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Analyse the impact of globalisation on the economic development and standard of living in an economy other than Australia.
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Globalisation is the progressive integration of national economies, leading to the removal of both natural and artificial barriers to the movement of goods, services, resources and finance between nations. The process of globalisation involves economic integration, world trade and financial flows, the increasing spread of technology, the growth of financial markets and products, the different directions of flow of investment portfolio and direct investment, and the movement of labour resources between countries. Different nations have been affected in different ways by globalisation, depending on their degree of development and the extent to which they are open to the flows of the world economy. The growth of the global economy has increased the opportunity for investment by breaking down national boundaries. This has facilitated the worldwide introduction of new technology, although technology has spread at different rates in different regions. Workers move between countries to find better employment opportunities. The numbers involved are still quite small, but in the period 1965-90 the foreign-born proportion of labour forces worldwide increased by about one-half. Most immigration occurs between developing countries. Increased globalisation, facilitated by a reduction in trade protection and increased financial deregulation, has meant that changes in trade and financial flows can have significant effects on a national economy. As a result many countries have become export focused and now rely upon foreign funds to finance economic expansion. This has also meant that national governments must consider to a much greater extent the international consequences of domestic economic policy. Trade occurs between countries, as it is beneficial for both countries. It is beneficial because of the differences in the distribution of resources between nations. A countries combination of resources or factor endowments (land, labour, capital and enterprise), allow a particular country to produce certain goods more efficiently and effectively than other countries can. These differences mean that it is in the interest of a country to specialise in the production of goods and services in which it is efficient. Trading of its surpluses for goods and service for which it does not produce as efficiently allows that country to enjoy a greater variety of these than would otherwise be possible. Comparative advantage is based on the relative efficiency of production and is a state where each country benefits from trade by specialising in the production of goods and services, which allow the most efficient use of resources. Comparative advantage uses the concept of opportunity cost in production where if a country can produce a good with greater comparative efficiency as measured by opportunity cost it should specialise and engage in trade. As both countries are using their resources more efficiently, trade will lead to higher standard of living than would be otherwise possible. This is compared to absolute advantage where a country would have an absolute advantage in the production of a good when it can produce more of that good with a given amount of resources than another country. Protection which is undertaken by the government is design to prevent free trade. This can be done to protect infant industries, ensure there are employment opportunities in the domestic economy, prevent dumping, reduce a countries dependency on foreign producers and limit the level of the trade deficit. Protection is needed in Australia as Australian workers cannot compete against low-wage countries without suffering a reduction in wage rates. Also if one country resorts to protection another country may retaliate, with the original country losing an export market and suffering increased domestic unemployment. Methods of protection include tariffs, subsidies, quotas and embargoes. A tariff is a tax imposed by the government on imported goods. Tariffs make the imported item more expensive and therefore less competitive with the locally produced item. Tariffs raise revenue for the government and cause resources to be reallocated from efficient industries to inefficient and uncompetitive industries. Through the introduction of a tariff, there is a redistribution of income away from consumers and importers towards domestic producers and the government. A quota is legally imposed to control the quantity of a good that can be imported into a country over a given period of time. For some products there is a quota tender system whereby importers pay the government for new quotas. Quotas on imports are often more effective in providing protection for domestic producers than tariffs because once the import quota has been filled further imports are prohibited, and producers are guaranteed a share of the domestic market.
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