define globalisation
the process by which the world is becoming increasingly interconnected through trade, investment, immigration, technology and information globally.
what is the average tariff rate on goods in 1990 and 2019
15% in 1990, 5% 2019
What are the 2 major indicators of globalisation
- Increase Trade Openness
2. Growth in FDI
how is trade openness measured and what does it indicate
the ratio of a country’s trade to GDP.
indicates how integrated a country is with the rest of the world
when does FDI occur
FDI occurs when a firm in one economy aquires at least 10% ownership of a foreign firm
how does FDI happen in developed and developing economy
developed = FDI associated with mergers/aquisition
developing = FDI associated with construction of new facilities ('greenfield ivnestment)why is FDI good?
it creates direct, stable and long lasting links between economies, encouraging transfer of tech and knowledge
what are 3 factors that facilitate globalisation
- The liberalisation of markets
- Technology
- Multinational Corporations
what is the GATT/WTO
general agreement on tarrifs and trade: reducing barriers to trade to increase living standards and promoting full employment – replaced by WTO in 1995
what is meant by the death of distance
transport costs/travel time have been cut to boost volume of goods traded and tourism
how have IT advances helped globalisation
growth of trade in services that were once considered nontradable have been outsourced in countries like India
what is a multinational corporation
large firms with headquarters in one country and subsidiaries in one or more other countries that establish production or retail and distribution facilities globally
why do MNCs expand globally
to increase sales, market shares and profits by exporting to the foreign location or establishing subsidiary through FDI
what are 3 arguments for globalisation
- economic growth - greater consumer market
- companies become efficient and competitive
- allows consumers to get cheaper imports
what are 3 arguments against globalisation
- impose costs on poor economies and poor workers
- increases income inequality
- job losses in less competitive economies
