topic 1: globalisation Flashcards
REASONS FOR TRADE (2)
- specialisation
- factor endowments
factor endowments definition
quality and quantity of the country’s supply of resources (FOP - CELL)
globalisation meaning
removal of barriers to rest of the world
- transforms the economy
BENEFITS OF GLOBALISATION (5)
- output (trade+specialisation)
- jobs (based on skill)
- productivity
- incomes
- choices (+SOL)
ECONOMIC BENEFITS OF FREE TRADE (4)
- international competitiveness increase
+ technical efficiency through specialisation - increase standards of living
- increased efficiency in resource allocation
+ via specialisation and comparative advantages - increased employment
NEGATIVE OF FREE TRADE (5)
- growing inequality
- structural UE
- financial contagion
+ dependency on other countries - loss of sovereignty
+ immigration policies, ‘imposed’ restrictions eg - environmental damage
VALID ARGUMENTS - REASONS FOR PROTECTION (4)
- INFANT INDUSTRY
+ EOS - DIVERSIFICATION OF ECONOMIC BASE
–> argument for: increase employment, technology and more use of high skilled workers
–> argument against: fluctuations in global demand lead to fluctuations in prices of major exports, leading to unstable export revenue, result falling incomes - NATIONAL SECURITY
- ANTI-DUMPING
QUESTIONABLE ARGUMENTS - REASONS FOR PROTECTION (4)
- protection of domestic jobs
- parallel importation restrictions
- reducing current account deficit
- prevent greater externalities
protection definition:
any government action with the aim to either hinder foreign competitors of domestic firms or provide an advantage to domestic exporters and/or domestic import-competing firms
tariff definition
government tax paid by the importer on imported goods
subsidy definition
cash property made by the government to domestic producers to offset higher production costs
- increase fiscal spending
subsidy arguments (preferred over tariffs) (8)
- consumer don’t pay higher prices
- lower domestic price
- can be short temp. gov. policy
- lower costs of domestic production
- makes domestic export producers more competitive internationally
- no change in consumption if there is a WP
- redistributes income via tax given to producers (gov rev)
- tariffs are regressive
quota define
physical restriction limiting the quantity or number of goods imported into a country
- increase of quota results in less protection
local content rules (example)
- manufacturing
: trade regulations insist certain % of parts have to be sourced/made in that country rather than imported - broadcasting services act
: 55% of aus programs between 6am-midnight on primary channel
economic integration
liberalisation of trade between countries
BRICS + AEIOU
Brazil, Russia, India, China, and South Africa
+ Argentina. Ethiopia, Egypt, Iran, Oil-rich Saudi Arabia, United Arab Emirates
- AIM: become more representative of developing nations (counter developed countries)
AUSFTA
- permits 10,000 aus professionals (and spouses) to live and work in the US without restrictions and can be renewed indefinitely
- allows aus to bypass the pool of hundreds of thousands of applicant competing for right to work in America
2018: around 5,600 aus are currently in scene
CLOSER ECONOMIC INTEGRATION
- trade agreements
- free trade area
- customs union
- common market
- monetary union
trade agreement definition
bilateral, regional, and multilateral agreement to bring down barriers to trade between signatory countries
- AUSFTA (bi), CERTA (bi), ASEAN (regional), APEC (regional), WTO (multi)
bilateral free trade agreement definition
between 2 countries
- limited scope (don’t involve trade diversification)
- aus has 13 ftas
multilateral free trade agreement definition
MORE THAN TWO countries
- large amt of members
PLURALATERAL
FTA with up few dozen members
- AANZFTA: with ASEAN and NZ
DISADVANTAGES OF BILATERAL FREE TRADE AGREEMENTS + FREE TRADE (6)
- inefficiencies: if the most efficient supplier is not in the FTA and attracts a higher tariff, then aus will buy from FTA partner
- secrecy: negotiated behind closed doors, can favour TNCs over consumers
- loss of gov. rev
- greater regulation: rules of origin monitoring
- diverting trade to less efficient members
- administrative paperwork on ‘rules of origin’
- costly monitoring
CUSTOMS UNION - SINGLE TRADE POLICY
- EU members trade without customs duties, taxes or tariffs between themselves and charge the same tariffs on imports from outside EU
- members cannot negotiate their own trade deals outside the EU, which is why leaving it has been one of the UK government’s BREXIT goals
