(a) Explain the factors that influence Globalisation. [10]
Globalisation refers to the increased trade of goods and services, and the flows of capital and labour, between countries. Several interacting factors influence its pace.
Technological advancement
Advances in communications, such as the internet, mobile telephony and digital platforms, have sharply lowered the cost and time of coordinating activity across borders. This enables trade in services, the management of dispersed multinational operations, and rapid cross-border capital flows.
Advances in transportation, including containerisation, cheaper air freight and more efficient shipping, have reduced the cost of moving goods over long distances, making international trade viable where it once was not.
- Together, these developments lower the practical and financial barriers to moving goods, capital and labour.
- This directly accelerates Globalisation.
- Example: The growth of global supply chains and e-commerce allows firms to sell products and services to customers worldwide.
Government policies (Trade liberalisation)
Deliberate government policy choices can open economies to cross-border flows.
- Trade liberalisation, through lowering tariffs and non-tariff barriers, signing free trade agreements (FTAs), and participating in the WTO, reduces the cost of trading across borders and increases trade flows.
- Capital liberalisation, by removing controls on capital movement, facilitates Foreign Direct Investment (FDI) and portfolio investment, increasing capital flows.
- Relaxing immigration and work pass regulations enables greater labour mobility between countries.
- Example: Singapore’s extensive FTA network and its openness to foreign capital and labour demonstrate how government policies can deepen integration into the global economy.
Economic factors (Comparative advantage and market forces)
Differences in factor endowments across countries create
Comparative advantage. This results in differing opportunity costs of production, giving countries and firms an incentive to specialise and trade, thereby increasing trade flows.
- Firms seek larger markets to exploit economies of scale.
- Firms relocate production to lower-cost locations to reduce production costs.
- This encourages multinational corporations to invest overseas through Foreign Direct Investment (FDI).
- Example: The emergence of low-cost economies such as China and India, with abundant labour and resources, has attracted outsourcing by European and US firms, further deepening globalisation.
Conclusion
In conclusion,
technological advancement,
Trade liberalisation, and the economic incentives created by
Comparative advantage, larger markets and lower production costs interact to accelerate
Globalisation. Together, these factors reduce the barriers and costs of moving goods, capital and labour across borders, promoting greater global economic integration.
