GLOBALISATION
The integration between countries through foreign
trade and foreign investment by MNCs is called
globalisation
MNCs connect different regions of the world
through globalisation
Before mid-20th century, production of goods took
place within countries
International trade was main channel in connecting
distant countries
A MNC is a company that owns and controls
production in more than one country. They set up
factories for production in places where they can
get cheap labour and a few other factors
MNCs do not only sell their products globally, but
also produce and manufacture the products
globally depending on the beneficial factors of
each country (e.g.: China has cheap manufacturing)
MNCs set up production where it is close to
markets; where skilled and unskilled labours are
available for cheap costs; where the availability of
other factors concerning production is assured; they
also look for the government policies that look
after their interests
The money spent to buy assets such as land,
buildings and machines is called an investment.
An investment made by an MNC is called a
foreign investment
Ways to control production in various countries:
1. MNCs set up production jointly with local
companies for increased production. The benefit
for the company is two-fold. The MNCs will
supply more money for investments. Secondly,
MNCs will bring in more advanced technology for
production.
2. MNCs will buy up local companies for expanded
production. MNCs with lots of money will have no
problem doing so. E.g.: Cargill Foods buying up
Parakh foods
3. Large MNCs from developed countries will place
orders for production from small producers in
various countries
MNC’s closely compete with producers from the
local market
Foreign trade creates opportunities for producers
to reach beyond the domestic markets. For buyers,
it created a vast selection of options, besides what
is available in the domestic market
A large part of foreign trade is controlled by the
MNCs
Countries are connected to each through
globalisation because to the increasing amount of
goods, services, technology etc. moving between
countries; movement of people between countries
for economic reasons
Factors that have enabled globalisation:
1. Technology: Rapid improvement in technology has
been a major factor stimulating the development of
technology.
2. Transport technology has improved in the last 50
years. Now goods can delivered faster for cheaper.
3. The development in information and
communication technology has been more
remarkable. Money can also be transferred through
the internet
Tax on imports is an example of a trade barrier. A
barrier is when a restriction has been set up.
Governments set trade barriers to regulate foreign
trade such as what enters the country and how
much of each good can enter the country
After independence, the Indian government
had put up trade barriers on foreign trade and
investment. This was in order to protect the
local companies from competing with the
MNCs. In the 1950 and 60s, companies were
just building up from the repercussions of the
British rule. Only a few essential imports such
as petroleum, machinery and fertilisers were
allowed. In 1991, the Indian government took
a big step and decided it was time for trade
barriers to be removed, they believed that
Indian producers were now big enough to
compete with the global market as it would
help the Indian producer improve the pace,
quality etc.
The removal of barriers and restrictions set by
the government is known as liberalisation
Businesses are allowed to make decisions
freely about what they wish to import or export
WTO is an organisation whose main aim is to
liberalise trade in every country
Nearly 160 countries of the world are members
of the WTO.
Though WTO is supposed to allow free trade
for all, in practice, it is seen that the developed
countries have unfairly kept trade barriers. On
the other hand, WTO rules have forced the
developing countries to remove trade barriers.
Consumers are at the advantage of
globalisation as there is a wider choice of
products to choose from better quality, cheaper
prices. They have a higher standard of living
the before
MNCs have increased their investments in
India which means investing in India must be
beneficial for them. New jobs have been
created and producers supplying raw materials
to these industries have prospered
Top Indian companies have also received
help from globalisation. With increased
competition from the global market.
Companies have invested in newer technology
and production methods and have raised their
standards of production. Some Indian
companies have also asserted themselves as
MNCs
Globalisation has also supplied more
opportunities for people working the service
sector. Especially people working in IT
The small industries in India employ the
largest number of workers (20 million) in the
country, next only to agriculture. Due to the
increasing competitions from MNCs, small
producers and businesses are losing out on
consumers which is making many people
jobless
Workers are being neglected, made to work
longer shifts with lower wages for seasonal
employment so the producers can cut cost on
production
not everyone has received help from
globalisation
Industrial zones, called Special Economic
Zones (SEZs), are being set up. SEZs are to
have world class facilities: electricity, water,
roads, transport, storage, recreational and
educational facilities. Companies who set up
production units in the SEZs do not have to
pay taxes for the first period of five years (In
order to attract more international companies
to invest in India)
The government has also allowed flexibility on
labour laws to attract foreign investment
Fair globalisation would open opportunities for
all and ensure that the benefit of globalisation
is shared by all
The government must protect the policies of
not only the rich and powerful but all the
people of the country
They can ensure that the labour laws are
properly implemented so that workers get their
rights
They can support small businesses in their
production until they become strong enough to
compete
They can negotiate with the WTO for fairer
rules. If necessary for the development of local
businesses, they could apply trade and
investment barriers
It can align with other developing countries
with similar interests to fight against the
domination of developed countries in the WTO
Massive campaigns and representation by
people’s organisations have influenced
important decisions relating to trade and
investments at the WTO
People can also play an important role in the
fight for fair globalisation
