What this lesson teaches
I can define globalisation.
Syllabus K343, 6.2.1. Definition of globalisation
I can explain what changes globalisation and how those changes affect trade, competition, the environment, migration, incomes and development.
Syllabus K343, 6.2.2. Causes and consequences of changes in globalisation: causes of changes in globalisation: changes in trade restrictions, changes in transport costs, changes in communication costs, movement of multinational companies (MNCs); effects of changes in globalisation on: international trade, competition, the environment, migration, income distribution, economic development
Make a guess
Container ships cut the cost of shipping goods across oceans. How does this change globalisation?
- It has little effect, because tariffs matter much more than shipping.
- It slows it, because fewer ships and sailors are needed.
- It speeds it up, because trade becomes cheaper.
Show the answer
It speeds it up, because trade becomes cheaper.
Lower transport costs make it worthwhile to make parts in one country and assemble them in another, so trade grows.
Globalisation is the growing connection of the world's economies, driven by fewer trade barriers, cheaper transport and communication, and MNCs.
Globalisation is the way the world's economies are becoming more closely linked. Goods, services, money, people and ideas move more and more between countries. The syllabus names four causes of changes in globalisation; each one works by making it cheaper or easier to do business across borders.
Changes in trade restrictions. When countries cut tariffs and quotas, or sign free trade agreements, imported goods become cheaper and easier to sell, so trade grows. Singapore has signed many free trade agreements for this reason. When countries raise trade barriers again, as the United States did with tariffs from 2018, globalisation can slow down.
Changes in transport and communication costs. Huge container ships carry goods across oceans at a low cost per box. So a firm can make parts in one country and assemble them in another. The internet, cheap phone calls and video calls let managers run a factory or a call centre from thousands of kilometres away. Lower costs make more trade worthwhile.
Movement of multinational companies (MNCs). An MNC is a firm that produces in more than one country. MNCs place each stage of production where it is cheapest or most skilled, and they move money, technology and managers with them. Each new factory abroad adds to trade and links the economies more closely.
- Globalisation
- Growing connection of the world's economies.
- Causes
- Fewer trade restrictions, lower transport and communication costs, MNCs.
- Effects
- Trade, competition, environment, migration, income distribution, development.
Worked example: Singapore as a hub of globalisation
Singapore sits on one of the world's busiest shipping routes and is home to the regional offices of many MNCs.
- Trade restrictions: Singapore charges almost no tariffs and has many free trade agreements, so goods move through it easily.
- Transport: its container port and Changi Airport link it to hundreds of cities.
- Communication: fast internet lets firms run their Asian business from Singapore.
- MNCs: thousands of foreign firms have offices or factories here, bringing jobs, skills and capital.
Watch out for this
Globalisation only means more trade in goods.
Globalisation also includes the movement of investment, people, ideas and technology between countries.
Check your understanding
Which change has encouraged globalisation?
- Higher tariffs on imports from distant countries
- Higher shipping costs for goods sent by sea
- A fall in the cost of international communication
Show the answer
A fall in the cost of international communication
Right. Cheap communication makes it easier to run business across borders.
Check your understanding
Which development has made it easier for firms to run offices and factories in many countries at once?
- Cheap, fast internet and video calls
- Countries raising tariffs on each other's goods
- A ban on foreign firms investing in a country
- Stricter visa rules for foreign workers
Show the answer
Cheap, fast internet and video calls
Right. Better communication lets managers run operations across borders, which spreads globalisation.