globalization

Question 1

Multinational companies

Answer 1

1. a company that owns or controls production in more than one country is called an MNC.
2. they set up factories and offices for production in places where they can get cheap labor and other resources.
3. the cost is hence low, and they gain greater profits.
4. the production is designed in complex ways.
5. eg/ china: cheap production, Mexico and Eastern Europe: proximity to markets in US and Europe. India: large population of skilled workers, english speakers.

Question 2

Interlinking production across countries

Answer 2

1. MNC’S set up production taking into consideration the proximity to markets, availability of skilled and unskilled labor, and government policies. Having assured themselves of these conditions they set up factories through foreign investment
2. they set up production jointly with local companies. the benefits of this is two fold: the local companies receive additional investment, latest technology and new machinery
3. it is more common for MNCs to buy local companies and expand production. eg/ cargill buying parakh industries. this is possible due to the immense wealth and buying power of MNC’S
4. some MNCs place orders for production with smaller producers. the products are then supplied to MNC’s and sold under their brand names to consumers. the MNCs have tremendous power to determine the price, quality, delivery and labor conditions for these distant producers
5. thus, production in widely dispersed locations is getting interlinked

Question 3

basic function of foreign trade

Answer 3

1. opportunity for producers to reach beyond the domestic markets, and compete in markets outside of their own countries
2. increases the choice for buyers beyond domestically produced goods
3. goods travel from one marker to another, and the price of similar goods in different markets becomes similar
4. connection and integration of markets around the world

Question 4

globalization

Answer 4

1. process of rapid integration and interconnection between countries
2. result of greater foreign investment and foreign trade
3. MNC’S play a major role
4. more and more goods and services, investments and technology are moving between countries.
5. the world is in closer contact than it was a few decades back

Question 5

role of globalization in migration

Answer 5

1. people move from one country to another in search of better income, jobs and education
2. not much increase due to restrictions
3. another way of interconnection between countries

Question 6

technology

Answer 6

1. rapid improvement of technology is a major reason for the globalization process
2. improvements in transport technology has made the faster delivery of goods over longer distances possible at low cost
3. satellite communication devices and developments in the IT industry have allowed communication from around the world, instant access to information and contact from remote areas.

Question 7

liberalization of foreign trade and foreign investment policy

Answer 7

1. if people had to pay taxes to import goods into a country, the cost would automatically increase. thus the imports and sale of these products would decline.
2. tax barriers are restrictions placed by the government to control the foreign trade, to decide which goods and the quantity of each, that should be allowed in the country. eg/ tax on imports
3. 1950-60: Indian government set up tax barriers to protect i]Indian producers who had just come up.
4. competition from foreign goods would have been detrimental at this stage. thus only the import of essential goods like machinery, petroleum and fertilizers were allowed.
5. starting from 1991, these restrictions were removed, as the government believed that Indian producers were ready to compete in the foreign markets. they felt that it would improve the performance of producers within the country as they would have to improve their quality. removing barriers and restrictions set by the government is called liberalization. businesses are allowed to make decisions freely on what they wish to import and export

Question 8

world trade organization and fair trade

Answer 8

1. aim: liberalize international trade
2. started at the initiative of the developed countries to establish rules regarding international trade, 164 countries
3. developed countries have unfairly retained their tax barriers, whereas the WTO has forced developing countries to remove theirs. eg/ agricultural products
   (the US government provides agriculturalists in their countries massive amounts of money for production and export; this allows them to sell their produce at abnormally low prices in other countries, which affects the farmers in these countries. this is despite asking developing countries to remove their tax barriers and to stop supporting their farmers)

Question 9

impact of globalization in India

Answer 9

1. consumers: advantageous, especially for well off sections in urban areas due to increased choice, improved quality and lower costs
2. foreign MNCs: increased investments in India- large market, new jobs and prosperity for local suppliers
3. India MNCs: benefitted from increased competition; newer technology and production, and higher quality; successful collaborations; eg/ Tata Motors, Infosys, Ranbaxy, Asian Paints, Sundaram Fasteners
4. small producers: rising competition has led many of them to shut down their businesses
5. laborers: exporters cut down labor costs to get large orders from MNCs, employed on temporary basis so that they are payed only for some seasons; long hours and shifts during peak season.

Question 10

fair globalization

Answer 10

1. policies and labor laws to protect all the people in the country
2. support small producers until they become strong enough to compete
3. implement trade barriers
4. negotiate with the WTO for fairer rules
5. align with other developing countries with similar interests.

Question 11

flexibility to attract foreign investors

Answer 11

1. special economic zones set up to have world class facilities: electricity, water, roads, transport, storage, recreational and educational facilities
2. do not have to pay taxes in SEZ for 5 years
3. flexibility of labor laws: companies can ignore labor laws, hire worker for short periods when there is pressure to reduce the cost of labor
4. companies are demanding still more flexibility