Geography Paper 2

• Globalisation


  The growing interdependence of countries, people and cultures worldwide through increasing connections including trade in goods and services and flows of capital, technology and ideas/
• Shrinking world


  Although physical distances around the world are unchanged, technology has massively reduced the time it takes to trade, travel, and communicate globally.
• Transport developments for globalisation

  - Railways

  - Aircraft

  - Containerisation
• ICT developments for globalisation

  - Mobile phones/telephones

  - The internet

  - GIS/GPS

  - Broadband/fibre optics
• Political and economic organisations

  1. World bank

  2. International monetary fund (IMF)

  3. World Trade Organisation (WTO)
• Why were political and economic organisations needed post WW2?

  Following the second-world-war, the economically weak western nations wanted to prevent the spread of communism from the east, which they saw as a threat. These organisations were established for economic development, and to control and oversee international agreements.
• Trade restrictions


  - Tariffs

  - Quotas

  - Embargo

  - Subsidies
• Tariffs


  A tax placed on goods that are imported from other countries
• Quotas


  A limit placed on the number of goods that are imported from other countries
• Embargo


  A ban placed on certain goods imported from other countries
• Subsidies


  A sum of money granted by the government to help an industry or business keep the price of goods low
• WTO goal


  The WTO wants to eradicate barriers to trade
• Free Trade


  Trade without any restrictions
• Free Trade process


  1. Governments take away barriers that make trade more difficult and costly.

  2. As coasts are reduced, TNCs will see a profit and want to invest in nations.

  3. TNCs will bring new ideas, products, cultures, etc. to a nation

  4. Also the TNC will generate wealth.

  5. Their wealth and development will increase standard of life and demand for foreign products.

  6. As an economy has more TNCs, they become more interconnected and interdependent for each other.
• Trading Blocs


  Countries which group together to improve their economic interest and trading patterns. They often do this by placing barriers to trade with countries outside the group.
• NAFTA


  North American Free Trade Agreement

  - USA, Mexico, Canada

  - Population = 472m

  - Combined GDP (PPP) = $20.2 tn
• EU


  European Union

  - Population = 508m

  = GDP (PPP) $19 tn
• MERCOSAR


  Southern Common Market

  - Six full members

  - Population = 289m

  - GDP (PPP) $4 tn

  - South America
• OPEC


  Organisation of petroleum exporting countries

  - A group of 12 major oil producing countries

  - African, South American, and Middle Eastern members

  - Control around 2/3 of global oil reserves

  - They can make sure they get a fair price from oil consuming countries
• ASEAN


  Association of South East Asian Nations

  - 10 countries formed in 1967

  - Combined population of 625 million

  - Combined GDP (PPP) = $3.6 tn

  - Seventh largest economy in the world
• Social positives of trading groups

  - Withing social and political unions people are often free to live and work in the country of their choice within the union.

  - Living standards go up as trade prospers
• Social negatives of trading groups

  - With relaxed borders it is easier for illegal immigrants to move around within the bloc

  - Legislation can limit workers as well as protect them
• Economic positives of trading groups

  - Trade blocs protect the are'as economy from competition

  - Free trade within the bloc

  - Market access and trade creation

  - Economies of scale

  - Jobs may be created as a consequence of increased trade between member economies

  - Firms inside the bloc are protected from cheaper imports from outside.

  - Inefficient producers within the bloc can be protected from more efficient ones outside the bloc.

  - Being within a trading bloc encourages FOREIGN DIRECT INVESTMENT from TNCs

  - Trading blocs can help companies grow
• Economic negatives of trading groups

  - The benefits of global free trade can be lost as countries concentrate trade withing their trade area or bloc

  - Trade blocs cost money
• Environmental positive of trading groups

  Social and economic unions can set high environmental standards
• Environmental negative of trading groups

  Trading blocs increase food miles as the cheapest product within the bloc will be the most traded.
• Political positives of trading groups

  - Weaker disadvantaged peripheral regions can be supported by the stronger areas.

  - The incentives of trade and political cooperation help to reduce the chances of violent conflict.

  - Giving smaller, individual countries greater political influence when dealing with other nations.
• Political negatives of trading groups

  - Trade wars

  - Non-member countries of the trade bloc will be ostracised

  - Loss of some financial controls to a central authority

  - Trading blocs add another layer of government which costs money and add complications for countries making their own decisions

  - Loss of sovereignty

  - Some smaller regions don't like big government and this has led the drive to SEPERATISM
• Foreign Direct Investment (FDI)

  an investment made by a company based in one country, into a company based in other countries (money, people...)
• Types of foreign direct investment

  - Offshoring

  - Foreign Merging

  - Foreign Acquisition

  - Transfer Pricing
• Offshoring


  Some TNCs build their own production facilities in 'offshore' low-wage economies.
• Foreign Merging


  Two firms in different countries join forces to create a single entity
• Foreign acquisitions


  When a TNC launches a takeover of a company in a different country.
• Transfer Pricing


  Some TNCs have sometimes channelled profits through a subsidiary company in a low-tax county.
• Government policies encouraging globalisation

  - Neoliberalism

  - Privatisation

  - Enterprise Zones
• New Global Regions


  Developing/emerging economies
• Privatisation


  Allowing foreign investors to gain a stake in privatised national services and infrastructure.
• Neoliberalism beliefs


  - Government intervention is markets impedes economic development.

  - As wealth increases, trickle down will take place from the richest to the poorest.
• Open Door Policy (1978)


  Deng realised that China needed Western technology and investment, and opened the door to foreign businesses who wanted to set up in China.
• SEZ


  Special Economic Zones in China, similar to UK enterprise zones.