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ECON 4 Globalisation and International Trade
Transcript of ECON 4 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
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
Task: Read pages 342-346
make brief notes to explain how these forces have driven Globalisation.
The collapse of communism
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
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
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!