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ECON 4 Globalisation and International Trade

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Mr Wilson

on 8 September 2013

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Transcript of ECON 4 Globalisation and International Trade

Globalisation and International Trade

The process of growing economic integration of the world's economies
Free movement of goods and services

Free movement of labour

Free movement of economic capital- FDI

Free movement of financial capital

Cultural factors
Businesses increasingly produce all or part of their products in other countries, or source their raw materials in other countries, or market their products on a world-wide basis.

You need to know:



According to WTO figures, exports as a percentage of world GDP have risen from 5.5% in 1950 to 19.4% in 2005.
Map 1: Merchandise exports and imports by region a, 2011
(WTO 2012)
Task: Read pages 342-346
make brief notes to explain how these forces have driven Globalisation.

Trade Agreements
Technological Advances
Cheaper Transportation
The collapse of communism
Increased openness
Export orientated development strategies
reduction and removal of controls on flow of capital
Relaxation of visa regulations
Prices: Falling prices due to low-cost production abroad.

Consumer choice: Increased availability of goods and services.

Incomes: World GDP is being raised due to specialisation & trade with transfers of capital & technology.

Employment & Unemployment: Large scale manufacturing job losses in Western countries (structural unemployment) but service sector employment rising.

Distribution of income: Widening inequality? (Dependent on combination of market forces and Govt policy.)

Environmental degradation: Rising production and extraction of resources.

Economic interdependency: Economic agents are increasingly dependent on each other.
Effects of Globalisation
15 Minutes
So why is trade beneficial?

Absolute and Comparative Advantage
Try this video to help explain
Economics in the news
A country has absolute advantage when it can produce more goods & services than another country with the same resources.
the same quantity of goods & services with fewer resources.
Ollie can make 30 cups a day or 10 plates

Alex can make 10 cups or 30 plates
Amount per day
Cups Plates
Ollie 10 30
Alex 30 10
Opportunity costs of production
Ollie 1/3 a cup

Alex 3 cups
Ollie 3 plates

Alex 1/3 a plate
Original output per day without trade

15 plates and 5 cups

New output WITH TRADE could be...

15 plates and 15 cups
Here's a video of the same example we did in class - with different names!
Full transcript