Revision Videos
Unit 3 Class Resources
Globalisation Issues
Globalisation is the integration of economies and cultures across national boundaries to move from a independent state to a interdependent planet.
BBC Globalisation Home Page
Planet Money Track a T-Shirt
Prep 1
Make a poster using images to represent either the main drivers of globalisation or some of the benefits of globalisation
Multinational Corporations
A MultiNational Corporation (MNC) has operations in more than one country.
MNCs and UK Tax Avoidance
Prep 2
List as many UK car manufacturers as you can think of. Investigate who actual owes them and where their HQ is based.
Prep 3 Specimen Paper Attempt the 12 mark question
"To what extent does the UK benefit from the process of globalisation"
Free Trade
The World Trade Organisation
the WTO's main activities are:
— negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers to trade) and agreeing on rules governing the conduct of international trade (e.g. antidumping, subsidies, product standards, etc.)
— administering and monitoring the application of the WTO's agreed rules for trade in goods, trade in services, and trade-related intellectual property rights
— monitoring and reviewing the trade policies of our members, as well as ensuring transparency of regional and bilateral trade agreements
— settling disputes among our members regarding the interpretation and application of the agreements
— building capacity of developing country government officials in international trade matters
— assisting the process of accession of some 30 countries who are not yet members of the organization
— conducting economic research and collecting and disseminating trade data in support of the WTO's other main activities
— explaining to and educating the public about the WTO, its mission and its activities.
10 Benefits of the Rules Based System
1. The system helps promote peace
2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and qualities
6. Trade raises incomes
7. Trade stimulates economic growth
8. The basic principles make life more efficient
9. Governments are shielded from lobbying
10. The system encourages good government
The WTO at 15
UK Trade Profile (WTO)
Prep: Research the role of the WTO
The Pattern of Trade
China India and Patterns of Trade
BRICS review 2010 (8 mins)
Protectionism
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PROTECTIONISM
The restriction of imports into a country by government measures
REASONS FOR PROTECTIONISM
• Protects UK businesses from extra competition
• Helps new UK businesses to develop before they face competition
• Helps protect UK jobs
• Prevents foreign countries ‘dumping’ lots of cheap imports into the UK
• Prevents imports of harmful or desirable goods
• Helps new UK businesses to develop before they face competition
• Helps protect UK jobs
• Prevents foreign countries ‘dumping’ lots of cheap imports into the UK
• Prevents imports of harmful or desirable goods
TRADE BARRIERS / METHODS OF PROTECTIONISM
- TARIFFS or IMPORT DUTIES These are taxes on imported goods. They raise the price to customers and make them less attractive
- QUOTAS These are limits on the quantity of a product that can be imported into a country e.g. 100,000 cars
- REGULATIONS This includes laws and safety guidelines
- QUOTAS These are limits on the quantity of a product that can be imported into a country e.g. 100,000 cars
- REGULATIONS This includes laws and safety guidelines
FREE TRADE
Trade without any protectionist / trade barriers between countries
BENEFITS OF FREE TRADE & PROBLEMS OF TRADE BARRIERS
1. Protectionism keeps UK firms away from genuine competition. They may become lazy and inefficient
2. Free trade forces UK firms to produce quality goods and services as they face much foreign competition
3. If the UK puts up trade barriers then other countries are likely to retaliate.
4. Free trade encourages firms to export and import. This should encourage a greater choice for consumers and a higher standard of living
5. Trade barriers increase the cost of trading. For example, a tariff would mean that UK firms and consumers may have to pay more for imports of raw materials or consumer goods
Britain and the EU
UK EU In or Out
Eurozone
Benefits of the Euro
Benefits of the Euro
Transaction costs
With a single currency, there will be no longer a cost involved in changing currencies; this will benefit tourists and firms who trade within the Euro area. It has been estimated that this benefit will be equal to 1% of GDP so will be quite significant. (this is sometimes known as frictional costs) Some studies have suggested that the Euro has led to a 6%increase in tourism, (though many other factors may be at work.)
Price transparency
With a common currency it will be easier to compare prices in different European countries because they would all be in Euros. This enables firms to source cheaper raw material and consumers to buy cheaper goods For example, arguably new car prices are higher in the UK than elsewhere, a single currency could help reduce these price differentials or make it easier for UK consumers to buy from the Eurozone. Within the Eurozone, there has been a degree of convergence in car prices since the Euro was introduced.
Eliminating exchange rate uncertainty.
Volatile swings in the exchange rate can destroy the profitability of exports (e.g. a rapid appreciation). This exchange rate uncertainty undermines business confidence in investing. Therefore with a single currency business confidence should improve leading to greater trade and economic growth.
Improvement in inflation performance
The ECB which sets interest rates for the whole Eurozone area will be committed to keeping inflation low; countries with traditionally high inflation should benefit from this greater inflationary discipline. EU inflation has been low.
Low interest rates
It was hoped membership of the Euro would help reduce bond yields as there was greater security belonging to a stronger currency. Initially this occurred with bond yields in Greece, Spain and Ireland converging on German bond yields.
Inward investment
Inward investment may increase from outside the EU as firms take advantage of lower transaction costs within the EU area. Some firms have said they prefer to invest within the Eurozone area.
Benefits to the financial sector.
The introduction of the Euro appears to have reduced the cost of trading in bonds, equity, and banking assets within the eurozone.
Problems of the Euro
Interest rates not suitable for whole Eurozone.
A common monetary policy involves a common interest rate for the whole eurozone area. However, the interest rate set by the ECB may be inappropriate for regions which are growing much faster or much slower than the Eurozone average. For example, in 2011, the ECB increased interest rates because of fears of inflation in Germany. However, in 2011, southern Eurozone members were heading for recession due to austerity packages. The higher interest rates set by the ECB were unsuitable for countries such as Portugal, Greece and Italy.
The Euro is not an optimal currency area.
If a state in the US, such as New York ,was in recession, workers in New York could move to New England and get a job. However, in the Eurozone this is much more difficult; it involves moving country and possibly learning a new language. There are more barriers to the movement of labour and capital within a diverse region like Europe. Therefore, an unemployed Greek can't easily relocate to Germany. see: Two Speed Europe
Limits Fiscal Policy.
With a common monetary policy it is important to have similar levels of national debt, otherwise countries may struggle to attract enough buyers of national debt. This is a growing problem for many Mediterranean countries like Italy, Greece and Spain who have large national debts and rising bond yields.
Lack of Incentives.
It is argued that being a member of the Euro protects a country from a currency crisis. Therefore, there is less incentive for countries to implement structural reform and fiscal responsibility. For example, in good years Greece was able to benefit from very low bond yields on its debt because people felt Greek debt would be secured by rest of Europe. But, this wasn't the case, and Greece were lulled into a fall sense of security.
No scope for Devaluation.
Since the start of the Euro, several countries have experienced rising labour costs. This has made their exports uncompetitive. Usually, their currency would devalue to restore competitiveness. However, in the Euro, you can't devalue and you are stuck with uncompetitive exports. This has led to record current account deficits, a fall in exports and low growth. This has particularly been a problem for countries like Portugal, Italy and Greece.
Interest rates not suitable for whole Eurozone.
A common monetary policy involves a common interest rate for the whole eurozone area. However, the interest rate set by the ECB may be inappropriate for regions which are growing much faster or much slower than the Eurozone average. For example, in 2011, the ECB increased interest rates because of fears of inflation in Germany. However, in 2011, southern Eurozone members were heading for recession due to austerity packages. The higher interest rates set by the ECB were unsuitable for countries such as Portugal, Greece and Italy.
The Euro is not an optimal currency area.
If a state in the US, such as New York ,was in recession, workers in New York could move to New England and get a job. However, in the Eurozone this is much more difficult; it involves moving country and possibly learning a new language. There are more barriers to the movement of labour and capital within a diverse region like Europe. Therefore, an unemployed Greek can't easily relocate to Germany. see: Two Speed Europe
Limits Fiscal Policy.
With a common monetary policy it is important to have similar levels of national debt, otherwise countries may struggle to attract enough buyers of national debt. This is a growing problem for many Mediterranean countries like Italy, Greece and Spain who have large national debts and rising bond yields.
Lack of Incentives.
It is argued that being a member of the Euro protects a country from a currency crisis. Therefore, there is less incentive for countries to implement structural reform and fiscal responsibility. For example, in good years Greece was able to benefit from very low bond yields on its debt because people felt Greek debt would be secured by rest of Europe. But, this wasn't the case, and Greece were lulled into a fall sense of security.
No scope for Devaluation.
Since the start of the Euro, several countries have experienced rising labour costs. This has made their exports uncompetitive. Usually, their currency would devalue to restore competitiveness. However, in the Euro, you can't devalue and you are stuck with uncompetitive exports. This has led to record current account deficits, a fall in exports and low growth. This has particularly been a problem for countries like Portugal, Italy and Greece.
ECB Videos
competitiveness
exchange rates
The Big Mac Index Explained
alternative explanation
big mac index
Development Issues
Globalisation and Development
Globalisation Notes Economics Online UK and Globalisation Video
Poverty
An overview of global poverty:
Anup Shah, Poverty Facts and Stats, Global Issues, Updated: January 07, 2013
America’s poverty line is $63 a day for a family of four. In the richer parts of the emerging world $4 a day is the poverty barrier. But poverty’s scourge is fiercest below $1.25 (the average of the 15 poorest countries’ own poverty lines, measured in 2005 dollars and adjusted for differences in purchasing power): people below that level live lives that are poor, nasty, brutish and short.
Poverty rates started to collapse towards the end of the 20th century largely because developing-country growth accelerated, from an average annual rate of 4.3% in 1960-2000 to 6% in 2000-10. Around two-thirds of poverty reduction within a country comes from growth. Greater equality also helps, contributing the other third. A 1% increase in incomes in the most unequal countries produces a mere 0.6% reduction in poverty; in the most equal countries, it yields a 4.3% cut.
China (which has never shown any interest in MDGs) is responsible for three-quarters of the achievement. Its economy has been growing so fast that, even though inequality is rising fast, extreme poverty is disappearing. China pulled 680m people out of misery in 1981-2010, and reduced its extreme-poverty rate from 84% in 1980 to 10% now.
The world now knows how to reduce poverty. A lot of targeted policies—basic social safety nets and cash-transfer schemes, such as Brazil’s Bolsa FamÃlia—help. So does binning policies like fuel subsidies to Indonesia’s middle class and China’s hukou household-registration system that boost inequality. But the biggest poverty-reduction measure of all is liberalising markets to let poor people get richer. That means freeing trade between countries (Africa is still cruelly punished by tariffs) and within them (China’s real great leap forward occurred because it allowed private business to grow). Both India and Africa are crowded with monopolies and restrictive practices."
source: http://www.economist.com/news/leaders/21578665-nearly-1-billion-people-have-been-taken-out-extreme-poverty-20-years-world-should-aim (accessed 21/11/14 08:00)
Limits
Sources of Growth
Aid
Fair Trade
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