Chapter 1 - Globalisation and Competitiveness

Question 1

Define Globalisation

Answer 1

Freer movement of goods, services, investment, ideas and people around the world
- desire for higher material living standards and bigger corporate profits

Question 2

Define Competitiveness

Answer 2

The degree to which a country can produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding real incomes

Question 3

What percentage of world GDP comes from trade?

Answer 3

30%

Question 4

IMD Drivers of Competitiveness

Answer 4

Economic performance
Government efficiency
Business efficiency
Infrastructure

Question 5

Purchasing Power Parity

Answer 5

The theory that a basket of goods at one location has the same utility as a basket of those same goods at another location

Question 6

Arguments FOR globalisation

Answer 6

Higher growth and material living standards - includes dynamic gains such as competition and benefit from economies of scale and static gains (specialisation form competitive advantage)
Higher tax revenue available for spending on public and merit goods
Multiculturalism
Access to Foreign Investment - promotes technology and knowledge transfer

Question 7

Arguments AGAINST globalisation

Answer 7

Loss of national and economic sovereignty - economic performance more vulnerable to economic shocks
Structural change - reduction in manufacturing jobs as MNCs outsource to low wage economies where health, safety and environmental standards are lower (increases environmental damage and results in higher unemployment among low-skilled workers)
Bad behaviour by MNCs - tax evasion and drive local companies out of business

Question 8

Causes of globalisation

Answer 8

Liberalisation of markets - through organisations such as IMF, World Bank, WTO and trading blocs (ASEAN). Since 1990 world tariff rates fallen from 29% to *%
Technology - "the death of distance" results in cut in transportation costs and boosts volume of merchandise trade. Encourages outsourcing 
Multinational Corporations (MNCs) - Account for a quarter of global GDP, expand into foreign markets for increased profits

Question 9

Factors that affect a country’s level of trade

Answer 9

Exchange rate
World and domestic economic growth
Relative inflation rates
Relative interest rates
Productivity and cost efficiency

Question 10

Three largest exporters

Answer 10

China, US and Germany

Question 11

Factors that facilitate globalisation

Answer 11

Government policy changes - reducing barriers of trade through unilateral action (Australia reducing tariffs on car imports), regional trade agreements (Australia-Japan), treaties promoted by WTO
Advances on transport technologies - resources, intermediate and final goods can be transported more reliably and efficiently
Increased communication