4.1.3 Factors Contributing to Increased Globalisation

Globalisation

The process where national economies become increasingly integrated and interdependent.

Trade liberalisation

🔗 The removal or reduction of restrictions on the free exchange of goods between nations.

📝 Example:

The EU is a trading bloc where tariffs have been removed.

Investment Flows

Foreign Direct Investment (FDI)

When a business makes an investment in a foreign country

• Increases employment
• Spreads business activity (access to global markets and reduction of reliance on one revenue stream)

Benefits and Drawbacks of Migration

• Supply of low-cost labour, lower costs, increased cost competitiveness
• Highly skilled labour, improved productivity
• However can be overcrowding and lead to domestic unemployment

Growth of Trading Bloc's Emerging Markets

🔗 Trading blocs – An intergovernmental agreement where barriers to trade are reduced or eliminated among the member states.

📝 Example: EU, ASEAN, NAFTA

Political Change

• Changes in the movement of goods and services.
• Level of protectionist measures used.
• Tensions with other countries may also affect trade.

Emerging Market's Middle Class

• The middle class will have rising disposable incomes as a result of a fast-growing economy.
• Consumers will then have a higher demand for imports from abroad.

Technology advances

• An improved internet connection allows greater communication at a lower cost than before.

Containerisation

🔗 A method of transport

• The costs of ocean shipping have come down, due to containerisation, bulk shipping, and other efficiencies.

Structural Change

• Increased contribution to national income from the tertiary sector due to higher returns
• Increases employment of high-skilled labour and demand for services internationally -> Strengthen global brands
• However, may cause a decline in profits of manufacturing (secondary) and extraction (primary) industries

MNC Growth

🔗 Multinational corporations – Businesses that are set up in multiple countries around the world.

• Expansion into other countries by businesses to transform into global brands.
• Can invest in a country's infrastructure to reduce the costs of transportation
• However, it does reduce cultural diversity.