Please enable JavaScript.
Coggle requires JavaScript to display documents.
Economics globalisation + trade - Coggle Diagram
Economics globalisation + trade
Causes of globalisation
Trade liberalisation - the reduction or removal of tariffs and other restrictions on international trade
WTO - bringing an increase in global product standards = more consumer confidence in imported goods
Reduction in real cost + time needed for transportation of goods = cheaper to import/export
Improvements in communications technology - making communication for international trade easier
MNCs looking to increase profits - e.g. investing in a factory in a developing country where labour is cheaper - increase in FDI
Firms expanding overseas to exploit economies of scale
Increased number of MNCs + growing significance and influence = more international trade + international investment
Governments wishing to obtain benefits of increased trade - providing incentives for foreign firms to invest in their country
Opening of new markets to trade + investment
Growth in international trading blocs
Increasing investment by sovereign stated - e.g. Norway investing oil revenue in foreign companies
More international specialisation
Characteristics of globalisation
-Increasing integration of world's local, regional and national economies into a single, international market
-Free trade of goods + services, movement of capital and labour and interchange of technology and intellectual capital
-More trade between nations and transfers of capital e.g. FDI
-Brands developing globally and labour divided between several countries
-Countries more interdependent - performance of own country depends on performance of others
Consequences of globalisation
Individual countries - Trade imbalances between countries - Imbalances and inequalities in consumers and countries access to health, education and markets - Income + wealth inequalities should benefits of globalisation not be evenly spread - Culture may spread across the globe and weaken some cultures
Governments - some may lose their sovereignty due to the increase in international treaties - individual states would find it hard to resist the force of them and if countries become members of organisations, they will have to abide by their rules
Producers + consumers - Earn benefits of economies of scale as firms become larger - operating in a more competitive environment = incentive to lower average costs and become more efficient
-Some consumers gain more from globalisation than others
Workers - Increased job opportunities but there may be structural unemployment - e.g. UK as manufacturing was more efficient abroad = structural unemployment
The environment - industrialisation may = increased pollution, deforestation, water scarcity, land degradation although as average incomes increase, consumers may show more concern towards the environment
Trade
Absolute + comparative advantage
Absolute - in the production of a good or service if it can produce it using fewer resources and at a lower cost than another country
Comparative - occurs when a country can produce a good or service at a lower opportunity cost than another country - means they have to give up producing less of another good than another country using the same resources
Countries can specialise when they have comparative advantage, increasing economic welfare