Globalisation

Summary and Exam Tips for Globalisation

Globalisation is a subtopic of International economic issues (A Level), which falls under the subject Economics in the Cambridge International A Levels curriculum. Globalisation involves transforming the world into a unified market by reducing barriers to the movement of goods, services, investments, and labor. This trend allows consumers to access products globally, facilitates international trade, and supports the growth of multinational corporations (MNCs). Key causes include advances in communication and technology, improved transportation, removal of trade restrictions, and reduced limitations on foreign investments. Indicators of globalisation include the growth of world trade relative to world output, exports to GDP ratio, and Foreign Direct Investment (FDI) to GDP ratio.

Globalisation can boost economic growth by encouraging specialization, leading to increased global output and higher living standards. However, it may also cause structural unemployment and make countries vulnerable to global shocks. Trade blocs, such as free trade areas, customs unions, and monetary unions, play a crucial role in economic integration. Trade creation and trade diversion are important concepts, with the former leading to increased efficiency and the latter potentially causing resource misallocation. Understanding these dynamics is essential for analyzing the impact of globalisation on both high-income and low-income countries.

Exam Tips

• Define Globalisation: Clearly articulate that globalisation is about creating a unified global market by reducing barriers to trade and movement.

• Causes and Consequences: Be prepared to discuss the causes of globalisation, such as technological advances and trade liberalization, as well as its economic impacts, including both benefits and drawbacks.

• Trade Blocs: Understand the differences between free trade areas, customs unions, monetary unions, and full economic unions. Use examples like the EU and USMCA to illustrate these concepts.

• Trade Creation vs. Trade Diversion: Explain how trade creation leads to efficiency and consumer benefits, while trade diversion may result in resource misallocation.

• Indicators of Globalisation: Familiarize yourself with key indicators like the export to GDP ratio and FDI to GDP ratio, as these are often used to measure a country's integration into the global economy.