International trade

• What is globalisation?

  Globalisation is the ever-increasing integration of the world’s local, regional, and national economies into a single, international market.
• What are the main components involved in globalisation?

  It involves the free trade of goods and services, the free movement of capital and labour, and the free interchange of technology and intellectual capital.

  
• How has globalisation affected trade between nations?

  Globalisation has led to more trade between nations and more transfers of capital, including foreign direct investment (FDI).
• What has been a significant outcome of globalisation regarding brands and labour?

  Brands have developed globally, and labour has been divided between several countries.
• Which countries have increased their participation in global trade?

  Countries like China and India have increased their participation in global trade.
• What does increased interdependence among countries imply?

  It implies that the performance of one country depends on the performance of other countries.
• What event illustrated the effects of global interdependence in 2008 and 2009?

  The global credit crunch illustrated the effects of global interdependence.
• What factor has contributed to globalisation in the last 50 years regarding trade in goods?

  Developing countries have acquired the capital and knowledge to manufacture goods.
• How have efficient forms of transport impacted global trade?

  Efficient forms of transport have made it easier and cheaper to transfer goods across international borders.
• Why do MNCs move production to developing countries?

  MNCs move production to developing countries due to the cost advantage of cheaper labour.
• What is the impact of trade in services from developing countries to developed countries?

  The trade of services such as tourism, call centre services, and software production has increased from developing countries to developed countries.

  
• What role does the World Trade Organisation (WTO) play in globalisation?

  The WTO advocates free trade and has contributed to the decline in trade barriers.
• What are Multinational Corporations (MNCs)?

  MNCs are organisations that own or control the production of goods and services in multiple countries.
• How do MNCs benefit from economies of scale?

  MNCs benefit from economies of scale by growing and taking advantage of risk-bearing economies of scale.
• What has increased regarding international financial flows?

  The flow of capital and foreign direct investment (FDI) across international borders has increased.
• What has facilitated the increase in international financial flows?

  The removal of capital controls has facilitated the increase in international financial flows.
• How has the spread of IT impacted globalisation?

  The spread of IT has made it easier and cheaper to communicate, leading to a more interconnected world.
• What is containerisation and its impact on shipping goods?

  Containerisation has made it cheaper to ship goods across the world, helping to meet world demand.
• What is a potential downside of containerisation?

  Containerisation could result in some structural unemployment as MNCs exploit this system.
• What are some impacts of globalisation on individual countries?

  There could be trade imbalances, income and wealth inequalities, and cultural spread affecting diversity.
• How can globalisation affect culture?

  Globalisation can spread culture, which some argue weakens cultural diversity while others see it as a positive improvement in quality of life.
• How might governments lose sovereignty due to globalisation?

  Governments might lose sovereignty due to the increase in international treaties that require compliance with external rules.
• What benefits do consumers and producers gain from globalisation?

  Consumers and producers can benefit from specialisation and economies of scale as firms become larger and more efficient.
• How does globalisation affect world GDP?

  Globalisation leads to a general increase in world GDP.
• What is the impact of increased demand from China on commodity prices?

  Increased demand from China has contributed to the increase in the price of commodities and raw materials.
• What are the implications of structural unemployment due to globalisation?

  Structural unemployment can occur when production shifts to lower labour cost nations, affecting workers in higher-cost countries.
• How can working conditions in lower-cost countries be perceived?

  Working in a sweatshop might provide a higher, more stable income than alternatives, but it can also involve exploitation and poor conditions.

  
• What environmental issues can arise from globalisation?

  Negative impacts on the environment can include pollution, deforestation, water scarcity, and land degradation.
• How does increased trade affect emissions?

  Increased trade leads to higher emissions from the movement of goods.
• What are the microeconomic effects of globalisation?

  • Effects on consumers and producers
  • Negative externalities
  • Increasing contestability of markets
• What is absolute advantage in production?

  A country has absolute advantage if it can produce a good using fewer resources and at a lower cost than another country.
• What is comparative advantage?

  Comparative advantage occurs when a country can produce a good at a lower opportunity cost than another country.
• How can opportunity cost be reflected in production?

  The opportunity cost of production is reflected in the gradient of the production possibility frontier (PPF).
• What does the PPF illustrate regarding production choices?

  The PPF illustrates that if more of one good is produced, less of the other good can be produced.
• What is the opportunity cost ratio for Country A and Country B in producing wheat?

  For Country A, the opportunity cost ratio is $\frac{3}{5}$, while for Country B it is $\frac{1}{5}$.
• What are some assumptions and limitations of the theory of comparative advantage?

  The theory assumes a perfectly competitive market and does not consider exchange rates or the complexity of the global trade market.
• What are the advantages and disadvantages of specialisation and trade in an international context?

  Advantages:

  • Greater world output and economic welfare
  • Higher quality production
  • Greater variety of goods and services
  • Lower average costs
  • Outward shift in the PPF curve
  • More opportunities for economies of scale

  
  

  Disadvantages:

  • Overuse of non-renewable resources
  • Over-dependence on one commodity
  • Structural unemployment
  • Stagnation in production capabilities

  
• What has contributed to the growth of manufactured goods exports from developing to developed countries?

  Developing countries have gained an advantage in the production of manufactured goods due to lower labour costs.

  
• How has the collapse of communism affected international trade?

  The collapse of communism has allowed more countries, especially developing ones, to participate in world trade.
• What is the impact of trading blocs on trade patterns?

  Trading blocs create trade between members but can divert trade from non-member countries.