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HSC Economics > Topic 1: Globalisation > Flashcards

Topic 1: Globalisation Flashcards

1
Q

international economic integration

A

the liberalisation of trade between countries

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2
Q

the global economy

A

consists of all the countries in the world that produce g/s and contribute to GWP

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3
Q

globalisation

A

the process of increasing integration between economies around the world due to increased trade, capital flows and technological change

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4
Q

protection

A

any artificial advantage given by countries governments to domestic industries to protect them from international competition

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5
Q

reasons for protection

A
  • protection of domestic employment
  • to protect infant industries
  • dumping
  • defence
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6
Q

protection - dumping

A

when a country exports a product at a price that is lower in the foreign importing market than the price in the exporter’s domestic market

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7
Q

methods of protection

A
  • tariff
  • subsidy
  • quota
  • local content rules
  • export incentives
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8
Q

methods of protection - tariff

A

a tax on imports. has the effect of raising the price of imported goods so that local producers are more competitive

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9
Q

methods of protection - subsidy

A

cash payment made to local producers to increase supply

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10
Q

methods of protection - quotas

A

a quantitative restriction on certain imported goods

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11
Q

methods of protection - local content rules

A

when the government enforces that a certain % of the product must be manufactured in Australia

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12
Q

methods of protection - export incentives

A

these attempt to reduce the costs of production for exporters by allowing a tax deduction for expenditure in developing export markets

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13
Q

gross world product

A

the total output of the world economy

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14
Q

globalisation: trade in goods and services

A

globalisation has led to higher world output. Aus exports have nearly doubled over the last decade - bilateral and regional trade agreements - AUSFTA, APEC.
Trade in G/S has increased from 38% of global output in 1990 to 50% in 2018

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15
Q

globalisation: financial flows

A

globalisation has increased the flow of debt, bonds, equity, shares, currency, hedging, superannuation. forex - forex daily turnover increased from $4 trillion in 2010 to $6.6 trillion in 2020 - 40% increase in trading volume in a decade

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16
Q

globalisation - investment and TNCs

A

easing capital controls and financial deregulation caused FDI’s in 2015 to increase to 6x their level in 1995

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17
Q

globalisation - technology, transport and communication

A

intro of 5g networks is set to increase global gdp as it facilitates faster mobile connectivity and continues to drive gains in productivity and efficiency. in 2016, mobile technologies generated 4.4% of GDP globally, estimated to grow to 4.9% in 2020

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18
Q

globalisation - international division of labour, migration

A

specialisation of labour skills. According to world bank, 3% of world population had migrated to work in different countries

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19
Q

globalisation - international and regional business cycles

A

research by RBA shows that 63% of changes in output in Aus has been due to changes in interest rate growth levels and inflation from G7 countries

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20
Q

Factors that strengthen the international business cycle

A
  • trade flows: reduced trade barriers
  • financial flows : deregulation, forex
  • investment flows: increased TNCs and FDIs
  • technology: improved transport and communication
  • global interest rates: contagion
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21
Q

Factors that weaken the international business cycle

A
  • domestic interest rates: contagion
  • government fiscal policies: taxes decrease spending
  • exchange rates: fluctuations can be unfavourable
  • structural factors: influence competitiveness of the economy
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22
Q

free trade

A

occurs when there are limited artificial barriers imposed by the government upon the flow of g/s across international borders

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23
Q

absolute advantage

A

when a country can produce more output with the same resources as another country

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24
Q

comparative advantage

A

when a country has a lower opportunity cost when producing a good (based on the David Ricardo’s theory of comparative advantage)

25
Q

advantages of free trade

A

specialisation - economies of scale, lower unit costs, more output/ increased competition/ exchange of knowledge and ideas/more efficient allocation of resources/greater incentive to increase international competitiveness/ higher world output/ greater variety for consumers/ increased living standards due to increased choice and purchasing power

26
Q

disadvantages of free trade

A

new businesses struggle/ structural unemployment in less efficient firms/ negative externalities/ more dependence on imports due to lack of diversification/ dumping

27
Q

WTO

A

trade liberalism, stability of trade relations. TFA, 2017, aims to improve efficiency, effectiveness and fairness of agencies that oversee trade. economic benefit of 68 billion - 1 trillion. Doha round - reduce agricultural subsidies in advanced economies and grant developing economies greater market access

28
Q

IMF

A

ensure global financial stability. IMF injected $250 billion into global economy after GFC. usually require governments to implement structural reform which can be seen as undermining national sovereignty and autonomy

29
Q

World Bank

A

boost development of poorer countries. helps by providing foreign aid and loans, support for long term investment projects and dispute settlements in investment projects. Major goals are to reduce extreme poverty to <3% and reduce inequality by fostering growth for the bottom 40%

30
Q

United Nations

A 
Designed to maintain international peace and security, fights climate change, gives humanitarian aid, -protects human rights and promotes democracy
Sustainable Development Goals (SDGs) -
Decent work and economic growth
Reduced inequalities
Gender 	equality
Quality education
31
Q

OECD

A

It makes policy recommendations to improve the economic performance of its member nations
Engages in research, consultation and coordination of economic issues
- Promote sustainable economic growth and development
- Maintain financial stability
- Contribute to global economic development

32
Q

G20

A

Members account for 85% of world economy, 75% of global trade, and 66% of world population
Aim to
- Coordinate fiscal stimulus
- Improve supervision of global financial system
- Discuss key issues in the global economy

33
Q

Trading Bloc

A

When a group of countries join together to a formal trade relationship excluding other countries
E.g. The European Union
countries enter preferential trade agreements - free trade between themselves and external tariffs on imports from the rest of the world

34
Q

Monetary Union

A

Members adopt a common currency and are run by a central bank. The central bank implements one monetary policy, or one interest rate

35
Q

North American Free Trade Agreement (NAFTA)

A
  • multilateral free trade agreement consisting of Canada, Mexico and the USA mainly based on eliminating agricultural protection and tariffs.
  • US + Canada: opportunity to increase international competitiveness by exploiting lower production costs in Mexico
  • Mexico: greater access for its exports to the larger markets
  • consumers have benefited from lower prices and US corporations from the lower costs. NAFTA accounts for 13% of global merchandise trade
36
Q

Japan-Australia Economic Partnership Agreement (JAEPA)

A

Around 98% of Australian merchandise exports to Japan will receive preferential access or enter duty free
Reduction or elimination of tariffs on agricultural commodities - 38.5% tariff on Aus beef will be halved over 15 years
Elimination of 15% tariff on Australian wine by April 2021
Removal of tariffs on Japanese goods such as cars, electronics and white-goods
Aus law firms have greater access to Japanese legal market

37
Q

Regional Comprehensive Economic Partnership (RCEP)

A

Includes ASEAN and their FTA partners - Australia, China, Japan, NZ and South Korea
World’s largest FTA covering 30% of the global economy
Standardises trade rules across countries
Countries in the agreement account for 58% of Australia’s two-way trade and 67% of exports
Biggest trade bloc in history
Expected to eliminate ~90% of tariffs on imports between its signatories over 20 years
Dr Patricia Ranald (Australian Institute of International Affairs) “RCEP has limited gains from trade and ignores labor, human rights and environmental stability issues)

38
Q

European Union (EU)

A

Political and economic union comprised of 27 member states, primarily located in europe
Policies aim to ensure the free movement of goods, people, services and capital within the union
EU’s Common Agricultural Policy subsidies absorbed 38% of its Budget in 2016
17% of the world market for exports - larger than China or US

39
Q

APEC (Asia-Pacific Economic Cooperation)

A

Intergovernmental forum comprised of 21 member economies, promoting free trade through the asia pacific region
One of the highest level multilateral blocs and exerts significant global influence
Promotes balanced, inclusive, sustainable, innovative and secure growth by accelerating regional economic integration
Even though APEC members account for approximately 40% of the world population they account for 60% of world GDP and 47% of world trade.
Target of “free trade” by 2020 under the Bogor Declaration but tariff levels within countries have dropped from 20% to 13% in 1994 - 2016

40
Q

Association of Southeast Nations (ASEAN)

A

Regional intergovernmental organisation made up of 10 southeast asian countries which promotes intergovernmental cooperation and facilitates economic, political, security, military, educational and socio cultural integration among its members
Aus and NZ joined in 2010 (ASEAN-Australia-New Zealand Free Trade Area) - ASEAN nations committing to eliminating tariffs on 96% of Australian exports to the region
This is the largest preferential trade agreement that Australia has concluded representing 20% of Australia’s trade in goods/services.

41
Q

Advantages of Multilateral Trade Agreements

A

Levels the playing field as all signatories treat each other equally
Increases trade for every participant
Standardised commerce regulations for all trade partners which saves companies legal costs
Allows countries to negotiate trade deals with more than one country at a time
Makes emerging markets stronger to help developed economies over time, middle class population increases

42
Q

Disadvantages of Multilateral Trade Agreements

A

Complex, difficult and time consuming to negotiate
Public often misunderstands them
Some companies and regions suffer when trade borders disappear
Gives competitive advantage to giant multinationals and small businesses cannot compete

43
Q

Advantages of Bilateral Trade Agreements

A

Opens markets to successful industries
Increases trade between the two members
Consumers benefit from lower costs
Easier to negotiate than multilateral agreements

44
Q

Disadvantages of Bilateral Trade Agreements

A

Less successful companies go out of business

May trigger competing bilateral agreements

45
Q

Economic growth

A

increase in GDP over time. A quantitative measure of the performance of an economy

46
Q

economic development

A

structural changes needed for growth to occur in an economy and to sustain increase in living standards. A qualitative measure of the performance of an economy

47
Q

distribution of income and wealth

A

Richest 1% own 44% of the world’s wealth

Number of billionaires it took to equal the wealth of the world’s poorest 50% fell from 380 to 26 between 2009 and 2019

48
Q

distribution of income

A

comparison of annual incomes, which are direct returns from the factors of production of citizens

49
Q

distribution of wealth

A

the comparison of asset ownership of citizens

50
Q

Income and quality of life indicators

A

GNI measure the sum of value added by all resident producers in the economy plus primary income from foreign sources, on a purchasing parity basis
Human Development Report in 2016 “inequalities in income influence inequalities in other dimensions of well being”
HDI: scale of 0 to 1 taking into account life expectancy, education levels and gross national income per capita

51
Q

Environmental sustainability

A

Advanced economies have created most of the existing global environmental problems including pollution and energy use due to high rates of production and consumption
Emerging economies deplete the environment in the pursuit of higher economic growth
OECD report predicts by 2050, the world economy will be 4x bigger than it is today, using 80% more energy

52
Q

The international business cycle

A

GFC exposed the issue of financial contagion. Due to the globalised nature of the US, foreign banks and investors experienced spill-over effects and there was worldwide panic in financial markets
Advanced economies contracted by 3.4% and the world economy experienced a recession

53
Q

Trade, investment and transnational corporations

A

Rapid increases in trade, investment and TNCs
Created a global web of production facilities and supply chains, connecting economies
TNCs are criticised for taking advantage of poorer countries by lower labour costs and natural resources, as well as for exploiting global tax laws
In 2019, Apple was accused of labour violations in China. Apple denies most allegations but acknowledged that they exceeded the number of contract workers allowed by Chinese Law and agreed to compensate workers

54
Q

Effects of globalisation

A

Increased opportunities for economies of scale, specialisation, and taking advantage of lower input costs
Increased technological innovation due to increased competition internationally, which has stimulated productivity levels
Financial Contagion - when financial crises can be transmitted quickly
Increased income inequality and the emigration of skilled labour from developing countries to advanced economies
According to the IMF, income inequality has increased by 0.45% per year over the past 3 decades
Easing trade restrictions have lowered prices which can improve living standards
Increased negative externalities such as environmental degradation and exploitation of the labour forces of developing nations

55
Q

advanced economies

A

High income levels, average per capita income over US 30,000 p.a.

slower growth in recent decades

Market based economies, services

e.g. usa and australia

56
Q

emerging economies

A

Income levels vary but fast growth in income levels

Strongest growth rate in the world and favourable prospects

Industrialising, manufacturing

e.g. China
India

57
Q

developing economies

A

Low-income levels, around half of population in absolute poverty

Moderate growth rates but population growth also high

Heavily reliant on agriculture and (in more extreme cases) foreign aid

e.g. egypt and cambodia

58
Q

global factors causing differences between economies

A

global trade system - favours advanced economies and fta are dominated by advanced economies. e.g. failure of doha round

Global Financial Architecture - high foreign debt burdens, investment into emerging economies

Global Technology Flows

59
Q

domestic factors causing differences between economies

A

economic resources - lack of natural resources, labour supply and quality, lack of infrastructure and capital, poverty cycles

institutional factors - political instability and corruption

HSC Economics (6 decks)

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