4.1.1

• globalisation - increased interdependence between economies worldwide
• a highly globalised world means that changes in one country's economy has a larger impact on other economies
• bilateral - involves two parties
• multilateral - involves several parties
• consensus - general agreement
• orthodoxy - generally accepted practice
• trade liberalisation is the removal or reduction of trade barriers
• comparative advantage - when a country produces a good at a lower opportunity cost than another country
• globalisation allows countries to specialise and become more productive in the goods that they have a comparative advantage in
• successful firms from globalisation increase living standards as wages and employment is boosted
• globalisation can lead to countries being overdependent in certain sectors
• globalisation has made countries increasingly interdependent because countries trade more with each other
• globalisation means that macroeconomic conditions in one economy will have a large impact on the other economies
• specialisation in goods that you have a comparative advantage in will reduce costs because firms become more productive and will experience economies of scale - these cost savings will push onto consumers through lower prices
• globalisation means increased choice for consumers
• info gaps means that consumers won't know how imported goods from abroad are produced (unaware of bad working conditions)
• globalisation can limit government tax revenues - if one country decides to reduce corporation tax, international firms will have an incentive to relocate to that country
• globalisation allows national firms to turn into global firms
• globalisation allow firms to shift production to a location where their costs would be lower
• producers are more exposed to more competition in a globalised world
• firms have more choice when it comes to suppliers - can obtain cheaper or higher quality raw materials
• offshoring - the relocation of a business process from one country to another
• bargaining power - the capacity of one power can dominate the other due to its influence, power, size or status in negotiations
• if workers demand higher wages or better working conditions - some TNCs may threaten to move production abroad (offshoring) - job losses - this means workers have lower bargaining power
• TNCs - transnational corporations
• skilled workers in industries that have a comparative advantage can get higher wages
• low skilled workers tend to work in uncompetitive firms where they don't have a comparative advantage - less likely to get higher wages
• loss of comparative advantage - leads to decline of demand in those industries - falling wages and unemployment