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2 - Trade & Globalisation - Coggle Diagram
2 - Trade & Globalisation
Trade
Comparative Advantage
Producing at the lowest opportunity cost possible
Absolute Advantage
Most effective at making a product in the world, the best
Benefits
Increase Consumer Welfare
Business increase sale revenue
Increase Injections to the circular flow through export revenue
Increase Aggregate Demand
Specialisation and trade investment global allocative efficiency and increase world output
Shared Technology and skills transfer
Costs
Imports are a leakage
Increased competition leading to structural unemployment
Negative Externalities
Exploitation
Protectionism
Examples
Tariffs
Added Tax for international goods
Quota
The limit on the amount of a product allowed in a country
Embargo
Ban on Products or Trade
Subsidy
A discount on certain national goods
Admin Barriers
Safety or Environmental Requirements in order for product to be imported
Causes
Infant Industries
Protect against dumping
Protect domestic employment
Protect against unfair low labour costs abroad
Raise Government Revenue
To improve Current Account Deficit
Avoid Risk of over specialisation
Consequences
Causes Market Distortion
Production Inefficiencies
Retaliation
Regressive
Custom Unions
Free Trade area between themselves but unable to have free trade to countries outside the union
Single European Market (SEM)
A single market comprising the 27 member states of the European Union
WTO
World Trade Organisation
Origins
1st January 1995
123 nations part of WTD
Purpose
Intergovernmental organisation which regulates international trade
Regulates trade between participating countries
Pros and Cons
Cons
Undemocratic
Not Transparent
Bias Toward Richer Nations
WTO wants to privatize Public Services
WTO - Destroying environmental as corporations dismantle barriers to trade
Pros
Enhanced the Value and Quantity of Trade
Improved on Previous Organisation (GATT)
Included development policies to help settle disputes
Improved monitoring of trade (Trade Policy Review)
Encourages Sustainable Trade Developments
1 Set of Rules for all members
(No Favouritism)
Reducing Subsidies and Trade Barriers to give consumers greater choice
Globalisation
Causes
Fall in Trade Barriers
Reduction in restrictions
Development in Information and Communications technology
Fall in real transport costs
Growth of MNCS
Mobility of Labour & Capital
Consequences
Less Developed Economies
Pros
Technology Transfer
Employment
Economic Development
Higher Living Standards
FDI Benefits
Improve HDI
Cons
Growing Inequality
Environmental Costs
Less Cultural Diversity
Trade Imbalances
More Developed Economies
Pros
Lower Costs - Outsourcing
More Choices
Access raw materials
Economies Of Scale
Cons
Higher Structural Unemployment
Greater Risk of External Shocks
Trade Imbalances
Multinational Corporations
A multinational company is a company with its headquarters in one country and its operations in another
How they Contribute to Globalisation
Movement of Labour & Capital between countries
Conducting FDI
Technology & Skills Transfer
Development of Global Supply Chains
Global Branding
Tax Avoidance
Monopoly power of multinationals
Structural Unemployment