Practise Edexcel Business questions on globalisation, trade and international operations, applying global opportunities and risks to a firm’s strategy.
Sources for use with
Extract A
Asia’s need for coal to lift Australian coal exports in 2019
The increasing import of coal by India and Southeast Asia has been driven by the greater use of electricity. This will lead to a strong increase in Australian coal exports over the next five years. The International Energy Agency (IEA) predicts a 4.6% rise in coal‑powered generation in India. Strong economic growth in Indonesia and Vietnam will increase the need for coal by 5%. The Australian economy is dominated by its service sector, even though it produces a lot of coal and other minerals. The service sector makes up 62.7% of Australian GDP and employs 78.8% of the labour force. Australian GDP in 2019 was estimated at A$1.9 trillion.
Extract B
Vietnam’s rising Foreign Direct Investment (FDI) inflow
Up to the year 2019 there have been 10 consecutive years of increase in FDI inflow into Vietnam. There is a significant increase in both the volume and the value of FDI projects. In 2019, there were 3,478 new projects, a 28.2% increase on the previous year. These new projects brought in an extra US$31.8bn, a 3.1% increase on the previous year. South Korea was the top investor in Vietnam in 2019 investing US$7.9bn, followed by Hong Kong at US$7.8bn. Vietnam has benefitted from the US‑China trade war, and the political tension in Hong Kong. Vietnam is being chosen by investors among other ASEAN countries because of its cultural similarity to China, low labour costs and pro‑investment policies. The Vietnamese processing and manufacturing sector attracted 68% of Vietnam’s total FDI in 2019. In June 2019, Apple announced its plan to start trial production of the wireless earphones, AirPods, in Vietnam to avoid the cost of tariffs imposed on China by the US. The World Bank expects FDI to continue to rise in 2020. Manufacturers are showing interest in the Central Region where land available for industrial use is vast. However, it is critical for the Vietnamese government to better integrate into the global supply chain and improve the skills of the labour force.
Extract C
Vietnam ranked 70th in World Bank’s 2020 Ease of Doing Business Ranking
Vietnam was placed 70th out of 190 economies in the World Bank’s 2020 Ease of Doing Business ranking. The ranking was down one place from the previous year, despite a higher score of 69.8 points out of 100. In the report, the World Bank marked and ranked economies in ten areas including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency, employing workers, and dealing with the government. Vietnam was said to have made significant improvements in getting credit and paying taxes, resulting in increases of 5% to 7% annually. Other areas witnessed minor improvements or remained unchanged. The ranking of other Southeast Asian countries were Malaysia (12th), Thailand (21st), Indonesia (73rd), the Philippines (95th), Brunei (66th), Cambodia (144th) and Laos (154th). Elsewhere, New Zealand came first in the 2020 ranking, followed by Singapore, Hong Kong (China), Denmark, the South Korea and the US.
Extract D
European Parliament approves EU‑Vietnam free trade and investment deal
The EU‑Vietnam trade agreement, described as the most modern and ambitious agreement ever concluded between the EU and a developing country, received the European Parliament’s backing on the 20 February 2020. The agreement will remove virtually all customs duties between the EU and Vietnam over the next ten years, including on Europe’s main export products to Vietnam. European businesses will also be able to bid on public tenders put out by the Vietnamese government and several cities, including Hanoi. The main EU imports from Vietnam include telecommunications equipment, clothing and food products. The EU mainly exports goods such as machinery and transport equipment, chemicals and agricultural products to Vietnam. Vietnam is the EU’s second largest trading partner in the Association of Southeast Asian Nations (ASEAN) after Singapore, its trade in goods is worth €47.6bn a year and €3.6bn when it comes to services. EU exports to the country have grown between 5% and 7% annually. The EU’s trade deficit with Vietnam was €27bn in 2018.
Australia is a developed economy.
Explain one characteristic of a developed economy.
Assess the importance of trade liberalisation in increased globalisation.
Extract A
Thailand's economy - 2021
- Thailand is the 22nd largest exporting country in the world
- It has a positive trade balance of $34.3bn
- The gross domestic product (GDP) of Thailand is $546bn with a population of 69,410,000
- Thailand is the largest exporter of natural rubber in the world
- It has a 33.3% share of the global export market for rubber that is worth $4.63bn annually
- Almost half of Thailand's rubber (42.4%) is exported to China.
Extract B
Vietnam's GDP between 2000 and 2020 in billion $
Extract C
International trade in developing economies
Over the last two decades, developing economies have made a big increase in their share of world trade. By 2019, the value of goods exported from developing countries had increased to 44.3% of the global total and the value of services exported increased to 30% of the global total. Several growing countries doubled their share of global trade from 2010 to 2019.
- Vietnam tripled its share of world exports of goods from 0.47% in 2010 to 1.4% in 2019 and its share of world exports of services grew from 0.19% to 0.45%
- Thailand almost doubled its share of world services exports from 0.87% to 1.34%
- United Arab Emirates quadrupled its share of service exports from 0.3% to 1.2%
- Bangladesh almost doubled its share of total services exports from 0.13% to 0.2% and its total goods exports from 0.06% to 0.1%.
Extract D
Regional Comprehensive Economic Partnership (RCEP) trade deal
In November 2020, the RCEP was signed in Hanoi, Vietnam after eight years of negotiations. Its 15 members are Australia, China, Japan, New Zealand, South Korea, plus 10 members of the Association of Southeast Asian Nations (ASEAN): Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Once agreed by all its members it will form the world's largest trade bloc, covering 30% of global output and almost one third of the global population.
Extract A Thailand's economy - 2021 - Thailand is the 22nd largest exporting country in the world - It has a positive trade balance of $34.3bn - The gross domestic product (GDP) of Thailand is $546bn with a population of 69,410,000 - Thailand is the largest exporter of natural rubber in the world - It has a 33.3% share of the global export market for rubber that is worth $4.63bn annually - Almost half of Thailand's rubber (42.4%) is exported to China.
Using Extract A, calculate to two decimal places the GDP per capita of Thailand.
Explain one advantage for Thailand of specialising in the production of rubber.
Discuss the extent to which economic growth in a country such as Vietnam may
have caused its employment patterns to change.
Assess how economic growth in developing economies may affect the trade
opportunities for European businesses.
Assess the possible impact on businesses in countries such as Thailand and
Vietnam from their membership of a trading bloc.
Extract A Driving growth in the Association of Southeast Asian Nations (ASEAN) The story of economic growth within the ASEAN trading bloc is a remarkable one. Having survived the 1997 Asian financial crisis and the 2008 global economic collapse, ASEAN's gross domestic product (GDP) is now four times higher than it was in 1999. It increased from $577bn to $2.5 trillion in 2016, making it the sixth-largest economy in the world. ASEAN is expected to maintain its strong and steady economic progress with 2018 growth rates averaging 5.3% according to forecasts by the Asian Development Bank (ADB). If ASEAN was considered as a single country, its approximate population would be 630 million, making it the third largest in the world behind India and China. It has a young population, 60% are below the age of 30, and it has the third largest labour force in the world behind China and India. The World Bank currently estimates ASEAN's labour force to be 350.5 million. The International Labour Organisation (ILO) predicts that ASEAN will add another 59 million people to its workforce by 2030 - making it the second largest growing labour force in the world behind India. This means ASEAN would account for 10% of the global labour force by 2030.
A growing workforce which is advanced and professional will also be a pull factor for
The European Union (EU), China, South Korea and Japan are the major investors. FDI in CLMV (Cambodia, Laos, Myanmar and Vietnam) rose by 8% in 2018, driven mainly by manufacturing and infrastructure industries.
Extract B ASEAN's newbies come into their own When the membership of ASEAN was enlarged between 1995 and 1999, the two most frequently asked questions were: could Cambodia, Laos, Myanmar and Vietnam (CLMV) integrate with the older ASEAN members? Would the 10-member ASEAN bloc survive with such a huge development gap, not to mention vast differences in political cultures? Two decades later, the answer is quite clear, the newer member states are moving toward full integration in the economic, political, security, and social cultures of ASEAN. For example, Vietnam has proven beyond any doubt that since joining ASEAN in 1995, it has adapted well to the bloc's structure and processes. In economic terms, Vietnam has become one of the most open economies in ASEAN. Since undertaking economic reforms in 1984, Vietnam has signed 17 free-trade agreements, even though it is still not classified as a market economy. With these global free-trade agreements, Vietnam is aiming high and wants to be a middle-income country within the next two decades.
Extract C
Vietnam's GDP growth rate \% per year
*2018 and 2019 are forecasts. Source: Asian Development Bank. Asian Development Outlook (ADO) 2018
Explain one reason why a European business might want to trade with countries in ASEAN.
Discuss the importance of foreign direct investment (FDI) to the growth of businesses in ASEAN.
Assess the likely impact of membership of the ASEAN trade bloc on Vietnamese businesses.
Sources for use with
Extract A
Asia’s need for coal to lift Australian coal exports in 2019
The increasing import of coal by India and Southeast Asia has been driven by the greater use of electricity. This will lead to a strong increase in Australian coal exports over the next five years. The International Energy Agency (IEA) predicts a 4.6% rise in coal‑powered generation in India. Strong economic growth in Indonesia and Vietnam will increase the need for coal by 5%. The Australian economy is dominated by its service sector, even though it produces a lot of coal and other minerals. The service sector makes up 62.7% of Australian GDP and employs 78.8% of the labour force. Australian GDP in 2019 was estimated at A$1.9 trillion.
Extract B
Vietnam’s rising Foreign Direct Investment (FDI) inflow
Up to the year 2019 there have been 10 consecutive years of increase in FDI inflow into Vietnam. There is a significant increase in both the volume and the value of FDI projects. In 2019, there were 3,478 new projects, a 28.2% increase on the previous year. These new projects brought in an extra US$31.8bn, a 3.1% increase on the previous year. South Korea was the top investor in Vietnam in 2019 investing US$7.9bn, followed by Hong Kong at US$7.8bn. Vietnam has benefitted from the US‑China trade war, and the political tension in Hong Kong. Vietnam is being chosen by investors among other ASEAN countries because of its cultural similarity to China, low labour costs and pro‑investment policies. The Vietnamese processing and manufacturing sector attracted 68% of Vietnam’s total FDI in 2019. In June 2019, Apple announced its plan to start trial production of the wireless earphones, AirPods, in Vietnam to avoid the cost of tariffs imposed on China by the US. The World Bank expects FDI to continue to rise in 2020. Manufacturers are showing interest in the Central Region where land available for industrial use is vast. However, it is critical for the Vietnamese government to better integrate into the global supply chain and improve the skills of the labour force.
Extract C
Vietnam ranked 70th in World Bank’s 2020 Ease of Doing Business Ranking
Vietnam was placed 70th out of 190 economies in the World Bank’s 2020 Ease of Doing Business ranking. The ranking was down one place from the previous year, despite a higher score of 69.8 points out of 100. In the report, the World Bank marked and ranked economies in ten areas including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency, employing workers, and dealing with the government. Vietnam was said to have made significant improvements in getting credit and paying taxes, resulting in increases of 5% to 7% annually. Other areas witnessed minor improvements or remained unchanged. The ranking of other Southeast Asian countries were Malaysia (12th), Thailand (21st), Indonesia (73rd), the Philippines (95th), Brunei (66th), Cambodia (144th) and Laos (154th). Elsewhere, New Zealand came first in the 2020 ranking, followed by Singapore, Hong Kong (China), Denmark, the South Korea and the US.
Extract D
European Parliament approves EU‑Vietnam free trade and investment deal
The EU‑Vietnam trade agreement, described as the most modern and ambitious agreement ever concluded between the EU and a developing country, received the European Parliament’s backing on the 20 February 2020. The agreement will remove virtually all customs duties between the EU and Vietnam over the next ten years, including on Europe’s main export products to Vietnam. European businesses will also be able to bid on public tenders put out by the Vietnamese government and several cities, including Hanoi. The main EU imports from Vietnam include telecommunications equipment, clothing and food products. The EU mainly exports goods such as machinery and transport equipment, chemicals and agricultural products to Vietnam. Vietnam is the EU’s second largest trading partner in the Association of Southeast Asian Nations (ASEAN) after Singapore, its trade in goods is worth €47.6bn a year and €3.6bn when it comes to services. EU exports to the country have grown between 5% and 7% annually. The EU’s trade deficit with Vietnam was €27bn in 2018.
Australia is a developed economy.
Explain one characteristic of a developed economy.
Extract A
Thailand's economy - 2021
- Thailand is the 22nd largest exporting country in the world
- It has a positive trade balance of $34.3bn
- The gross domestic product (GDP) of Thailand is $546bn with a population of 69,410,000
- Thailand is the largest exporter of natural rubber in the world
- It has a 33.3% share of the global export market for rubber that is worth $4.63bn annually
- Almost half of Thailand's rubber (42.4%) is exported to China.
Extract B
Vietnam's GDP between 2000 and 2020 in billion $
Extract C
International trade in developing economies
Over the last two decades, developing economies have made a big increase in their share of world trade. By 2019, the value of goods exported from developing countries had increased to 44.3% of the global total and the value of services exported increased to 30% of the global total. Several growing countries doubled their share of global trade from 2010 to 2019.
- Vietnam tripled its share of world exports of goods from 0.47% in 2010 to 1.4% in 2019 and its share of world exports of services grew from 0.19% to 0.45%
- Thailand almost doubled its share of world services exports from 0.87% to 1.34%
- United Arab Emirates quadrupled its share of service exports from 0.3% to 1.2%
- Bangladesh almost doubled its share of total services exports from 0.13% to 0.2% and its total goods exports from 0.06% to 0.1%.
Extract D
Regional Comprehensive Economic Partnership (RCEP) trade deal
In November 2020, the RCEP was signed in Hanoi, Vietnam after eight years of negotiations. Its 15 members are Australia, China, Japan, New Zealand, South Korea, plus 10 members of the Association of Southeast Asian Nations (ASEAN): Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Once agreed by all its members it will form the world's largest trade bloc, covering 30% of global output and almost one third of the global population.
Extract A Thailand's economy - 2021 - Thailand is the 22nd largest exporting country in the world - It has a positive trade balance of $34.3bn - The gross domestic product (GDP) of Thailand is $546bn with a population of 69,410,000 - Thailand is the largest exporter of natural rubber in the world - It has a 33.3% share of the global export market for rubber that is worth $4.63bn annually - Almost half of Thailand's rubber (42.4%) is exported to China.
Using Extract A, calculate to two decimal places the GDP per capita of Thailand.
Extract A
Thailand's economy - 2021
- Thailand is the 22nd largest exporting country in the world
- It has a positive trade balance of $34.3bn
- The gross domestic product (GDP) of Thailand is $546bn with a population of 69,410,000
- Thailand is the largest exporter of natural rubber in the world
- It has a 33.3% share of the global export market for rubber that is worth $4.63bn annually
- Almost half of Thailand's rubber (42.4%) is exported to China.
Extract B
Vietnam's GDP between 2000 and 2020 in billion $
Extract C
International trade in developing economies
Over the last two decades, developing economies have made a big increase in their share of world trade. By 2019, the value of goods exported from developing countries had increased to 44.3% of the global total and the value of services exported increased to 30% of the global total. Several growing countries doubled their share of global trade from 2010 to 2019.
- Vietnam tripled its share of world exports of goods from 0.47% in 2010 to 1.4% in 2019 and its share of world exports of services grew from 0.19% to 0.45%
- Thailand almost doubled its share of world services exports from 0.87% to 1.34%
- United Arab Emirates quadrupled its share of service exports from 0.3% to 1.2%
- Bangladesh almost doubled its share of total services exports from 0.13% to 0.2% and its total goods exports from 0.06% to 0.1%.
Extract D
Regional Comprehensive Economic Partnership (RCEP) trade deal
In November 2020, the RCEP was signed in Hanoi, Vietnam after eight years of negotiations. Its 15 members are Australia, China, Japan, New Zealand, South Korea, plus 10 members of the Association of Southeast Asian Nations (ASEAN): Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Once agreed by all its members it will form the world's largest trade bloc, covering 30% of global output and almost one third of the global population.
Explain one advantage for Thailand of specialising in the production of rubber.
Extract A Driving growth in the Association of Southeast Asian Nations (ASEAN) The story of economic growth within the ASEAN trading bloc is a remarkable one. Having survived the 1997 Asian financial crisis and the 2008 global economic collapse, ASEAN's gross domestic product (GDP) is now four times higher than it was in 1999. It increased from $577bn to $2.5 trillion in 2016, making it the sixth-largest economy in the world. ASEAN is expected to maintain its strong and steady economic progress with 2018 growth rates averaging 5.3% according to forecasts by the Asian Development Bank (ADB). If ASEAN was considered as a single country, its approximate population would be 630 million, making it the third largest in the world behind India and China. It has a young population, 60% are below the age of 30, and it has the third largest labour force in the world behind China and India. The World Bank currently estimates ASEAN's labour force to be 350.5 million. The International Labour Organisation (ILO) predicts that ASEAN will add another 59 million people to its workforce by 2030 - making it the second largest growing labour force in the world behind India. This means ASEAN would account for 10% of the global labour force by 2030.
A growing workforce which is advanced and professional will also be a pull factor for
The European Union (EU), China, South Korea and Japan are the major investors. FDI in CLMV (Cambodia, Laos, Myanmar and Vietnam) rose by 8% in 2018, driven mainly by manufacturing and infrastructure industries.
Extract B ASEAN's newbies come into their own When the membership of ASEAN was enlarged between 1995 and 1999, the two most frequently asked questions were: could Cambodia, Laos, Myanmar and Vietnam (CLMV) integrate with the older ASEAN members? Would the 10-member ASEAN bloc survive with such a huge development gap, not to mention vast differences in political cultures? Two decades later, the answer is quite clear, the newer member states are moving toward full integration in the economic, political, security, and social cultures of ASEAN. For example, Vietnam has proven beyond any doubt that since joining ASEAN in 1995, it has adapted well to the bloc's structure and processes. In economic terms, Vietnam has become one of the most open economies in ASEAN. Since undertaking economic reforms in 1984, Vietnam has signed 17 free-trade agreements, even though it is still not classified as a market economy. With these global free-trade agreements, Vietnam is aiming high and wants to be a middle-income country within the next two decades.
Extract C
Vietnam's GDP growth rate \% per year
*2018 and 2019 are forecasts. Source: Asian Development Bank. Asian Development Outlook (ADO) 2018
Discuss the importance of foreign direct investment (FDI) to the growth of businesses in ASEAN.
Sources for use with
Extract A
Asia’s need for coal to lift Australian coal exports in 2019
The increasing import of coal by India and Southeast Asia has been driven by the greater use of electricity. This will lead to a strong increase in Australian coal exports over the next five years. The International Energy Agency (IEA) predicts a 4.6% rise in coal‑powered generation in India. Strong economic growth in Indonesia and Vietnam will increase the need for coal by 5%. The Australian economy is dominated by its service sector, even though it produces a lot of coal and other minerals. The service sector makes up 62.7% of Australian GDP and employs 78.8% of the labour force. Australian GDP in 2019 was estimated at A$1.9 trillion.
Extract B
Vietnam’s rising Foreign Direct Investment (FDI) inflow
Up to the year 2019 there have been 10 consecutive years of increase in FDI inflow into Vietnam. There is a significant increase in both the volume and the value of FDI projects. In 2019, there were 3,478 new projects, a 28.2% increase on the previous year. These new projects brought in an extra US$31.8bn, a 3.1% increase on the previous year. South Korea was the top investor in Vietnam in 2019 investing US$7.9bn, followed by Hong Kong at US$7.8bn. Vietnam has benefitted from the US‑China trade war, and the political tension in Hong Kong. Vietnam is being chosen by investors among other ASEAN countries because of its cultural similarity to China, low labour costs and pro‑investment policies. The Vietnamese processing and manufacturing sector attracted 68% of Vietnam’s total FDI in 2019. In June 2019, Apple announced its plan to start trial production of the wireless earphones, AirPods, in Vietnam to avoid the cost of tariffs imposed on China by the US. The World Bank expects FDI to continue to rise in 2020. Manufacturers are showing interest in the Central Region where land available for industrial use is vast. However, it is critical for the Vietnamese government to better integrate into the global supply chain and improve the skills of the labour force.
Extract C
Vietnam ranked 70th in World Bank’s 2020 Ease of Doing Business Ranking
Vietnam was placed 70th out of 190 economies in the World Bank’s 2020 Ease of Doing Business ranking. The ranking was down one place from the previous year, despite a higher score of 69.8 points out of 100. In the report, the World Bank marked and ranked economies in ten areas including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency, employing workers, and dealing with the government. Vietnam was said to have made significant improvements in getting credit and paying taxes, resulting in increases of 5% to 7% annually. Other areas witnessed minor improvements or remained unchanged. The ranking of other Southeast Asian countries were Malaysia (12th), Thailand (21st), Indonesia (73rd), the Philippines (95th), Brunei (66th), Cambodia (144th) and Laos (154th). Elsewhere, New Zealand came first in the 2020 ranking, followed by Singapore, Hong Kong (China), Denmark, the South Korea and the US.
Extract D
European Parliament approves EU‑Vietnam free trade and investment deal
The EU‑Vietnam trade agreement, described as the most modern and ambitious agreement ever concluded between the EU and a developing country, received the European Parliament’s backing on the 20 February 2020. The agreement will remove virtually all customs duties between the EU and Vietnam over the next ten years, including on Europe’s main export products to Vietnam. European businesses will also be able to bid on public tenders put out by the Vietnamese government and several cities, including Hanoi. The main EU imports from Vietnam include telecommunications equipment, clothing and food products. The EU mainly exports goods such as machinery and transport equipment, chemicals and agricultural products to Vietnam. Vietnam is the EU’s second largest trading partner in the Association of Southeast Asian Nations (ASEAN) after Singapore, its trade in goods is worth €47.6bn a year and €3.6bn when it comes to services. EU exports to the country have grown between 5% and 7% annually. The EU’s trade deficit with Vietnam was €27bn in 2018.
Assess the importance of trade liberalisation in increased globalisation.
Extract A Senegal - Selected indicators
- Population of Senegal in 2021 was 17.2 million
- GDP of Senegal in 2021 was $25.5bn
Gross Domestic Product (GDP) growth rates
* estimate
Extract B Africa's Free Trade Area The African Continental Free Trade Area (AfCFTA) started in 2021. All African countries have signed the agreement, apart from Eritrea. It is hoped that these 54 countries will grow together to form a single market.
They have pledged to eliminate import tariffs on 97% of goods traded between African countries over a period of time. It is hoped that this will increase trade between African countries, which will in turn boost economic growth, bringing more prosperity and social equality to those on the continent.
According to the World Economic Forum, African nations currently trade more internationally than with each other. Only 17% of African exports go to other African countries, whereas in Asia 59% of its exports go to other Asian countries and in Europe it is 68%.
Extract C Senegal attracts investors The largest wind farm in West Africa is in Senegal, 70 km northeast of Dakar. Stretching across 41 hectares, the Taiba N'Diaye wind power project has attracted over $400m of Foreign Direct Investment (FDI). When operating at full capacity, it will provide two million people with electricity and supply nearly a sixth of Senegal's power needs.
It is not the only large energy project that looks set to transform Senegal's economy. Reserves of more than 1 billion barrels of oil and 40,000 billion cubic feet of gas have been found just offshore. Another major find by British oil company BP and US operator Kosmos Energy has led to the development of the $4.8bn Greater Tortue Ahmeyim (GTA) project, which has 15 trillion cubic feet of recoverable gas reserves.
As a result of the oil and gas discoveries investor interest has increased, encouraged by the appealing nature of the broader Senegalese market. In a relatively unstable region, with recent coups in Guinea and Mali and turbulence in Côte d'Ivoire, Senegal stands out for its political stability.
Extract D The second wave of globalisation was enabled by technology The worldwide expansion of trade after the Second World War was largely possible because of reductions in costs. This was due to technological advances, such as the development of commercial aviation, the increase in productivity in shipping and the improvements in communication.
The reductions in costs had an impact, not only on the volumes of trade, but also on the types of exchanges that were possible and profitable.
By the end of the 20th century...
- Passenger air transport costs were of the costs in 1930
- Sea freight costs were 22.32% of the costs in 1930
- International calling costs were 0.03% of the costs in 1930
Assess the role of reduced costs of transport and communication in increasing globalisation.
Sources for use with
Extract A
Peru clothing industry welcomes tariff barrier to block large increase in clothing imports
A report by the Peruvian competition authority said that imports of clothing into Peru rose by 254% between 2016 and 2020. As a result, imports have increased their share of the Peruvian clothing market to 13.4%. The report warns that there is a danger of damage to the domestic clothing industry and urges the government to increase tariffs on imports. The clothing industry employs over 420,000 people and is 8% of Peru’s manufacturing output.
Extract B
Branding lessons from Inca Kola, the Peruvian fizzy drink that beat Coca-Cola
Anyone who has visited Peru is aware of the passion that Peruvians have for Inca Kola. With its yellow-gold colour, sweet flavour and secret formula, this fizzy drink is one of the few soft drink brands more popular than Coca-Cola in their home market. Currently, Inca Kola is the market leader in Peru with 26% of soft drink sales, closely followed by Coca-Cola, with 25.5%. Coca-Cola now owns Inca Kola but has found it difficult to sell the Peruvian cola into global markets. One of the challenges for Coca-Cola is the distinctive smell, taste and colour of Inca Kola. Although very popular in Peru, it has not become popular with foreign buyers who seem to prefer black colas to yellow colas. 5 5 10
3
Extract C
How Peru became one of the biggest markets for Foreign Direct Investment (FDI) in South America
Peru has a stable economy with strong growth. In the first quarter of 2021, Peru attracted $3.47bn of FDI, more than all of Peru’s FDI in 2020. The World Bank predicts its GDP will grow by 3.9% in 2022 and that it will be the second-fastest growing economy in South America. Peru has 21 Free Trade Agreements (FTAs) in force. In addition, it has 28 investment agreements with countries including Canada, Brazil, Chile, Japan and Switzerland. Peru has a low public debt to GDP ratio and is predicted to have the second-lowest inflation rate in South America. It has a good infrastructure and a supportive government with a stable legal framework. All this has made Peru a prime location for FDI, particularly in renewable energy, manufacturing, food, tourism, retail and technology. The average salary for an employee in Peru increases by 9% every 17 months. The global average is 3%.
Extract D
Remittances*: the hidden engine of globalisation
According to the World Bank, the number of people in the world who live outside the country where they were born has risen from 153 million in 1990 to 270 million in 2020. It is estimated that these migrants from around the world will send a combined $689bn back home. For the first time these remittances will overtake foreign direct investment (FDI) as the biggest inflow of funds to developing countries. The large difference in income between developed and low-income countries means that job opportunities abroad will continue to be attractive. The World Bank expects another 550 million people to become migrant workers by 2030. The global trend is towards more migration, not less and the push from poor countries will be met by a pull from the rich ones. *A remittance is the term used for money that migrants send back to their home country
Assess the role of migration in increased globalisation.
Sources for use with
Extract A
Chinese tariffs force Alaska seafood industry to look beyond China
The Alaska Seafood Marketing Institute is looking for ways to expand the Alaska seafood brand in response to a 25% tariff on Alaskan seafood imposed by China in summer 2018. China buys $1bn of Alaskan fish annually, making it Alaska’s top seafood export market. The Institute’s director says Alaska’s seafood sales are down by more than 20% so far in 2019 in response to the price increase caused by the tariff. He says the three-year federal Agricultural Trade Promotion grant of $5.5m awarded in January will be used to develop new markets such as Japan, Southeast Asia and parts of South America. The Institute will continue to work in China and other established markets such as Germany.
Extract B
The impact of Alaska’s seafood industry on the American economy
• The Alaskan seafood industry creates an estimated 99,000 jobs, $5.2bn in annual labour income and $12.8bn in economic output. • Alaska exports more than one million metric tonnes of seafood each year, bringing over $2.5bn into the US economy. • The industry catches and processes enough seafood each year to feed everybody in the world at least one serving of Alaskan seafood, or one serving for every American for more than a month (12.9 billion servings in 2015). • Alaskan seafood was sold in 105 countries around the world in 2016. Export markets typically account for approximately 67% of sales value, while the US market buys the remaining 33%. • Seafood directly employs more workers than any other industry in Alaska. 1,323 812 707 669 182 China Japan Canada Korea Germany Alaska’s Top 5 Export Markets (Millions of U.S. Dollars) Alaska’s Top 5 Export Categories (Millions of U.S. Dollars) Fish & Other Marine Products Minerals & Ores Petroleum & Coal Products Transportation Equipment Oil & Gas 2,533 1,795 180 94 86
Extract C
Alaska
Weaknesses: Challenges to economic development Geography and distance: Alaska’s remoteness, its huge size, limited infrastructure, extreme weather, and varied landscape present challenges to economic development. This increases the cost of finished goods and exports. Development obstacles: The cost of doing business in the state, complex logistics, and state land ownership present enormous barriers to the development of mining, oil, gas and timber. Infrastructure limitations: Of Alaska’s 29 regions, 17 lack a highway connection to the rest of the continent. Broadband access is severely limited (or nonexistent) in many rural areas. There are few ports and harbours in Western and Arctic Alaska in particular, which limits the flow of goods and increases costs. Strengths: Assets to support economic development Established industry sectors: Oil, gas, mining, seafood, and tourism, are all creating economic growth. Emerging industry sectors: Outside of the state’s established industries there are a number of other sectors with high growth potential in Alaska. These include maritime industries, renewable energy, aviation, agriculture and healthcare. Natural resource endowment: Alaska has plentiful natural resources, including oil, gas and minerals. It also has timber and an abundance of seafood.
Discuss the benefits for China of imposing tariffs.
Sources for use with
Extract A
Peru clothing industry welcomes tariff barrier to block large increase in clothing imports
A report by the Peruvian competition authority said that imports of clothing into Peru rose by 254% between 2016 and 2020. As a result, imports have increased their share of the Peruvian clothing market to 13.4%. The report warns that there is a danger of damage to the domestic clothing industry and urges the government to increase tariffs on imports. The clothing industry employs over 420,000 people and is 8% of Peru’s manufacturing output.
Extract B
Branding lessons from Inca Kola, the Peruvian fizzy drink that beat Coca-Cola
Anyone who has visited Peru is aware of the passion that Peruvians have for Inca Kola. With its yellow-gold colour, sweet flavour and secret formula, this fizzy drink is one of the few soft drink brands more popular than Coca-Cola in their home market. Currently, Inca Kola is the market leader in Peru with 26% of soft drink sales, closely followed by Coca-Cola, with 25.5%. Coca-Cola now owns Inca Kola but has found it difficult to sell the Peruvian cola into global markets. One of the challenges for Coca-Cola is the distinctive smell, taste and colour of Inca Kola. Although very popular in Peru, it has not become popular with foreign buyers who seem to prefer black colas to yellow colas. 5 5 10
3
Extract C
How Peru became one of the biggest markets for Foreign Direct Investment (FDI) in South America
Peru has a stable economy with strong growth. In the first quarter of 2021, Peru attracted $3.47bn of FDI, more than all of Peru’s FDI in 2020. The World Bank predicts its GDP will grow by 3.9% in 2022 and that it will be the second-fastest growing economy in South America. Peru has 21 Free Trade Agreements (FTAs) in force. In addition, it has 28 investment agreements with countries including Canada, Brazil, Chile, Japan and Switzerland. Peru has a low public debt to GDP ratio and is predicted to have the second-lowest inflation rate in South America. It has a good infrastructure and a supportive government with a stable legal framework. All this has made Peru a prime location for FDI, particularly in renewable energy, manufacturing, food, tourism, retail and technology. The average salary for an employee in Peru increases by 9% every 17 months. The global average is 3%.
Extract D
Remittances*: the hidden engine of globalisation
According to the World Bank, the number of people in the world who live outside the country where they were born has risen from 153 million in 1990 to 270 million in 2020. It is estimated that these migrants from around the world will send a combined $689bn back home. For the first time these remittances will overtake foreign direct investment (FDI) as the biggest inflow of funds to developing countries. The large difference in income between developed and low-income countries means that job opportunities abroad will continue to be attractive. The World Bank expects another 550 million people to become migrant workers by 2030. The global trend is towards more migration, not less and the push from poor countries will be met by a pull from the rich ones. *A remittance is the term used for money that migrants send back to their home country
Explain one advantage of using tariffs for a country such as Peru.
Extract F
European Union (EU) steps up pressure to remove trade barriers
According to a report by the European Commission, 66 countries, including many having trade deals with the EU, have introduced unjustified trade barriers. These barriers include health controls, customs administration fees and limits on the foreign ownership of companies. Most countries have steadily reduced import tariffs but often replaced them with non-tariff barriers that exclude foreign goods and services.
The EU found 462 barriers among 66 countries at the end of 2020. China had the largest number with 40, followed by Indonesia and the US. But there are problems even with longstanding partners. Norway, which is in the EU single market for goods, maintains high tariffs on processed foods.
Extract G
United States (US) Has Passed Far More Trade Restrictions Than Its Peers
The number of US trade barriers has surged past those of other advanced economies. Since 2008, the US has passed almost 800 protectionist measures, compared to 357 passed in the United Kingdom and 390 passed in Germany. Other advanced economies, like Canada (199) and Australia (174) passed fewer of these restrictions.
Number of protectionist measures passed in selected countries between 2008 and 2019
Extract A adapted from: https://www.just-style.com/news/peru-apparel-industry-welcomes-tariff-barrier-to-block-import- surge/
Extract B adapted from: https://knowledge.wharton.upenn.edu/article/branding-lessons-from-inca-kola-the-peruvian- soda-that-bested-coca-cola/
Extract C adapted from: https://gulfbusiness.com/how-peru-became-one-of-the-biggest-markets-for-fdi-in-south- america/
Extract D adapted from: https://gulfbusiness.com/how-peru-became-one-of-the-biggest-markets-for-fdi-in-south- america/
Extract E adapted from: https://www.bangkokpost.com/business/2321562/inside-thailands-ev-revolution
Extract F adapted from: https://www.ft.com/content/b988cf7d-baf6-49ca-97c2-1ba16c6bdd10
Extract G adapted from: https://www.statista.com/chart/20139/number-of-trade-restrictions-selected-countries/
Extract A
Thailand's economy - 2021
- Thailand is the 22nd largest exporting country in the world
- It has a positive trade balance of $34.3bn
- The gross domestic product (GDP) of Thailand is $546bn with a population of 69,410,000
- Thailand is the largest exporter of natural rubber in the world
- It has a 33.3% share of the global export market for rubber that is worth $4.63bn annually
- Almost half of Thailand's rubber (42.4%) is exported to China.
Extract B
Vietnam's GDP between 2000 and 2020 in billion $
Extract C
International trade in developing economies
Over the last two decades, developing economies have made a big increase in their share of world trade. By 2019, the value of goods exported from developing countries had increased to 44.3% of the global total and the value of services exported increased to 30% of the global total. Several growing countries doubled their share of global trade from 2010 to 2019.
- Vietnam tripled its share of world exports of goods from 0.47% in 2010 to 1.4% in 2019 and its share of world exports of services grew from 0.19% to 0.45%
- Thailand almost doubled its share of world services exports from 0.87% to 1.34%
- United Arab Emirates quadrupled its share of service exports from 0.3% to 1.2%
- Bangladesh almost doubled its share of total services exports from 0.13% to 0.2% and its total goods exports from 0.06% to 0.1%.
Extract D
Regional Comprehensive Economic Partnership (RCEP) trade deal
In November 2020, the RCEP was signed in Hanoi, Vietnam after eight years of negotiations. Its 15 members are Australia, China, Japan, New Zealand, South Korea, plus 10 members of the Association of Southeast Asian Nations (ASEAN): Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Once agreed by all its members it will form the world's largest trade bloc, covering 30% of global output and almost one third of the global population.
Assess the possible impact on businesses in countries such as Thailand and
Vietnam from their membership of a trading bloc.