Factors Contributing to Increased Globalisation
Containerization is perhaps the most significant physical driver of globalisation. By standardizing the size of shipping containers, goods can be moved seamlessly between ships, trains, and trucks, drastically reducing loading times and labor costs.
The development of Large-Scale Logistics and massive container ships has created economies of scale. This means the cost of transporting a single item across the ocean has become negligible, making it economically viable to produce goods in distant countries with lower labor costs.
Air Freight Improvements have enabled the rapid transport of high-value or perishable goods. This supports 'just-in-time' production methods where components are delivered exactly when needed, reducing the necessity for expensive local warehousing.
Trade Liberalization involves the removal or reduction of barriers to the free exchange of goods between nations. This is achieved through the elimination of tariffs (taxes on imports) and quotas (limits on the quantity of imports).
International organizations like the World Trade Organization (WTO) play a crucial role by negotiating trade agreements and resolving disputes. These institutions provide a stable framework of rules that encourage countries to open their markets to foreign competition.
The formation of Trading Blocs (such as the European Union or ASEAN) creates regional free-trade zones. These agreements encourage deeper integration between member nations, fostering regional supply chains and political stability.
Transnational Corporations (TNCs) are large companies that operate in multiple countries. They drive globalisation by investing in foreign markets (Foreign Direct Investment) and establishing global supply chains to minimize production costs.
TNCs utilize Global Sourcing, where they procure materials and labor from the most cost-effective locations worldwide. This spreads technology and management practices to developing nations, further integrating them into the global economy.
Through Brand Globalisation, TNCs create uniform consumer demands across different cultures. This leads to a degree of cultural homogenization, where the same products and services are recognized and consumed in almost every corner of the globe.
| Feature | Trade Liberalization | Protectionism |
|---|---|---|
| Primary Goal | Increase efficiency and consumer choice | Protect domestic jobs and industries |
| Tools Used | Free Trade Agreements, Tariff removal | Tariffs, Quotas, Subsidies |
| Economic Effect | Lower prices, increased competition | Higher prices, reduced competition |
| Globalisation Impact | Accelerates integration | Slows or reverses integration |
Link the Factors: When discussing globalisation, always explain how factors work together. For example, containerization (transport) is only effective if trade barriers (policy) are low enough to allow the ships to dock and trade.
Use Precise Terminology: Distinguish between 'Foreign Direct Investment' (building factories/offices) and 'Trade' (exchanging goods). Examiners look for these specific economic terms to demonstrate depth of understanding.
Focus on 'Why': Don't just list the internet as a factor; explain that it reduces 'asymmetric information' and allows for the coordination of fragmented production processes across different time zones.
Check for Balance: While focusing on the drivers, briefly acknowledge that these factors do not affect all regions equally, leading to a 'digital divide' or uneven development.