Trade and globalisation

Globalisation refers to the increasing interconnectedness and interdependence of countries across the globe through the expansion of trade, technology, people and ideas.
It has been propelled by changes in technology, policy and trade liberalisation, and has seen a profound impact on the structure of economies all over the world.

In terms of economics, international trade is the exchange of goods and services between countries. This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by global events.
Comparative advantage is the economic theory that countries should specialise in producing goods and services where they have a lower opportunity cost. This leads to greater efficiency and beneficial trade between countries.

Increased economic efficiency. By specialising and trading, countries can benefit from economies of scale, which leads to higher output and income.
Greater competition also means firms strive to innovate and improve their products, while keeping prices low to attract consumers.
Accessibility to a wider range of goods and services that may not be available domestically.
Globalisation enables stronger international cooperation and diplomacy, fostering better international relations.

Inequality. Globalisation may lead to income disparities both between and within countries. Wealthier nations often benefit more from globalisation than developing ones.
Globalisation can lead to job losses in specific sectors as firms move production to countries with cheaper labour.
Cultural homogenisation. As global cultural exchanges increase, there are fears that local cultures may be lost or overrun by dominant ones.
Negative environmental impact. Increased production and consumption can lead to environmental degradation.

Organisations like the World Trade Organisation (WTO) and International Monetary Fund (IMF) play crucial roles in facilitating and regulating global trade.
The IMF monitors global economic trends and provides financial assistance to developing countries.
The WTO aims to liberalise trade and ensures that trade flows are smooth, predictable and as free as possible.

Access to larger markets. This increases their customer base and potential sales.
Cheaper production costs. Some countries have lower material and labour costs, which can increase a firm’s profitability.
Businesses can diversify their products and services across markets, reducing the risk of failure in one market.

By understanding these points about trade and globalisation, one can dive deeper into the intricacies of managing the economy in a global world.