Key Players In Globalisation Flashcards
What do international organisations influence?
The pace + nature of globalisation
International Monetary Fund (IMF)
IMF promotes financial cooperation + trade between countries. Provides loans to member countries in exchange for lifting trade restrictions
World Trade Organisation (WTO)
Set up to increase trade + help resolve trade disputes between member countries
Sets rules about how countries should trade with each other
World Bank
Member countries pay a subscription to the bank - then loan money to less developed countries
Why were these 3 organisations formed?
Formed after the Second World War to try build stronger relationships between countries
Hoped these relationships would strengthen the world economy as well as prevent the outbreak of another world world
What does the World Bank, IMF, WTO do?
Advocate free trade + opposes protectionism :
- encourages countries to join/form trade blocs. Reduces tariffs placed on goods that are traded internationally
- work to make trade legislation more practical for trading nations
Encourage national governments to accept FDI
Free trade
Unrestricted trade between countries
Protectionism
When a country uses tariffs + quotas to limit trade in order to protect their own industries from foreign competition
Foreign direct investment
FDI is when a person, company, other group spends money in another country in order to generate a profit
E.g. by opening a new branch of their business or investing in local infrastructure
FDI can also take firm = merger between 2 companies operating in different countries.
Or = acquisition = TNCs take over the running of a company in a different country
The work = international organisations can be controversial
Some people believe international organisations hold too much power over global flows of capital + goods + act in ways that are unfair to some countries
- to receive a loan = IMF + World Bank countries need to abide = strict rules + conditions (structural adjustment programmes) which can be difficult for poorer or developing countries to follow
- governance = WTO, IMF, World Bank is predominantly found in developed countries - means developed countries cast most votes in key decisions. Some decisions may serve the needs of the richer nations over the needs of poorer ones
National governments make decisions that affect globalisation
1) some countries = protectionist while other follow policies that promote free-market liberalisation. Policies remove restrictions placed in the trade of goods + capital between countries (promoting stronger connection)
2) national governments = privatise services that are run = state (rail network) + allow buyouts from overseas companies
E.g. 2013 a share = Manchester Airport Group was sold = IFM Investors = Australian investment management company
3) Gov can give incentives to foreign companies (subsidies/lower business rates) to encourage them to relocate their operations overseas. May provide grants to encourage international business start-ups
4) national governments can decide whether their country = part of a trade bloc. TB = group of countries that all agree to remove tariffs on goods traded between them (e.g. UN + ASEAN)
Trade blocs have number of advantages for members
- trade = encouraged within a trade bloc because member states receive goods at a cheaper price
- larger market for goods supplied by a member state - increase volume of trade + allow producers 2 reduce production costs
- TB can set up trade barriers w/ non-member states so that certain more vulnerable industries within the TB = protected
- mergers between smaller TNCs within the bloc can occur more easily - can streamline their operations + make them more profitable
- TNCs = utilise different strengths of countries in TB e.g. a TNC might use cheaper labour from 1 country + development resources from another
- greater political security b/ member states due 2 = mutual economic dependence
The European Union (EU)
- began = European Economic Community =1957
- 2022 the EU = 27 members. Free trade exists b/ members + there are common external tariffs on goods imported into the bloc. EU has its own currency (euro) + European Parliament to pass EU laws
- Schengen Agreement allows free movement of European workers across its borders
Association of South East Asian Nations
- allows free trade between its nations - encourages local manufacturing + banking industries to grow, making ASEAN countries more economically competitive with other countries.
- 1995 member states agreed not to use any nuclear weapons = union more politically stable.
- ASEAN is one of the world’s largest trade blocs
Political + economic decisions accelerate globalisation in new regions (SEZs)
1) Govs in emerging countries have developed incentives 2 encourage foreign business to invest there
2) Special Economic Zones = areas of land often on coast where special economic rules apply e.g. low tax rates/tax breaks for foreign businesses + removal of import + export tariffs on goods traded in + out = zone
3) SEZs often have infrastructure networks e.g. road + port connections already established 2 encourage TNCs set up there
4) Govs can invest in improving transport networks = SEZs 2 encourage trade. Particularly important for land-locked countries or those with challenging topography
5) Govs can offer subsidies 2 support local + international businesses in the first few years while they become established
