Week 6 Lecture material Flashcards
What is the WTO?
The World Trade Organisation (WTO) founded in 1995, is an international body designed to make global trade fairer, more open, and more predictable. Its objective is to enhance, living standards, create jobs, and support sustainable development through trade.
Core functions:
- Negotiation Forum: A platform for governments to set global economic rules through trade negotiations.
- Consensus-Based Decisions: All decisions are made by consensus among members, ensuring equal participation.
- Non-Discrimination Principle: No member can be unfairly excluded. Trade privileges given to one member must be extended to all members to ensure a level playing field.
Alignment with Global Goals:
The WTO supports the United Nations Sustainable Development Goals (SDGs) by:
- Preventing food shortages through effective trade policies
- Promoting green energy initiatives via trade frameworks
- Empowering developing economies: helping them expand markets, integrate into supply chains and climb up value chains
Key Takeaway:
- The WTO is more than just a trade regulator - it is a collaborative platform for global economic stability, sustainable growth and inclusive development
What is globalisation?
Globalisation describes a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration and transportation.
Key Features:
- A process that transcends national borders and integrates markets globally.
- Driven by advancements in technology, communication, and transportation.
- Facilitated by free trade agreements and international organizations (e.g., WTO)
Historical Context:
- Not a new phenomenon: Rooted in centuries of global trade
- The first global company quoted on the Amsterdam Exchange was in 1602
Modern Globalisation:
- Accelerated by the industrial revolution
- Enabled the rise of Transnational Corporations (TNCs)
Transnational Corporations (TNCs):
- Companies operating in at least two countries with production, management, and supply chains spanning borders
Examples:
- Early European TNCs: British American Tobacco and Nestlé
- 1950s American Challenge: Dominance of US-based firms
- Modern players: Japanese, Chinese, and Indian TNCs becoming significant global forces
Key takeaway:
Globalisation is a multi-dimensional phenomenon driven by historical trade, modern technology and global cooperation
Phases of Globalisation
Hyperglobalisation (1986-2008)
- A period marked by rapid growth in global trade and economic interdependence
- Key statistic: The share of world trade in global GDP rose from 13.7% (1970) to 29.7% (2018)
- It was a period of peak growth
Key Changes During Hyperglobalisation:
- Manufactured Goods: Became the dominant share of global trade.
- Services Trade: Significant growth in sectors like shipping, tourism, insurance, legal services.
- Agricultural Trade: Remains limited and region-specific.
- Minerals: Continued importance in global trade networks
Role of Technology and Policy:
- The rise of Information and Communication Technology (ICT).
- Trade liberalisation agreements (e.g., GATT (General Agreement on Tariffs and Trade → WTO).
- Standardised shipping containers reduced transportation costs dramatically.
Key takeaway:
Hyperglobalisation represented an era of rapid trade expansion, supported by technological advancement, trade policies, and improved logistics
Global Value Chains (GVCs)
Definition:
A Global Value Chain (GVC) refers to the cross-border flow of goods, services, and production processes across multiple countries.
Key features:
- Backward linkages: Imported inputs used in domestic exports
- Forward Linkages: Domestic exports integrated into another country’s production cycle
Example Flow:
1. Country A: Produces raw materials and exports to Country B
2. Country B: Processes materials and exports to Country C
3. Country C: Assembles the product and exports to Country D
Significance of GVCs During Hyperglobalisation:
- 1986-2008: GVCs played a central role in tarde growth
- Enabled firms to outsource production processes globally, optimising efficiency and cost
- Stagnation Post-2008: Growth slowed after the Great Recession, with reduced cross-border investments
Key Takeaway:
GVCs are the backbone of modern international trade, enabling complex global supply chains
Drivers of Hyperglobalisation
- Technological Change (ICT Revolution)
- Moores Law: Computing power and memory capacity double approximately every two years
- Butter’s Law: The cost of transmitting data over optical networks halves approximately every nine months
- Internet Usage: Rapid rise in global internet users, doubling every two years
Impact:
- Firms gained the ability to coordinate global production networks efficiently
- Information could be transmitted instantly across borders - Trade Liberalisation:
- GATT (General Agreement on Tariffs and Trade): Esablished global trade rules post- WW2
- WTO (1995): Enhanced dispute resolution and trade liberalisation frameworks
- China joins WTO (2001): Integrated the world’s most populous country into global trade - Containerisation:
- Standardised shipping containers drastically reduced trade costs
- Enabld efficient transportation of goods worldwide
Key takeaway:
The ICT revolution, trade liberalisation, and logistics improvements collectively drove hyperglobalisation.
Slowbalisation Period (Post 2008 to COVID-19)
Key Characteristics:
- Trade Costs Plateaued: After sharp reductions in the 1970s and 80s, trade costs ceased to fall further
- Financial crises (2008): Reduced global investments and financial trade
- Emerging Markets: Increased self-reliance and reduced dependence on imported inputs
China’s Role in Slowbalisation:
- Higher wages reduced cost advantages.
- Focus shifted to higher value-added activities within supply chains.
Rise of Trade in Services:
- Increasing importance of R&D, IT, finance, healthcare, education, and legal services.
- Services often support manufacturing sectors.
Key Takeaway:
Slobalisation represents a cooling-off period for global trade, driven by structural, economic, and political changes
Road to Deglobalisation?
Key Trends:
- Backlash against globalisation: Winners vs losers narrative intensified
- Protectionism: US-China trade war, tech war, supply chain decoupling
- Stalling Liberalisation:
1. WTO Doha Round Incomplete: The WTO tried to negotiate better global trade rules to help developing countries integrate into the global economy in the Doha Round, but disagreements between countries prevent any final agreement
2. Brexit Uncertainty: Brexit disrupted established trade relationships, leading to confusion and delays in trade agreements
3. Renegotiation of NAFTA with the “Sunset Clause”: The new NAFTA deal (USMCA) has an expiry date unless all countries agree to renew it every 6 years
Technology wars:
- US restrictions on Chinese firms
- Concerns over intellectual property theft
- US pressures allies to decouple supply chains from China
Increased Uncertainty:
- Trade disputes create instability in global markets
Key Takeaway:
Deglobalisation reflects a shift towards protectionism and geopolitical competition in global trade.
Renegotiation of NAFTA with the “Sunset Clause” explained (maybe dont learn word-for-word
NAFTA (North American Free Trade Agreement) was a trade deal between the USA, Canada, and Mexico, originally signed in 1994.
In 2020, NAFTA was renegotiated and replaced by the USMCA (United States-Mexico-Canada Agreement).
The “Sunset Clause” in the new agreement means:
The deal must be reviewed every 6 years.
It will expire after 16 years unless all three countries agree to extend it unanimously.
This creates uncertainty because the agreement isn’t permanent and could potentially collapse every review cycle.
Barriers to Trade in Services
Key Challenges:
- Regulatory Barriers: Different policies across nations
- Political Protectionism: Governments protecting domestic service sectors
Examples of trade in services:
- Transportation
- Finance
- Tourism
- Legal and IT services
Key Takeaways:
While services play an increasingly vital role in trade, they remain highly regulated and restricted in many regions
GIRLYPOP What is Globalisation?
Okay, babe, think of globalisation like a huge international shopping mall. 🛍️🌍 Every country is like a store in the mall, and they’re all trading goods, services, and ideas with each other.
Why it’s cool: It helps countries share resources, make money, and grow.
Throwback vibes: It’s not new! Back in the day, we had OG global influencers like the Dutch East India Company (1602) and English East India Company (1600).
Modern Day Main Characters: Companies like Nestlé, British American Tobacco, and now even Japanese, Chinese, and Indian brands are running the global trade game.
✨: Globalisation is like all the countries shopping, trading, and vibing together on an international scale.
GIRLYPOP Phases of Globalisation
Hyperglobalisation (1986–2008)
Think of this phase as the Black Friday of global trade. 🖤📦 Everyone was trading like crazy, and global trade basically doubled during this time.
Products on Sale: Mostly manufactured goods (like electronics and clothing), but also services (e.g., tourism, legal help, shipping).
Tech was the It-Girl: Computers, the internet, and shipping containers made everything fast and cheap to move across the world.
✨ Hyperglobalisation was like a worldwide shopping spree, powered by technology and trade deals.
GIRLYPOP Global Value Chains (GVCs)
lright queen, imagine making the cutest custom tote bag 👛 – but:
The fabric comes from Country A.
The bag is stitched in Country B.
The logo is printed in Country C.
The finished bag is sold in Country D.
That’s basically a Global Value Chain (GVC) – every step happens in a different country.
Backward Linkages: Country A sends supplies to Country B.
Forward Linkages: Country B sends the finished parts to Country C.
✨ GVCs are like an international collab to create products step-by-step across different countries.
GIRLYPOP Drivers of Hyperglobalisation
- Technological Change (ICT Revolution)
Imagine if computers were glow-ups. 💻✨ They got faster, cheaper, and smarter every few years (Moore’s Law).
The internet went from dial-up drama 📞🔌 to lightning speed 🚀, making it super easy for businesses to communicate globally.
🤝 2. Trade Liberalisation
Trade rules became less strict thanks to agreements like GATT (1948) and WTO (1995).
China joined the party in 2001 and brought major business vibes.
📦 3. Containerisation
Shipping containers became the it-bags of global trade. 👜 They made transporting stuff super easy, fast, and cheap.
✨ Global trade got a major tech glow-up, rules got friendlier, and shipping became the star player.
GIRLYPOP Slowbalisation (Post-2008 to COVID-19)
Okay, so after the Great Recession (2008), the global shopping spree slowed down. 🛑💸
Why?
Trade costs stopped dropping.
Countries like China started making their own stuff instead of relying on imports.
Companies weren’t making as much profit from global investments.
But Services Are Thriving:
Sectors like IT, finance, tourism, healthcare, and R&D started shining as the new trade queens.
✨ The shopping spree slowed down, but service industries (like tech and finance) kept thriving.
GIRLYPOP Road to Deglobalisation?
Alright babe, this is where the tea gets messy. ☕🚨
Backlash Drama: Not everyone loves globalisation. Some workers lost jobs, and some countries felt left out.
Protectionism (Gatekeeping vibes): Countries (like the US and China) started fighting over trade. Think trade wars and tech wars.
Stuck Deals: The Doha Round (WTO’s trade agreement talks) went nowhere.
Brexit Confusion: The UK left the EU, and trade rules became super foggy.
Sunset Clause (NAFTA 2.0): Imagine a friend group chat that self-destructs every 6 years unless everyone agrees to keep it. That’s NAFTA now.
✨ Global trade got political, countries started gatekeeping, and trade agreements stalled.
