IGCSE Economics 0455

Topic: International Trade and Globalisation

Objective: Causes of changes in globalisation: changes in trade restrictions

This section explores how changes in trade restrictions have driven the increasing interconnectedness of economies – a process known as globalisation. We will examine the types of trade restrictions, their impact, and how their reduction has fuelled global trade flows.

What is Globalisation?

Globalisation refers to the increasing integration of economies around the world through international trade, investment, migration, and the spread of technology and culture. It involves a reduction in barriers to international trade and investment.

Trade Restrictions: Types and Examples

Trade restrictions are measures governments use to limit or prevent international trade. These can be broadly categorised as follows:

• Tariffs: Taxes imposed on imported goods.
• Quotas: Limits on the quantity of a good that can be imported.
• Subsidies: Government payments to domestic producers, giving them a competitive advantage.
• Embargoes: A complete ban on trade with a particular country or for a specific good.
• Non-tariff barriers: Indirect measures that restrict trade, such as complex regulations, standards, or customs procedures.

How Trade Restrictions Impact Globalisation

Trade restrictions act as barriers to the flow of goods and services between countries. They increase costs for consumers and businesses, reduce competition, and limit opportunities for economic growth. The removal or reduction of these restrictions is a key driver of globalisation.

Causes of Changes in Trade Restrictions

Several factors have contributed to the historical changes in trade restrictions, leading to increased globalisation:

• Political Changes: The collapse of communism, increased democracy, and improved international relations have fostered a more cooperative environment for trade.
• Economic Arguments: The economic benefits of free trade, such as increased efficiency, lower prices, and greater consumer choice, have become increasingly recognised.
• International Agreements: The establishment of international organisations like the World Trade Organisation (WTO) and the negotiation of trade agreements (e.g., GATT, NAFTA, EU) have played a crucial role in reducing trade barriers.
• Technological Advancements: Improvements in transportation (e.g., container ships) and communication (e.g., internet) have made it easier and cheaper to trade internationally.
• Pressure from Consumers and Businesses: Consumers and businesses often lobby governments to reduce trade barriers in their interests.

The Role of the WTO

The World Trade Organisation (WTO) is an international organisation that regulates and facilitates international trade. Its main aims are:

1. To reduce tariffs and other trade barriers.
2. To provide a forum for trade negotiations.
3. To resolve trade disputes between countries.
4. To promote fair trade practices.

Impact of Reduced Trade Restrictions on Globalisation

The reduction of trade restrictions has had a profound impact on globalisation:

Aspect	Impact of Reduced Trade Restrictions
Trade Flows	Increased volume and variety of goods traded internationally.
Foreign Direct Investment (FDI)	Encourages FDI as companies can more easily access foreign markets.
Economic Growth	Stimulates economic growth by increasing efficiency and productivity.
Consumer Choice	Wider range of goods and services available to consumers at lower prices.
Specialisation	Countries can specialise in producing goods and services where they have a comparative advantage.

In conclusion, changes in trade restrictions are a major catalyst for globalisation. The ongoing reduction of these barriers, driven by political, economic, and technological factors, continues to reshape the global economy.