Globalisation, Specialisation And Trade, Terms Of Trade Flashcards
(26 cards)
Define Globalisation
Process of increased integration and co-operation of different national economies through increasing trade, technology and migration of workers
What are the causes of globalisation
Containerisation- bulk shipping, lower costs, markets are more contestable
Technological change- decrease cost in communicating information
Opening up global financial markets- removed capital control
Less protectionism- increase trading blocs, higher labour mobility
What are the characteristic of globalisation
Greater trade in G+S
Expansion of FDI, more foreign ownership of companies
TNCs experiencing greater EoS
Greater specialisation
Higher labour migration
Interdependence
What country is most open to trade
HK China
Value of exports and imports- more than 170% of its GDP
Which country has the greatest value of exports
China
$3.4 trillion in 2023
-reciprocal tax meaning it may change
What is the most valuable global brand
Apple
What are the world’s leading export countries
China
US
Germany
What are the consequences of globalisation to consumers
Lower prices, more choices- as increased competition
However, more westernisation, decrease sense of place
What are the consequences of globalisation to producers
More economies of scale
More choices for raw materials- lower cost of production
Increased technology- higher productive capacity
However, loose monopoly power as increased competition
What are the consequences of globalisation to workers
Increase mobility, more job opportunities
However, increased competition of jobs, lower wages, increased AI + robots
What are the consequences of globalisation to government
Increased economic growth as increased market size and specialisation- X-M, AD
More job opportunities- lower unemployment
Increased migration- more tax contributions
However, structural unemployment in LIDCs- as increase competition
Tax avoidance
Inequality- tax not redistributed effectively
Trade imbalance
Reliant on few exports, if they collapse, economic decline- overdependence
What are the consequences of globalisation to environment
Global co-operation in environmental goals
However, higher CO2 level, plastic waste, and depletion of resources
What is absolute advantage
When one country is able to produce more of a G or S using same amount of FoP than the other country
What is comparative advantage
When one country can produce a product with a lower opportunity cost than another country
What are included in the assumptions of comparative advantage
Zero transport cost
Perfect information
Factor substitution easily (labour/ capital)
Constant returns to scale -no EoS
Limitations of theory of comparative advantage
Overdependence
Negative externalities of production
Inequality
Structural unemployment
Reasons for UK’s changing patterns of trade
Changes in comparative advantage- shifted from manufacturing towards service (high tech industries)
Impact of emerging economies- rise of countries like China and India- cheaper labour
Trading Blocs and Bilateral Agreement- CETA (EU and Canada), EU- half of UK exports goes to EU
Changes in relative exchange rates- strong pound- hard to compete on price, so rely on high tech industries
What is Terms of Trade
Measures the extent to which a country can afford to import G+S from abroad from a given number of exports
Equation of Terms of Trade
Index of Export Prices / Index of Import Prices x 100
What is it called when there is an increase in value of ToT
Improvement in ToT
Export prices rises more than import
Import prices falls more than export
What is it called when value of ToT fell
Worsening of ToT- deterioration
When import price rise more than export
When export prices fall more than imports
What are factors influencing ToT
Exchange rates
Relative inflation
Changes in demand and supply of G+S- increase demand increase prices
Specialisation towards high-tech industries
Prices of global commodities- lower, lower price of imports
Changing incomes- rising incomes, increase tourists, benefits tourism based economies (Spain)
Prebisch Singer Hypothesis
Long run price of primary goods declines in proportion to manufactured goods
For primary goods dependent countries- deterioration of their ToT, potentially hinder economic development
Impacts of ToT
Improvement on ToT, one unit of exports can buy more imports, improving standards of living
Depends on PED, or else, improvement leads to fall in output, decrease competitiveness
