answer 4

Increased fnancal capital spread Fund investment- ie nissan battery plant in somerset

Answer 5

Easier to communicate internationally Zoom, emails ect

Answer 6

Decrease prices- specilisation, greater comp, move to low cost countries- clothes india andpakistan But in some gs where supplu not perfectly elastic high anounts waste Real econ growth in china and other econ has increased demand for commodities such as oil, ematlas ect

Answer 7

Wider variety- exotic furit, hliday destinations But homogenisation of many gs- macodnalds- reduces cultural diversity

Answer 8

Raises world gdp and av income per capita esp higher skilled pwrkers-it finance law Specialisationa nd trade more productive Relatively closed econ, not embrace globalisation- cuba and nk seen growth rates fall But Low skilled workers may lose jobs- structural unemp New firms in service sector often fraggmented less unionised and lower rpaid Lower wages in agricuture due to ledcs

Answer 9

Increase world gdp and increase level s of emp But accelerated shock may create structural econ loss- labour intensive makret may move where cheaper, less developed ecn larger transfer of worker from rural to urban areas- increase real income higher material living standardss

Answer 10

Anti globablisation argue that increase inequality Real income risen yet fallen in many other parts war (sudan), climate change, lack education (esp war Uk rise income inequality- unklilled labour,s turctural econ change, higher paid in skilled Technological innovation disproportionaly enefit skilled worker

Answer 11

Firms with physical operations in more than one country ie macdonalds google When set up in another country (fdi)- build plants/factory, open retail outlet, purchase majority shareholder- mondelex international/kraft over cadbury

Answer 12

Diff stages of production process taking place in diff countries Bp oil rig refinery petrol station

Answer 13

Perform the same basic oeprations in each of the country in whcih they operate Ie tesco- stores uk ireland eyripe May specialise in capital goods industry and may not be h ousehold name siemnas

Answer 14

Locations close to target markets- avoid transport costs, greater market orientation Locate close to sources of raw materials /corperations- eg oil mining Take advantage of low cost production facilities or geographical characteristics- flat land Take advantage of cheap labour- dyson malaysia Take advantage of skilled labour- pharma near uni cambridge, recruit from uni Low corporation tax in host country- increase retained profit- ireland alogabet Expanding markets/prodction may lead to econ of scale, decreasing ac, decrease unit cost, decrease prices, increase profit margins Longer term survival of company due to spread of markets- spreading risk may maintain when recession in one country By setting up prodcution in target market, transport costs, import tarffis and quotas may be avoided- nissan in uk avoid eu external tarrif

Answer 15

Many gov forom developed and less d wish multinat as provide employment Expirts increase injection positive multiplier Technology transfer- multinat introduce new ideas Train and educate local worjers- nissan ne greater standard of life than fordm engineers trained up to meet requirements, boost overall rpductivity Direct inward investment from multinat- nissan battery plant sunderland for new electric model gov contribute

Answer 16

Regulatory capture Lack social responsibility Job displacement Trojan horse effect Tax avoidance

Answer 17

Multinat may pressure gov to legilsate in their favor Mondeliex internat campaign against sugar tax and more labelling

Answer 18

Double standards May be indirectly subcontractorsor directly Primark- exploitation of labour Pollute enviroemnt- bp shell, oil spill in gulf of mexico Tax avoidance via transfer polucy- anaxon

Answer 19

Some multinat have no loyalty to host country and may close operations very rapidly when econ climate changes Hoover dijon fr to glasgow Uk offer large grants and financial incentive to entice fdi yet some opp cost- not spent on domestic firm

Answer 20

Over reliance on multinat by a host country displace or crowd out domestic market Leave host econ vulenerable if multinat switch countries- ie chepaer labour

Answer 21

Through transfer price agreenents Buy and sell between nat office- ie london opp more profitable and dublin office sells it Unethical as using country public goods yet not contributing Min coroporation tax (2021) 15% g20

Answer 22

When multinat bring finance from their country of origin and invest in greenfield sit ein host country ie nissan factory ne, net injections multiplier Direct investment recorded in financial account of bop Once operation starts make profit, post tax profits may be reptairated to country of origin/offshore and recorded as an outflow/invisable import in current account bop Eu now rules of origin limits opp to evade tax and compenent parts sold to a tranfer company and sold tax free ie vw 1970 sbraxil Current account largely benefit multinat direct investment Uk net investment aborad with inward investment being higher outward investment- gnp via net property income from abroad- pisitive impact But reversed in recent years

Answer 23

Removal of foreign exchange controls by most developed econ and improve in info tecnology means huge sums of money can be moved between firm centres Multinat and foriegn may have large cashflow suplus at avrious times over the year Money can vbe invested in moving moneymarkets around world within 24 hours Move these cash suplus where can achieve highest rate of return in interest rates and excess rates- hot money flows seculation Rapid extremely volatile, may destablis eindustyr Britain exit erm in 1992 can be attributed to massive hot money flows out of uk as speculators sould pind sterling believing to be devalued

Answer 24

Icnrease operations and sale rev to increase net assets of business

Answer 25

Ie takeover and merger May be cheaper to take over when share prices low and weak change rate Quicker Existing customer base Vertical and horizontal already

Answer 26

Take over unrelated business Ie sony- emi music records but electrical equipment

Answer 27

If firms ethical in way operate and look after interests of all stakeholders positive immage, boost slaes, increasel likely survival But free market friedman- main objective of private sector business should be to max profit of shareholders If fiems seek to min costs and max sales more efficient allocation of resources, increase innovation, decrease prices- max welfare gain society in lt Not the job of businesses to look after intersts of society and social responsiblities distract from primary role- could lead to waster of resources Free makret role of gov to put laws in place to prevent market failure to avoid exploitation of factors of production Uet even most effective regulatiures to do not protect stakeholders efforts - ie after thiadamide incident more rigerous testing Environmental protection may not be major concern

Answer 28

Tarrif Qupta Subsidies to domestic prdocuers that export Complex admin procedures imports Complex or non uniform systems Trade embargo Boluntary export agreement

Answer 29

Tax on imported goods Import duty, Deliberate attempt to discriminate inmports and protect home industry Can also increase gov revenue to fund public spending Increase price so switch domestic producer Yet domestic consumer lose out by paying higher price- as domestic producer also sell at higher price

Answer 30

Physical limit on q oof good imported Physical control Limit of imports increase share of market available for domestic producers Increase price of product domestic consumer lose out But lead to gains to domestic importers as those who still import win reduced q allow higher price As buy at world supplu, sell at higher, greater profit

Answer 31

Money lagrley wasted due to oppcist Although incnrease welfare producer, increase can benefit welfare gain See diagram

Answer 32

Unecessarlily lagre delays as customs posts Esp posty brexit Increases costs as seen us and canada border Problem perishable goods ie fish

Answer 33

Cars in use diff catalytic converter Uk 3 point plug

Answer 34

Ie nhs purchase drugs even though if cheaper abroad could be imported

Answer 35

Econ sanctions Ban on imports Russian oil gas Illegal drugs weapons

Answer 36

Uk with japan that they should not take uuyp more than 10% car manufacturing market in uk

Answer 37

All countries protect domestic industriesto some extent ie agricultire Proetction of infant industries Protection of sunset industries Strategic trade theory Proetction against dumping Protection of empoyent against cheap labour

Answer 38

Developing country Poretct infant idnsurteis from established rivals in advanced econ to take adv of econ of scale ie technological managerial financial econ of scale Japan did so post ww2 with infant car industies Even devekiped econ such as uk subsidise infant indsurteis such as biotechnology idnsurty- tax breaks for science parks, rand d Wto support this for developing countries- but when stop?

Answer 39

Developed econ Minimise impact of structural econ cange- buys time to adjust , as can lead to deinstrialisation mass unemp regional decline and econ imbalance Argument for multifibre agreement protect eu from cheap textiles from asia- yet wto pressure to withdraw more quickly as most developed econ have welfare state and ecuation system to help structural unemp to accept sturctural econ change

Answer 40

Krugmen Gov can create comp adv by nurturing strategically selected industry or econ security- justify protecting industries while company developing Skills gained in developing it sector or energy sector may spill over (positive externalities) to help ptehr sectors Protectionism can prevent explloitation by fair business practises Protect strategically improtant industrie-s shipbuilding defecne Proetct culurally important industries=- fr film industry, idnependent book shops

Answer 41

When a country produces too much of a good for domestic consumption so sold below cost price on foriegn markets Eu common agriculture policy pricing following overpricinbg of agricultural produing in eu 1980 and 70s- dumped on less developed econ China dump cheap steel eu

Answer 42

Mass strctural unemp in developed econ by exploitation cheap leab on less developed econ where human rights abused Seen esp where minimal unions workers rights, sweat shops- yet better than subsistence farming

Answer 43

Welfare losses Retaliation Props up inefficient and omnopoly prodcuers Protection redistributes income in favour of producer Counter to protection for employment against cheap labour

Answer 44

Occur due to econ ineff as countries are not specialising in porducing these gs- lowest op cost Domestic consumer pay higher prices Eu proetctionism for food process- ground coffe or cocoa powder face much higher tax than raw onese Estimated that w trump av household lost 1300 dollar per yearr= ig protectionism

Answer 45

Countries who feel that their domestic industries will be harmed by protectionism are likely to retaliate Decrease world trade to detriment of all- country around world pay higher price- dynamic benefits of free trade and greater comp are lost Ie current trade war china and us- increased 0.5% against us

Answer 46

Do not face efficient or effectove cpm[ Many italian and fr textile firms delayed trying to compete with cheaper textile imports- went as luxury Less efficient allocation of resources

Answer 47

If one country stops with free trade protectionism Increasing prices Sugger increased unemp

Answer 48

Structural unemp in developed econ helped by werlfare payments and acess to education and retraining Poorer working in less developed econ still better off than subsistence farming Yet also vital consumers put pressure on multinat to prevent exploitation Gov can also put pressure on less developed econ to put laws in place to protect human rights in return for trade deals

Answer 49

Measrying the rate of exchange of one product for another when two countries trade Index= 100 x av index export prices/av import price index Ricardo theory of comparative advantage explains that if country specilaise in production of gs in which have comparative adv- all countries mover own ppf and gain from trade

Answer 50

Increase terms of trade- import cheaper food, increase standard of living Weak exchange rate, icnrease imports, decrease terms of trade- makes imports more expensive

Answer 51

If a country can buy more imports with a given q of exports, terms of trade imporve Consumer price boom, terms of trade increases increasing export further Deterioration terms of trade- exports cheaper, imports more expansive Factors affected- exchannge rate, elasticity for demand for export

Answer 52

More internat trade- structural econ change, areas that lose comparative adv regional decline and market shifts where competition increased- but occupational, geographical imobility fo lab factors of prduction Internat trade benefits consumers when can obtain more cheaper products and have highreal income May benefit producer who can expanc into export market or take advantage of of cheaper imports But may lose jobs structural econ change

Answer 53

Extent to which imports have met needs of market as % of total shares

Answer 54

Price Product- design, durability, appearance, innovation, after sales service, reliability Promotion- brand image, ads Place- availbality distribution Jlr-high value added Bae innovative

Answer 55

Main objective is to reduce tariffs and other barriers to trade whilst also eliminating discrimination in trade Forum for multinat trade negotiations between its 164 member countries to contribute incnreasing libing standards Most favored nation pricniple applies when one country member that offers a reduction in tarrfis to another country must ofer the same reduction to all other members

Answer 56

Create a level playing field - firms compete on equal terms for bysiness No firm will be protected by tarrifs quotas anti comp practtises cartels or tacit agreements

Answer 57

Countries jpin wto must consider effect of decreasing quotas and tarifs on bop and domestic econ as lead to sturctural eocn change Special circumstances- econ crisis, protection infant industry- may be exception Anti comp pactises in diff countries may discourage importers- despite removal tarrifs and quotas A country in wto may prefer not to offer a tarif reduction to another country as would have to offer the same reduction to all other measures May have to apply dif measures to remove proetctionism- with uraguay tooik 4 years in 90s to negotiate

Answer 58

Uet to reach a satisfcatory conclusion Iam to help develiping counrteis expandtheir trade through develiped countries ipen market to exports from developed countries Developing countreis not expected to liberate their markets to same extent Eu declared eliminating agricultural export subsidies

Answer 59

Some developing countries Envrionmental groups Antiglobalisation pg Tu in developed econ

Answer 60

Developing countreis and environmentalists concerned about wto ruling failed to protect dolphins from fishing nets or envrionmental exploitation for develiping countries to multinat such as shell Labour unions threat globalisation and structural econ change, exploitation of child and female labour

Answer 61

Not trading with developing countries confides many poorest countries to remain poor Countries ngo and media can out pressure on retailers and multinat to ensure good conditions along supply chain

Answer 62

All countries can benefit from speiclaition and free trade Inequlity on gini cooeficient drceasing as living standards increaein china and india But tirckle down doenst happen increasing inequality in developed en Esp not african countrieis sucha s congo Judicial failure/corruption- contracts not upheld, no one rent land properly, intellectual rpoerty copied, exploiation of workers- rulee of law nt enforced War- spnedt on weapons not pubilic goods, destorus productive capacity

Answer 63

Can involve two ountries reducing tarrifs on each others goods or perhaps reducing bureacracy by simplifying import/export procedures

Answer 64

Might inivolve creating free trade areas Creates larger amrket, greater access to raw materials, more comp Should lead to lower unit costs as firms are able to gain econ of sclae

Answer 65

Eu Usmca- us mexico canada

Answer 66

Members eliminate trade barriers between themselves but each country cant operate their own barriers against non members

Answer 67

Members eliminate trade barriers between themselves and establish uniform barriers against non members and common external tarrif

Answer 68

A customs union ytat also provides for rthe free movement of labour and capital across own borders Eg european single market

Answer 69

Free movement of goods, money and workers Integrate monetary and fiscal policies (not necessarily shared currency- that is monetary union)

Answer 70

Shift in domestic econ spending from a higher cost domestic sourec to a lower cost partiner source within customs union As a result no tarrifs in intra uiinon trade Ie uk families get insurance from chepaer fr rather than uk sources

Answer 71

Increase consumer suprlys Income effect- frees up inocme for othe rg&s- esp if domestic Firms may benefit cheaper raw amterials compenent parts within customs union- ie western european car manufacturer can get tcheaper galss or rubber tyres from within Trade creation should stimilate an increased intra eu trade within cutsoms union and efficient utilisation of scare resources Gains in producer and consuemr welfare

Answer 72

Like qupota one with lower for eu than world suppluy Abcd producer gain B+d net welfare gain

Answer 73

Shift in domestic consumer spending from low cost world source to eu partner source higher cost Tarrifs mean importing expensive to Maning more expensive, high cost producer and consumer Welfare loss Trade diversino likely with agirculture and processed foods

Answer 74

Tarrifs A+b welfare loss C= rev tarrif to eu

Answer 75

Promote free trade- consumers and frirms should purchase from most efficient supplier within eu Specialisation increases output to higher incomes and rising living standards Firms expand by selling to larger markets taking advantage of of econ of scale Greater comp between firms within eu- low prices ect Free trade should enhance allocative and productive efficiency

Answer 76

Common market Free movement of factors of production- largely capital and labour As wel as eliminating barriers to trade such as tariffs and quoteas Removal all border controls Goods produced witin have same technical standards- min health and safety environmental standards but less standardisation with services market

Answer 77

Bodies inc creating european policy Council of ministors- made yp of heads of states or their reps- unanimous decision makiing European parliament composed elected members like hol- rubber stamp and ammend Eu commisoners are appt bu the gov of member countires- propose policy and are responsible with carrying out once ratified by council of ministers and eu parliament

Answer 78

Rresponsible for creating a level plaing field on which the effiicent workings of single market depends Objective to encourage competition- make buisness behavoir as close to perfect comp as possibel

Answer 79

Collusive aggeements between suposedly independent competition organisations Power exeryted by firms with degree monopoly power Distortions of market resulting from gov subsisies legal restrictionas and purchasing policies

Answer 80

Investigate compliants Initiate complaints Search and size documents and records Produce a reaosned decision on its findings which can be carried out by nat gov or commisisoner itself Impose a fine of up to 10% annual business turnover

Answer 81

Coca cola premises in ger austria and denamrj- ability to demoniat position by making retailers stock full range of coca cola- full line forcing and offers loyalty ddiscounsts that rwuire distributers to seell less competitor products Interbrew/inbev- producer stella artois- dominant belgian beer brew raided of allegations of practises that excluded competing beers from bars Ba fined 6.8 million euros for operating loyalty shceme that discourage travle agents from rival airlines ickets Fr gov chalenged over subsidies to bank credit lyonnaise Apple fined $14bn nfor sweetheart tax deal with irish gov which eu comcluded resulted in state subsidy

Answer 82

V slow investigating and coming to conclusions V diff comm to enforce deciisons on nat gov- serveral countries have notorious record for ignoring eu rulings Eu comp comm tries to control retrains on trade by businesses while many gov want to lok after some rtad indisutries to proetct jobs and promote nat pride and own political dutrie Trade off- country emp and efffective comp In theory eu single market and single currency should lead to smae price of goods across eu yet vat fidd- challenging price harmonisation If firms are operating business agreements or joint ventures dont consider harm to consumer can notify eu comp comm- asking exemption from ruling but problem idf later challenge

Answer 83

Free to negotiate trade delas No longer transfer funds to eu to subsidise farmers Gained fishing righst No longer eu emp legislatin Fiinancial services sector Own targets green poer generatiuon Free movement lab Free subsisdies

Answer 84

Since leaving eu singed trade deals 71 countries and 1 eu But majority simply rollover deals copying terms of when in eu Despite free trade deal eu, signif more barrierst o trade than when uk memebr of eu and single market- complex customes forms, uk financial firms lost their ‘passport’ to trade acorss eu without restirctions

Answer 85

Treaty savung up 8bn - uk recived 3.5bn for farmers Food oculd become cheaper in uk but famrers lose subsideis Under wto rules cuountries may reduce import barriers as long as dont beneift some over others- Yet stilll aas eu does too highe comon external tarrif on agriculture- leading to trade diversion

Answer 86

May be better able to protect fishinhg sites as icelnend did so outside ey Exluding eu fisherman from waters protects fishing righst

Answer 87

Uk could scrap working time directive (no more 48h per week unless volunteer Abandon agency workers directive which gives temp workers swme rights enjoyed by permenant staff Free to remove rules on health ssafety maternity and paternity levae

Answer 88

Free from obligation to abide by ever changing eu rules 2022 gov pans of edinburgh reforms further deregulation- scrap cap abankers nss, lure back more hedge funds

Answer 89

Could mean cheaper power but could undermine eu and global initiatives to reduce co2 emissions

Answer 90

fewer migrants form eu Reduce pressure on public services esp se But led to labour shortage and minimal labour displacement at time

Answer 91

Single market Customes Decrease exports Financial services Decrease gdp Research projects science

Answer 92

Not frictionless trade and freedom of movement of factors of production

Answer 93

Uk exports customes frmms- red tape- increase cost Delays discourage some su costoms buy british goods- uk farmers producing shellfish and salmon perishable goods Whilst nissan and toyota agree remain- honda closed operations in eu, bmw no loonger pfouce electric mini in uk

Answer 94

Down 14% in 2021

Answer 95

Lost direct access eu and passport rights which allowed major global banks to serve acorss eu from britain Around 7,000 financial service staffa nd apporx 1.3trn on assets lost to eu

Answer 96

4% fall 40bn lossu k gov tax rev

Answer 97

Ie science Ie horizzon european innovation programme and galieo project Lead to brain drain and potentially damage uk econ in lt due to lack innobveation But uk gov announce extra 15bj of dunss for uk based science projects

Answer 98

Intro- define protectionsism, example tarrif quota Benefits free trade- loss of tarrif Krugman strategic trade theory Retaliation Exploitation of lab Loa- limited protection with strategic tade thoery

Answer 99

Net welfare gain free trade- diagram- choice market, gainning export marets ect Net welfare loss result import tarrif or quota

Answer 100

Protectionsim justified as gov create comparative advantage than nurturoing strategicc selected industry Proetct infant and sunset industries Protect against dumping, strategic or culturally impoportant industry

Answer 101

Wto temporary protection of infant (china) and sunset (multifibre agreement) provided gradually lifetd as industry more comp or econ developed more comp industry to replace those in structural decline Proetct against dumping justfied providing can be proved- but diff Portect strategic or culturallyy important eval case by case

Answer 102

Trade war-china and us, us and eu 1930s proetct deppen depression Supply side policies target welfare policies may he;p to develop and econ adapt more effectively to structural eocn change rtahe rthan resorting to proetctionism Eductaiona nd training by encourage occupational mobility and regiuonal policu with geographic immobility Flexibility programme denmark v effective and copied

Answer 103

Many ledcs cannot affort welfare and limited education provision infrastructure not position to compete with mroe comp econ Protection measures with strategic trade theory may be jsutrifed

Answer 104

Ie multinat sweatshops in developed countries Yet cont freee trade but ngos and media highlight human and property rights- thus consumers do not have assymetircis info Put pressure on retailiers and multiat to ensure integrity of suppyl change Important to reach and enforce international agreements on proetction of property rights and human rights International greements on tax avoidance reduce increasing global ineuality associated free trade Nike accuseed exploitation but improved

Answer 105

Supply side policies Well educated, higly skiled workforce Infrasturcture Investment r and d Comp markets Low tax Deregulate Low stable inflation Stale exhcnage rates

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Globalisation And International Trade Flashcards

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