National Governments and Trade Blocs EQ1

Question 1

What are the ways national governments influence globlisation?(3)

Answer 1

1)Free Market Liberalisation:
2)privatisation
3)Encouraging Business Start-Ups:

Question 2

What is Free Trade?

Answer 2

trade without tariffs/taxes

Question 3

What is trade liberalisation?

Answer 3

a country removing forms of protectionism to allow free movement of trade

Question 4

What is forging direct investment (FDI)?

Answer 4

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.

Question 5

What is trickle down?

Answer 5

the positive impacts on peripheral regions (and poorer people caused by the creation of wealth in core regions (and among richer people)

Question 6

What is Privatisation?

Answer 6

the transfer of a business, industry, or service from public to private ownership and contro

Question 7

What are special economic zones (SEZs)?

Answer 7

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.

Question 8

What is outsourcing?

Answer 8

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.

Question 9

What are the different types of FDI?(4)

Answer 9

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

Question 10

What role do national governments play in facilitating globalisation?

Answer 10

-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.

Question 11

How does free trade increase globalisation?

Answer 11

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.

Question 12

What are the key players in terms of national government in promoting free trade blocs?

Answer 12

-The EU
-The ASEAN

Question 13

What is the EU?

Answer 13

A political and economic union of 27 member states that are located primarily in Europe

Question 14

What is the ASEAN?

Answer 14

A regional intergovernmental organisation compromising ten South East Asian countries

Question 15

What are the advantages of a trade bloc membership?

Answer 15

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

Question 16

What are the disadvantages of a trade bloc membership?

Answer 16

1)Interdependence: Increased trade within a bloc makes countries dependent on one another, so a disruption (e.g., the European banking crisis where the financial instability in Greece quickly spread to others due to their shared financial systems ) can severely impact the economies of all member states
2) Loss of Sovereignty: Trade blocs may lead to a loss of national control over certain policies. For example, the EU addresses not just trade but also issues like human rights, consumer protection, and environmental standards, which can limit individual countries’ autonom

Question 17

What is the difference between the EU and ASEAN?

Answer 17

-ASEAN is a decentralized organisation, where decision-making power is distributed among member states, and no single country has overriding authority. In contrast, the EU has a more centralized structure where certain powers are vested in EU institutions like the European Commission.
-The EU agreements are often binding, meaning that they are legally required for member states to follow. In contrast, ASEAN’s agreements are not initially binding, but will become institutionalized over time as the organization moves toward more formal and structured rules.

Question 18

How does free market liberation influence globalisation?

Answer 18

-Free market liberalisation helps promote globalisation by reducing government regulations in terms of trading
-By deregulating industries like banking and finance, the UK allowed greater investment and growth.
-With fewer rules, businesses can expand and attract international investment, leading to economic growth.
-This has helped places like London become global financial centers, showing how reducing government control can boost globalisation.

Question 19

How does privatisation influence globalisation?

Answer 19

Privatisation can encourage investment and improve efficiency, promoting globalisation.
-In the UK, industries like railways were privatized, allowing private companies to run them, attracting foreign investment.
-This increases competition and efficiency, while also making the economy more open to global markets.
-However, privatization can sometimes reduce the quality of services, as seen with issues in the UK’s railway services, showing that the impact is not always positive.

Question 20

How does encouraging business start ups influence globalisation?

Answer 20

-Governments can encourage globalisation by offering incentives to attract businesses.
-The UK government gave tax breaks and infrastructure support to Nissan, helping them build a plant in Sunderland.
-This lowers costs for businesses, allowing them to compete in global markets and attract international investment.
-Such incentives foster global connections and economic growth, showing how government support can drive globalization.