The International Economy: trade & globalisation Flashcards
(26 cards)
What is globalisation?
The process of increasing economic integration of the world’s economies
What are the causes of globalisation?
- Improvements in information and communication technology
- Developments in transport
- Deregulation of financial markets
- Geopolitical changes
- Multinational cooperation’s
- Growth of WTO’s
- Economies of scale
What are the characteristics of globalisation?
- Increasing power of MNCs, TNCs and international capitalism
- Increasing mobility of labour & capital across borders
- Growth of international trade and reduction of trade barriers
- Easy flows of capital (finance) across borders
- Decrease in governmental power to influence decisions made by MNCs to shift economic activity between countries
- Deindustrialisation of lder industrial regions and countries, and movement of manufacturing industries to NICs
What is the World Trade Organisation (WTO)?
An international body whose purpose is to promote free trade by persuading countries to abolish import tariffs and other barriers to trade
What is a multinational cooperation (MNC)?
Enterprises operating in several countries but with their headquarters in one country
What is a transnational cooperation (TNC)?
Transnational Corporations (TNCs) are companies that operate in multiple countries, locating their headquarters, production and sales in different countries
What is an newly industrialising country (NIC)?
A country experiencing rapid economic development, often driven by a shift towards manufacturing and urbanization, but not yet fully developed. They are characterized by substantial GDP growth, increased trade, and a growing role in global trade and investment.
Common examples of NICs include countries like China, India, Brazil, and South Korea
What is a less developed economy / LDC?
Countries considered behind in terms of their economy, human capital, infrastructure and industrial base.
They are characterised by low national income per head, high rate of population growth, low levels of human capital, high unemployment, poor infrastructure and overdependence on the export of a few primary economies.
Examples include countries like Afghanistan, Angola, Bangladesh, and Benin.
What is a more developed economy /MDC?
Countries with a high degree of economic development, high avg income per head, high standards of living, service industries dominating manufacturing, and investment having taken place over many years in human capital and infrastructure.
What are the consequences of globalisation for LDCs?
- Sweatshop workers may work in poor conditions, some MNCs claim to improve labour market conditons
- Glocalisation
- Erasing culture
- Depletin of natural resources
- Employment opportunities
- Reduction in absolute poverty
What are the consequences of globalisation for MDCs?
- Jobs may be lost in MDCs (deindustrialisation), reducing wages and living standards
- Jobs created in the highly skilled service sector
- Increased trade
- Increased capital flow
What is the dependency theory of trade and development?
That the terms of trade have generally been moved in favour of industrialised counties and against primary producers.
Developed nations extract resources (raw material & cheap labour) and then sell them at a igher price creating a cycle of dependency
Further reinforced by flows of profit to MNC head quarters and interest payments from finance.
What are the roles of MNCs in globalisation?
- Cross border trade (Greater choice of goods, cultural globalisation)
- Technology flow
- Labour moblity (outsourcing, deinsustialisation, structural unemployement)
- Capital flow (through FDI, better infrastructure–> increased globaI networks)
What is absolute advantage?
Occurs when a country is able to podue a product using fewer factors of production than another company
What is comparative advantage?
A theory that states that a country should specialise in the goods/services it csn produce at the lowest opportunity cost.
- Volume of production increases
- Excess production exported
- Goods/services not produced in the country can be imported
What is a quota?
A trade barrier that limits the quantity of a specific good that can be imported into the country over a set period
What is a tariff?
A tax imposed on imported goods and servises
What is an export subsidy?
A government payment to domestic firms, lowering their costs of production, to make their goods cheaper in export markets, encouraging them to sell their products abroad.
What is a customs union?
Trading blocs in which member countries can enjoy inernal free trade in with all the member countries with a common external tariff barrier
What is a free trade area
Member countries abolish tariffs on mutual trade, but each partner determines its own tariffs on trade with non-member countries
What are the assumptions of comparative advantage?
- Transport costs are zero
- Perfect knowledge: each country knows what is has a comparative advantage in and other countries
- Easy factor substitutiion between capital and labour dependent on global market conditions
- Constant costs of production (doesn’t consider economies of scale)
Consequences of tariffs?
Consequences of quotas?
Consequences of export subsidies?
