National Governments and Trade Blocs EQ1 Flashcards
What are the ways national governments influence globlisation?(3)
1)Free Market Liberalisation:
2)privatisation
3)Encouraging Business Start-Ups:
What is Free Trade?
trade without tariffs/taxes
What is trade liberalisation?
a country removing forms of protectionism to allow free movement of trade
What is forging direct investment (FDI)?
a financial injection made by a TNC into nation’s economy either to build new facilities (factories or shops) or to acquire, or merge with, any existing firm already based there.
What is trickle down?
the positive impacts on peripheral regions (and poorer people caused by the creation of wealth in core regions (and among richer people)
What is Privatisation?
the transfer of a business, industry, or service from public to private ownership and contro
What are special economic zones (SEZs)?
an industrial area, often near a coastline, where favourable conditions are created to attract foreign TNCs. These conditions include low tax rates and exemption from tariffs and export duties.
What is outsourcing?
TNCs contract another company to produce the goods and services they need rather than do it themselves. This can result in the growth of complex supply chains.
What are the different types of FDI?(4)
1)offshoring- some TNCs build their own new production facilities in “off-shore” low wage economies e.g. US owned fender opening plant in Mexico
2)Foreign Mergers-Two firms in different countries join forces to create a single entity e.g. Royal Dutch shell has HQ in Uk and Netherlands
3)Foreign Acquisitions- When a TNC launches a take over of a company in another country e.g. Cadbury was taken over by US Kraft
4)Transfer Pricing- Some TNCs have channeled profits through a subsidiary company in a low tax country e.g. Ireland. The OECD is trying to limit this practice
What role do national governments play in facilitating globalisation?
-Governments can both limit and encourage globalisation through various measures e.g. they can provide grants and subsidies (like the Common Agricultural Policy in the UK) to boost certain industries’ competitiveness.
-they can promote the growth of trade blocs to trade freely with their neighbours
-Through privatisation of state-owned companies (such as British Gas and British Rail), they can encourage investment and entrepreneurship. -Governments may also create special economic zones with tax incentives to attract foreign direct investment (FDI). Additionally, improving transport networks helps boost trade, especially for landlocked or mountainous countries.
How does free trade increase globalisation?
Free trade increases globalization by removing trade barriers, boosting TNC investment and trade, fostering global supply chains, and spreading ideas, products, and cultures across nations.
What are the key players in terms of national government in promoting free trade blocs?
-The EU
-The ASEAN
What is the EU?
A political and economic union of 27 member states that are located primarily in Europe
What is the ASEAN?
A regional intergovernmental organisation compromising ten South East Asian countries
What are the advantages of a trade bloc membership?
1)Access to Bigger Markets: The economic alliance between the UK and the EU has been beneficial for the UK in several ways. With access to the EU’s single market of 508 million people, UK businesses like Tesco have been able to expand into new markets, increasing their customer base and boosting sales. The removal of tariffs and trade restrictions means that UK companies can source goods at lower prices from within the 28 EU member states, reducing their costs and increasing profitability. This also allows UK consumers to benefit from a wider range of affordable goods and services. Additionally, the free movement of goods, services, and capital within the EU has supported economic growth and created opportunities for UK companies to establish operations in other EU countries, further expanding their reach. Overall, being part of the EU economic alliance has facilitated trade, reduced costs, and promoted business growth for the UK.
2) Protection & Political Stability: Trade blocs protect domestic industries by limiting imports (e.g., the EU blocking £50 million of Chinese-made clothes in 2007), helping maintain political stability and supporting local manufacturers