Globalisation 2

Frage	Antworten
Foreign Direct Investment	A financial injection made by TNC into a nations economy, either to build new facilities (factories or shops) or to acquire, or merge with, an existing firm already there.
BRICS Group	The four large, fast growing economies of Brazil, Russia, India and China, recently joined at their annual summit meeting by South Africa.
Trickle Down	The positive impacts on peripheral regions (and poorer people) cause by the creation of wealth in the core regions (among the rich people).
Sovereign Wealth Funds	Government-owned investment funds and banks, typically associated with China and countries that have large revenues from oil, such as Qatar.
Trade Blocs	Voluntary International Organisations that exist for trading purposes, bringing greater economic strength and security to the nations that join.
Tariffs	The taxes that are paid when importing or exporting goods and services between countries.
Special Economic Zone	An industrial area, often near the coastline, here favourable conditions are created to attract foreign TNC's. These conditions include low tax rates and exemption from Tariffs and export duties.
Political Factors - Global Flows may be seen as threats (3 ways)	Imports of Raw Material and Commodities can threaten a nations own industry. Migrants can bring cultural change and religious diversity, not everyone welcomes this. Information can provide citizens with knowledge that their government finds threatening.
The work of International Organisations 3 institutions that make up the Bretton Woods institution. Why was it created?	World Bank, IMF, World Trade Organisation, have promoted globalisation. Striving to build free trade consensus. Established at meeting with 43 countries in Bretton Woods, USA, after WW2 to re-stabalise world economy and avoid conditions that led to great depression of 1930's, when there was protectionism.
Protectionism after the Great Depression	Nations had blocked foreign imports with tariffs, damaging export markets for other countries, resulting in a vicious downwards spiral of economic output for all major players.
Plans from the Bretton Woods insitution...	Provide confidence required for countries and businesses to trade internationally. They increase the flow of trade by reducing taxes and tariffs, standardising production so that consumers can buy compatible and reliable products, and outlaw damaging competition, such as flooding a market with subsidised products so as to put competitors out of business. Conditions on loans, encouraged to adopt free market approach.
How does FDI work? Financial Deregulation - The process of removing government rules controlling the way banks and other financial organisations operate.	TBWI have created a global legal and economic framework suited to free trade and FDI. TNC's have thrived in this environment, helped by changes of rules that dictate how they operate. 1980's financial deregulation in Europe and USA, led to banks and finance globalising rapidly, using strategies like off-shoring foreign mergers, foreign acquisition and transfer pricing. All involved injection of capital into the economy of FDI, in the absence of political barriers.
Strategies used by US and Europen banks and finance which resulted in companies globalising rapidly. OFFSHORING	Some TNC'S build their own new production facilities in 'off-shore' low wage economies. For example, US guitar maker Fender opened its Mexican plant at Ensenada in 1987.
Strategies used by US and Europen banks and finance which resulted in companies globalising rapidly. FOREIGN MERGERS	Two firms in different countries join forces to create single entity. Royal Dutch Shell has HQ's in both the UK and the Netherlands.
Strategies used by US and Europen banks and finance which resulted in companies globalising rapidly. FOREIGN ACQUISITIONS	When a TNC launches a takeover of a company in another country. 2012- Uk's Cadbury was taken over by US Food giant Kraft. The UK had few restrictions to foreign takeovers. In contrast the committee on Foreign Investment in the USA closely scrutinises inbound foreign take-overs.
Strategies used by US and Europen banks and finance which resulted in companies globalising rapidly. TRANSFER PRICING	Some TNC'S (Starbucks/Amazon), have sometimes channelled profits through a subsidiary company in low taxed country (Ireland). The Organisation for Economic Co-orperation and Development (OECD), now attempting to limit this practise.
IMF - Role in Globalisation Resulting in TNC's setting up in countries more easily.	Based in Washington DC. Channels loans from rich nations to countries that apply for help. Recipients must agree to free market economies, that are open to outside investment. USA exerts significant influence over IMF policy, though European President.
IMF- Evaluation of Role	IMF rules and regulations can be controversial, especially the strict financial conditions imposed on borrowing governments, who may be required to cut back on healthcare, education, sanitation and housing programmes.
World Bank - Role in Globalisation	Based in Washington DC. Lends money on global scale. 2014- a US$470 million loan granted to philippines for poverty reduction. Also gives direct grants to developing countries e.g. 2014 help was given to D.R of Congo to kick start mega dam project.
World Bank - Evaluation of Role	The World Bank distributed a total of US$65 billion in loans in 2014, though strict conditions on loans and grants e.g. encourages trade liberalisation and free market in return for loans/grants. All World Bank presidents have been American.
WTO - Role in Globalisation	Took over General Agreement on Trade/Tariffs (GATT) IN 1995. Based in Switzerland. Advocates trade liberalisation, for manufactured goods, and abandon protectionist attitudes, favour for untaxed trade e.g. China persuaded to lift export restriction on 'rare earth minerals' 2014
WTO - Evaluation of Role	WTO has failed to stop the world's richest countries such as the UK and USA, from subsidising their own food producers. This protectionism is harmful to farmers in developing countries who want to trade on a level playing field.
Which is the luckiest nut in the world? What is trade liberalisation?	American Peanut. Process of trade becoming free by reducing restrictions.
Why did Senegal need help from the World Bank and what did the World Bank advise? What happened to the global production of the groundnut following this?	Told them to focus on the exports of groundnuts because they didn't have the resources to invest in their own development. Increased - more groundnuts on market meaning prices dropped. 1980s other countries copied Senegal.
What effect did this have on Senegal?	Senegal got into debt due to the price of groundnuts lowering, the debt kept increasing meaning there was less money to be spent on Education/Health.
What economic reforms did Senegal implement following World Bank Advice?	Facing bankruptcy they implemented an economic reform programme with the aid of world bank economists. The World Bank called for trade liberalisation which involved the removal of tariffs, also privatisation of industries so groundnut was privatised. Farmers no longer had a main income and strategy was implemented for 10 years... got worse.
What problems does Senegal have today?	Today it is one of the world's most indebted countries. It spends more of repaying debt that health and education combined.
Issues that need to be considered about the Bretton Woods Institution. Global financial crisis (2008-9)	The global financial crisis of 2008-9, which originated in the US and EU money markets and undermined the entire world economy. As a result, governments in developing countries have become sceptical of the financial advice that the IMF and World Bank offer.
Issues that need to be considered about the Bretton Woods Institution. New Institution Banks	Geopolitical changes mean new alternatives emerging to the BWI. Developing Countries can now approach the China Development Bank (CDB), China loaned more than US$110 billion to developing countries in 2010, a value that exceeded world bank lending. Also BRICS Group - New Development Bank (NDB)
Attitudes and Actions of National Governments. 3 Policies	Key players in globalisation when they adopt policies that allow TNC's to grow in size and influence using strategies such as offshoring, foreign mergers/acquisitions and transfer pricing. Policies include... Free market liberalisation Privatisation Encouraging business start-ups
Free Market Liberalisation Associated with? When? Beliefs they followed?	Policies associated with Ronald Reagan and Maggie Thatcher, 1980. The 2 main beliefs they followed was governments intervention in market impedes economic development. Also as overall wealth increases trickle-down will take place.
Free market liberalisation What was it like in practise? What impact did it have on London in 1986?	In practise, restrictions were lifted on the way companies and banks operated. Removed large amounts of restrictions and paved the way for London to become the worlds leading global hub for financial services and the home of many super wealthy 'non-dom billionaires (foreigners attracting wealthy migrants)
Privatisation What have successive UK governments led the way too allowing?	Foreign Investors to gain a stake in privatised national service and infastructure.
Privatisation Until the 1980's, important assets, such as railways and energy supplies, were owned by state. However, why did the government sell these to private investors?	Because running them prove costly, so they said them in order to reduce government spending and to raise money.
Privatisation Overtime ownership of many assets has passed overseas. Give some examples...	The French company Keolis owns a large stake in Southern England's railway network. EDF energy company is owned by Electrice de France.
Privatisation Since the global financial crisis, who has the British government approached to help fund new infrastructure projects?	Chinese and Middle Eastern Sovereign wealth funs (SWF)
Encouraging Business Start-ups What methods have been implemented to encourage business to start up?	Low business taxes to changes in the law, allowing local and foreign owned businesses to make a greater profit.
Encouraging Business Start-ups In 1994 what resulted in the UK becoming a more attractive market for foreign retailers? Give examples of the foreign retailers.	Sunday trading was introduced. Burger King/Disney Store
Encouraging Business Start-ups Why does the city of Prato in Italy now have the largest chinese population in Europe?	Italy eased restrictions on Chinese investors wanting to start up textile companies inside the EU.
Other Government mechanisms to encourage FDI include...	Low Corporation Tax and low individual income tax rates Tax 'holidays' or other types of tax concessions Preferential Tariffs (Sometimes with SPEZ -China) Free or subsidised land
Advantages of Trade Bloc Membership Bigger Markets (but not extra taxes)	The Uk has a population of 65 million and the EU has a population of 508 million. UK companies like Tesco have benefitted by expanding into other EU countries and sourcing their goods as the best price from within the 28 member states.
Advantages of Trade Bloc Membership National Firms can merge to for TNCs	Smaller national firms within a trade bloc can merge to form TNCs, making their operations more cost effective. Airtel Africa is a mobile phone company HQ'd in Kenya whose expansion into 17 African states has been helped by existence of EAC and COMESA trace blocs.
Advantages of Trade Bloc Membership Firms that have a comparitive advantage in the production of a particular product or service should prosper.	Thus French wine-makers, thanks to their advantageous climate and soil, produce a super product that is widely consumed throughout a tariffs-free Europe.
Advantages of Trade Bloc Membership Being in a trade bloc can result in an increase in FDI and job creation	For example, the Japanese car manufacturers Honda, Toyota and Nissan have all set up production plants in the UK to avoid the tariffs and quotas placed on good produced outside the EU. This has created thousands of jobs or UK citizens.
Disadvantages of Trade Bloc Membership Loss of Severeighnty	A trade bloc (and political union) is likely to lead to some loss of sovereignty. For example, the EU deals not only with trade matters but also with human rights, consumer protection, greenhouse gas emissions an other issues only marginally related to trade.
Disadvantage of Trade Bloc Membership Interdependance	Because trade blocs increase trade among participating countries, the countries become increasingly dependent on one another. A disruption of trade with a trading bloc may have severe consequences for the economies of all participating countries. The current chill yes facing the banking sector of all Eurozone countries are a good example of this.
The Actions of Governments in New Global Regions What is the one important reason for acceleration of globalisation in recent years?	The changing of government attitudes in regions outside Europe and North America. Asia's three most populated countries - China, India and Indonesia - have all embraced global markets as a means of meeting economic development goals. In all three cases, the establishment of SEZs, government subsidies and changing attitudes of FDI play big roles.
Special Economic Zones and Government Subsidies SEZs are a good example of governments building what? to attract what?	Building INFRASTRUCTURE to attract FDI and INCREASE TRADE FLOWS.
Special Economic Zones and Government Subsidies Characteristics? What do they do?	Large areas of land set aside in locations well placed for international trade, such as seaports. Companies can import raw materials and export finished manufactured goods from these zones without incurring domestic taxes, so encouraging TNCs to set up branch plants (subsidiaries)
Special Economic Zones and Government Subsidies How does this benefit the host country?	Provides employment for locals Payroll taxes provide money for government spending Transfer of Technology Domestic firms can link in to supply the branch plant so they make greater profit. In time the strengthening of the domestic economy in and around the zone may enable these domestic firms to expand abroad (become TNCs themselves)
How has Indonesia encouraged the acceleration of globalisation? POSITIVE	1960s, president Sugart turned back on communisation + opened up Indonesia's markets. American + European TNC's built attractive new legal + economic framework for foreign investors (popular offshoring location for TNCs). World Bank Lending funded speedy modernisation of roads, power supplies and ports.
How has Indonesia encouraged the acceleration of globalisation? NEGATIVE	Human rights campaigners expressed concern that capital city Jakarta's export zone - Low tax haven for sweat shop manufacturing.
How has India encouraged the acceleration of globalisation? POSITIVE	1991- sweeping financial reforms took place. TNCs grown in size and influence. 90% India's shops are family owned (deterred some foreign retailers - Ikea). India's mobile network operator become major global players.
How has India encouraged the acceleration of globalisation? NEGATIVE	Until 2013, foreign retailers could only gain a presence on India's own high streets by agreeing to form partnerships with local firms.
What evidence is there that the EU has contributed to the acceleration of globalisation?	In 1957 there were only 6 countries in the EU, now in 2013 there are 28 members in the EU. This has seen an acceleration in globalisation as countries are more interconnected.
EU FACT FILE Simple trade bloc - multi governmental organisastion Own Currency Euro and shared political legislation Member states are eligible for EU structural funds to help develop their economies	EU also helps cities gain a global reputation by awarding prestigious titles such as 'capital of culture' Agricultural producers in the region all benefit from farm subsidies from the common agricultural policy. The only taking bloc granting citizens of member states freedom of movement.
ASEAN FACT FILE 10 member states (trade freely as they eliminated tariffs), combined population of 600 million, established in 1967. Members include HIC, singapore and Emerging Economoies of Indonesia, Malaysia and Philippines.	Success of Indonesia's manufacturing and Philippines call centres are likely to result in further links with countries and blocs outside of ASEAN. The bloc is likely to follow the EU and adopt a single currency and free movement of people further connecting the countries politically and economically.
China's 1978 'Open Door Policy' Introduction	Prior to China's 'Open Door' reforms, much of the population lived in poverty in rural areas. In 1978 Deng Xiaoping began the radical reforms which allowed China to embrace globalisation while remaining under one-party authoritarian rule.
China's 1978 'Open Door Policy' Agricultural Reforms	Agricultural communes were dismantled and farmers were allowed to make a small profit for the first time. Strict controls on the number of children were also introduced to curb the population growth.
China's 1978 'Open Door Policy' Transformation into an urban, industrialised nation.	Gained rapid momentum, 300 million people left rural areas in search for better life in city. Soon 200 Chinese cities with 1 million habitants or more. Only a strict registration system Hukou prevented rural villages from emptying together. Hukou- prevents all rural villages from emptying out.
China's 1978 'Open Door Policy' Impacts of urbanisation and globalisation	Fuelled grow of low-wage factories (workshop of the world). TNCs quick to establish branch plants or trade relationships with chinese owned factories in coastal SEZs. 50% GDP-generated in SEZs. By 2015- workers earning $40 a day or more making quality goods (iPhone).
China's 1978 'Open Door Policy' Today.	China = Worlds largest economy 400 Million people escaped poverty Supports hyper global view to core poverty
China's 1978 'Open Door Policy' Evidence that China is still not entirely open to global flows.	Google and Facebook's- Little or no access to China's market (Youka provide service). Government set strict quota of only 34 foreign films to be screened in cinemas each year. Strict controls on foreign TNCs (blocked coca cola acquisition of huigan juice in 2008)

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