Globalisation And Trade Flashcards
What is globalisation
A process of deeper integration between countries and regions of the world
What does globalisation involve
- more trade
- increase in FDI
- development of global brands
- spatial division of labour
- internal migration
What % of the world output does the UK contribute to
Less than 3%
Key aspects of globalisation
- trade to GDP ratios increase
- large financial capital flows between countries
- rise in FDI
What is trade
The exchange of products between countries
What can trade be a driver for
Sustained GDP growth and rising living standards
What is one way of expressing the gains from trade in goods and services
To distinguish between static gains (allocative and productive efficiency) and dynamic gains
When does a country have comparative advantage
When a country has a ‘margin of superiority’ (Ricardo) i.e. where the marginal cost of production is lower
What needs to happen for mutually beneficial trade to take place
The two nations have to agree on an acceptable rate of exchange of one product for another
What are the key assumptions behind comparative advantage
- occupational mobility of factors of production (switching factor resources form one industry to another involves no loss of efficiency and productivity)
- constant returns to scale
- insignificant externalities from production and / or consumption
What type of concept is comparative advantage
A dynamic concept meaning that it changes over time
What factors are important in determining the relative unit costs of production
- quality and quantity of natural resources available
- demographics
- rates of capital investment
- increasing returns to scale and division of labour
- XR
- protectionism
- institutions
Why is comparative advantage often a self-reinforcing process
- entrepreneurs
- economies of scale
Main gains of trade
- reduce poverty
- increased market competition
- better access to new technologies
- inflows of specialist knowledge
- economies of scale
- better use of scarce resources
Successful international trade provides:
- source of foreign exchange
- financing capital equipment
- injection of demand
- increased employment (+ multiplier effects)
