macro 26-27 globalisation/international trade Flashcards
define globalisation?
The process by which the world’s economies have become integrated
explain “reduced protectionism” as a cause of globalisation?
Trade liberalisation means less protectionism.
Emergence of trade blocs.
explain “improvement in technology” as a cause of globalisation?
Containerisation for the movement of goods has made it easy for countries to import and export goods.
The internet for communications and sales, aviation for moving people, emails and video conferencing.
explain “migration and increased mobility” as a cause of globalisation?
Increased movement of people across international boundaries seeking work.
There is free movement of labour in the EU.
explain “deregulation of financial markets” as a cause of globalisation?
There is less capital control which means money can be moved between countries by financial institutions.
What are other characteristics of globalisation?
-Decreased power of governments .
- Outsourcing of jobs and de-industrialisation in Western countries .
- Growing international mobility of labour and other factors of production.
- Growing power of MNCs.
Explain “scale of exports” as an advantage of globalisation for developed countries?
Benefitted from selling high value exports to other countries.
As labour is a form of derived demand, leads to Economic growth.
EVAL:
creates dependency, when demand falls from other countries a country is more susceptible to recessions.
- Created imbalances in balance of payments. Surplus run by some countries means others run deficits which has created more protectionism from the likes of USA.
Explain “access to raw materials” as an advantage of globalisation for developed countries?
Developed countries can buy cheap raw materials from suppliers.
Consumers have benefitted from lower prices for goods and services.
EVAL:
- Made countries dependent on countries like Russia. The war has caused cost-push inflation.
Explain “skilled labour” as an advantage of globalisation for developed countries?
Developed nations have been able to fill skills shortages in all areas of the economy. This has allowed them access to a greater quantity and quality of labour increasing their productive potential.
EVAL:
brain drain as people leave these countries in search of better job opportunities.
Explain “FDI” as an advantage of globalisation for developed countries?
Globalisation has increased investment in all countries, creating jobs and economic growth.
EVAL:
- FDI is often a small percentage of total AD when compared to consumption.
- Profits are often repatriated to home countries.
Explain “loss of comparative advantage” as a disadvantage of globalisation for developed countries?
Developed nations have lost comparative advantage in manufacturing industries to other nations who are able to produce at lower cost, often due to easier to extract resources or lower unit labour costs.
This has led to:
- hysteresis/unemployment
- CA deficits in developed nations.
EVAL:
- jobs have been created in the service sector. Financial services have become significant for countries like the UK.
Explain “Contagion and imported inflation “ as a disadvantage of globalisation for developed countries?
Contagion is how quickly a crisis spreads to other countries.
Developed nations dependent on imported raw materials are also vulnerable if the price of these starts to rise.
Eg: Financial crisis.
EVAL:
- governments are introducing stringent regulation to prevent another financial crisis.
e.g. banks now have to hold more liquid assets.
Explain “Exports and jobs” as an advantage of globalisation for less developed countries?
Selling commodities, agricultural goods and raw materials abroad has created many jobs. RIsing consumption has led to multiplier.
Increased sales of exports have boosted X which is a component of AD.
EVAL:
- Creates dependency. Revenue falls if price falls due to a fall in demand.
- Comes at a cost to the environment
Explain “access to capital” as an advantage of globalisation for less developed countries?
Allowed many developing nations to import advanced capital from developed nations. Boosted productive capacity and shifted AS right.
EVAL:
- Developing countries don’t have access to foreign reserves so can’t buy imports.
Explain “free movement of labour” as an advantage of globalisation for less developed countries?
Reduced the cost of moving between countries, better job opportunities, more income, more remittances.
EVAL:
- Reversal of free movement post-covid and Brexit with countries tightening up rules on migration.
- Created brain drain.
Explain “Price volatility in the primary commodities market” as a disadvantage of globalisation for less developed countries?
Over-reliance on exports to create economic growth. In recessions, the demand for commodities and raw materials fall. Developing countries see a fall in revenue.
Agricultural products can fluctuate a lot in supply according to weather/harvest. HIgher supply leads to lower price - problem for farmers with no other income.
EVAL:
- Improved trade means consumers have access to goods they would not have had previously.
Explain “sustainability” as a disadvantage of globalisation for less developed countries?
Nations dependent on primary resources are vulnerable when these resources run out.
EVAL:
- Attempt at shifting resources to renewable sources.
- Countries like Saudi and UAE are investing in boosting tourism as a back up.
Explain “negative externalities” as a disadvantage of globalisation for less developed countries?
damages the quality of resources such as land and human capital.
EVAL:
- There are positive externalities too e.g. job creation and economic growth.
Explain “migration” as a disadvantage of globalisation for less developed countries?
Labour migrates abroad in search of higher pay, causing brain drain.
These workers are most capable of delivering merit goods and social improvement required in developing countries.
EVAL:
- More remittances.
define Multi national company?
A company that is headquartered in one country but operates in many countries around the world.
how does the trading possibility frontier look?
