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Globalisation Trade Aid and Exchange Factsheet
Keywords Defined
Globalisation Trade Aid
Process by which the world Transaction or exchange of Transfer of money, goods or
is becoming increasingly goods and services. This services, without needing
interconnected as a result of might be one country something in exchange.
massively increased trade trading with another
and cultural exchange. country, e.g. Kenya selling The purpose is to help a
fruit and flowers to the UK. It country develop, or to
Globalisation has increased might be trade between support the basic needs of
the production of goods and villages or even between that country’s population.
services. The biggest individuals.
companies are no longer
national firms but Trade is usually good for the
multinational corporations country which is selling
with subsidiaries in many goods and products as it is a
countries. Globalisation has way to make money which
been taking place for can be used to build the
hundreds of years, but has infrastructure and services
sped up enormously over within the country through
the last half-century. the payment of taxes.
What do we mean by Globalisation?
It is the things which we use in our daily lives which are derived from a more and more
increasingly complex geography of production, distribution and consumption.
Increasingly, a business’ success has been defined by how large it has become. Some
organisations are held in public or government ownership (communication, transport and
energy), most are privately owned.
Because of the concerns over loss of jobs, the merging of cultures and the unequal spread of
income and gains from economic growth across the world, there is an increasing number of
people who view the effects of globalisation negatively.
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Is Globalisation Good or Bad? Thoughts from Politicians
Marine Le Pen Anna Lindh Tony Blair, 2001
Wild globalisation has Globalisation has Globalisation is a fact. Not just in
benefited some, but it’s made us more finance, but in communication, in
been a catastrophe for vulnerable. It creates a technology, increasingly in culture, in
most. world without borders, recreation. In the world of the internet,
and makes us painfully information technology and TV, there
aware of the will be globalisation. And in trade, the
limitations of our problem is not that there is too much of
present instruments, it, on the contrary, there is too little of it.
and of politics to meet
The issue is not how to stop
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its challenges. globalisation. The issue is how we use
the power of community to combine it
with justice...the alternative to
globalisation is isolation.
Hyper Globalists
Hyper globalists believe strongly in the benefits of globalisation. For them, our national
borders are no longer as relevant as they were in the past. This view has positive and
negative implications. There are even two perspectives of hyper globalisation.
Political Spectrum (Left) Political Spectrum (Right)
The fast pace at which the world is Those in favour of free market capitalism on
changing is too much for governments and the whole. Globalisation represents the
society to keep up with. power of markets to create growth, raise
incomes, improve product quality and
They see the rewards of globalisation being choice, and lower prices for consumers.
enjoyed by the privileged few. For them it is
important to return to local markets and They believe that we stand to gain from
reject the power of multinationals. global communication networks, shared
research and development and closer
economic integration.
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Is Trade always good for development?
Trade is usually good for development but sometimes it can be damaging because of unfair
conditions and prices or because of the value of the products being traded. Most of the
profits from global trade go to businesses and people in economically more developed
countries.
Now look at the two cycles below which show how sometimes trade can keep the poorest
countries poor and keep the richer countries rich.
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It can also be a problem if a country depends too much on a single product or commodity.
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What is Foreign Aid, and does it work? (7 Minute Video)
Notes from the video:
Foreign Aid: Transfer of money, goods or services, without needing something in exchange.
The purpose is to help a country develop, or to support the basic needs of that country’s
population.
Types of Foreign Aid
1 Humanitarian & Eg Tsunami (Thailand 2004), earthquake relief (Nepal 2015)
Disaster Relief or conflict causing the displacement of people (Syrian War)
2 Economic Aid To sponsor development or investment in infrastructure,
military support,family support or healthcare programmes to
prevent diseases.
3 Military Support To assist a country or its people in its defense efforts.
4 Healthcare programs Such as family planning, reducing infant mortality or
prevention of a particular disease.
Who provides Foreign Aid?
1. Public (Official Development Assistance -ODA)
a. Bilateral: Given by one country to another
b. Multilateral: Aid provided by multiple countries to or through a multilateral
agency like the UN, World Bank or IMF
2. Private
a. NGO’s or Charities like Oxfam or Red Cross / Red Crescent
03 Reasons why Countries give Foreign Aid
1 Moral or Ethical Aid can be given to right past wrongs,
Reasons Address consequences of colonialism,
Ensure equal distribution of resources,
Promote shared prosperity,
Moral obligation to help those less fortunate to help raise
standard of living
2 Economic Self Develop or expand markets for donor market’s goods.
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Interest Tied Aid is foreign aid that must be spent on goods produced by
the donor country.
3 Political / Buy friends and influence, for security reasons. Example, during
Strategic Self the Cold War, the USA used aid to persuade countries to side
Interest with them over the Soviet Union.
Perspectives on Foreign Aid
Supporters of Foreign Aid Critics of Foreign Aid
Economist Jeffrey Sachs & entrepreneur Bill Economist William Easterly and Dambisa
Gates say: Moyo who claim foreign aid:
● Resolves Poverty Trap, by filling the ● Helps to keep corrupt governments
savings gap (which can then be used in power, as they steal aid and don't
to invest) provide public goods.
● Instrumental in eradicating smallpox ● Providing aid for the education of
young girls is good, but it does not
● Provides treatment for HIV/Aids, go far enough to provide them a job
Tuberculosis and Malaria when they graduate. What good is an
education if there is no job
opportunity?
● Investment and job creation is more
important than Aid
● Unable to get feedback on whether
the recipients need or want the aid.
Summary
1. Issue facing aid agencies is the indirect and distant relationship between the
taxpayer and the recipient.
2. Objectives of giving the aid from aid agencies are not always aligned to the beliefs of
taxpayers on what the aid should be spent on.
3. Little follow up from aid agencies to measure the effectiveness of foreign aid given to
countries. Aid agencies need to look at investing in finding out the impact of their
investment.
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Arguments for and against Aid
Should the UK continue to give Foreign Aid?
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Official development assistance Organisation for Economic Co-operation and
Development (OECD) Financing for Development Office, UN-DESA
(FFDO/UNDESA)
The Addis Agenda reaffirms official development assistance (ODA) commitments contained
in both the Monterrey Consensus and the Doha Declaration on Financing for Development,
including the commitment by many developed countries to achieve the target of 0.7 per cent
of ODA/GNI and 0.15-0.2 per cent of ODA/GNI to the least developed countries. The Addis
Agenda also goes beyond earlier international agreements. It highlights the importance of
ODA for the poorest and most vulnerable countries and includes a commitment to reverse
the recent decline in ODA to LDCs, to encourage ODA of 0.2 per cent of GNI to LDCs, and to
recognize those countries that allocate at least 50 per cent of ODA to LDCs. It also commits
to prioritizing the allocation of concessional international public finance to those with the
greatest needs and least ability to mobilize other resources.
In 2015 how many countries were meeting the target?
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08 Reasons Why some countries seek to restrict trade (Protectionism)
1. Fledgling / infant Industries that are just beginning may need some protection from
industries competition abroad while they grow and develop. The World Trade
Organisation has slowly accepted this as a good reason for
developing countries to restrict trade and protect their economy,
as they try to perform on a level playing field as developed nations
2. Sunset Industries There are certain industries that are at risk of disappearing due to
new innovations, competition from abroad or environmental
concerns. Car and steel industries became sunset industries in
Europe and the USA when Japan became a major car producer,
and China becoming a producer of steel.
3. Anti Dumping Foreign producers sometimes sell at unfair prices. If the selling is
lower than production cost, then this is called dumping. This is
against the rules set by the World Trade Organisation.
4. Protect Jobs It's never nice to lose your job. Sometimes when countries go
through major structural changes, tension can happen between
policy makers and workers in industry. Policy makers want the
economy to be competitive and that inefficient industries are not
being subsidised unnecessarily. Workers want to make sure their
jobs and income are not at risk, and they can support their
families. Competition from abroad can make this difficult.
5. Health, Safety and Countries can limit goods if they fail to meet requirements for
environmental manufacturing processes or chemicals used. These reasons
regulations would be imposed for health or environmental reasons. A recent
example is that the UK has recently declared they would not
import chlorinated chicken from the USA. This angered US
farmers, but UK farmers were pleased.
6. Security It might be a good idea to keep some industries domestic. This
includes food as it is unwise to be reliant on food imports if prices
rise. Another example is Huawei wanting to invest in the UK
telecommunications system. Concerns over national security
caused the UK Government to prevent Huawei investing.
7. Independence During the first half of the 20th Century, some countries in Latin
America restricted trade to attempt to get rid of its colonial past.
Countries like Brazil wanted to stop being overly reliant on other
countries for simple goods like textiles and clothes, so they can
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create an industry in their own country for their own people.
8. Preventing loss of Some goods, like food items, are a part of the country’s culture
culture that receive special protection from the government. There are
even international protections for some food and drinks. If
Champagne is produced outside of the Champagne region in
France, it must be called something else. Parmesan is also
protected, so if it's produced outside of particular regions in Italy,
it has to be called something else.
What types of Trade Agreements exist?
1. Free Trade Area
2. Customs Union
3. Common Market
1. Free Trade Area
Countries can agree to reduce trade barriers for certain goods. This is called a preferential
trade agreement. A Free Trade Area (FTA) goes one step further, as countries promise to
remove all barriers to trade in goods and services between participating countries.
Examples of FTA’s are:
● North American Free Trade Agreement (NAFTA)
● South Asian Free Trade Area (SAFTA)
● ASEAN - Australia - New Zealand Free Trade Area (AANZFTA) (ASEAN: Association of
Southeast Asian Nations)
● Central Europe Free Trade Agreement (CEFTA)
● Common Market for Eastern and Southern Africa (COMESA)
Being a member of an FTA is not restrictive
and members can still engage in trade or
trade agreements with any non member
countries. Countries can also choose to
not trade with non members or erect
barriers that are different from those in the
FTA.
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2. Customs Union
A customs union is an agreement between members of a
Free Trade Area that requires members to set exactly
the same trade policy with non member countries. That
means that if the bloc finds a reason to set a trade
barrier against a non member country, then all countries
in the customs union must agree to the same barrier.
The customs union does promote free trade between its
members, such an agreement can be seen as not
promoting free trade with the outside world. However it
does make it easier for countries to negotiate trade
agreements with the entire bloc, as opposed to having
to make these arrangements with each country separately.
Because of Brexit, the UK is now Country D.
3. Common Market
A common market includes the
characteristics of an FTA and a
customs union, but there is also free
movement of goods, people and
services across the borders within the
common market. This means you don't
need to show your passport when you
cross a border, and trucks and other
goods are free to be transported
across the borders. Workers and
students do not need visas to love,
work or study in countries within the
common market. This significantly
reduces costs for business.
Examples include:
● The European Union (EU) (now minus the UK because of Brexit)
● Gulf Cooperation Council (GCC)
● MERCOSUR (Argentina, Brazil, Paraguay, Uruguay, and Venezuela)
