The reduction of international trade barriers and the reduced cost of transport and

communication are two factors that have contributed to increased globalisation.

Evaluate which of these two factors is the most important reason for increased
globalisation.

[20 marks]

Globalisation is the process of businesses expanding their operations and influence beyond national
borders. This could be through investment in foreign land or cross border trade.

The reduction of international trade barriers has been a significant catalyst for increased
globalization. By lowering tariffs, quotas, and other trade barriers, countries have significantly
increased the flow of goods and services across borders. This has led to several positive outcomes.
Firstly, it has stimulated economic growth and development by creating opportunities for businesses
to access larger markets and attract foreign investment. This expansion of market access has resulted
in increased competition, leading to improved efficiency and innovation as companies strive to gain a
competitive edge. As well as this, the reduction of international trade barriers, particularly through
the lowering of tariffs within and between trading areas like the European Union as stated in the
extract, facilitate trade by reducing the costs associated with exporting and importing goods and
services. This reduction enables countries to specialize in the production of goods or services in
which they have a comparative advantage and engage in international trade more efficiently.
However, despite the positive impacts of the reduction of international trade barriers, when trade
barriers are lowered, domestic industries that previously had protection may face increased
competition from foreign companies. This can lead to job losses and economic challenges in those
industries.

Others could argue that the reduced cost of transport and communication has a large role in
contributing to increased globalization. As mentioned in the context, digital technology has
revolutionized communications, making it easier for businesses to coordinate operations across
countries. This enhanced connectivity enables efficient information sharing and collaboration
regardless of geographical distances. Moreover, advances in technology have lowered labour costs
through automation and streamlined processes, further promoting international business activities.
Additionally, the ease and cost-effectiveness of transportation has promoted the expansion of
businesses into foreign markets. With reduced transportation costs, companies can access new
markets with a much lower short-term investment and relocate their operations abroad to take
advantage of emerging opportunities at a much lower cost. However, it should be noted that the
reduced cost of transport and communication may disproportionately benefit larger businesses. this
is because they generally have more short-term financing options compared to smaller companies to
invest in new tech.

In conclusion, I would say that the reduction for international trade barriers would be the most
important reason for increased globalisation. This is because in the short term, the effect of trade
liberalisation as stated in the extract would allow for a lowering of tariffs and therefore an instantly
cheaper way to export products into other countries. In the long term, it would promote competition
which would increase innovation in a company and may drive them to be more efficient with their
production methods. An economic factor of this would be that residence of the country would be
able to purchase the products for much cheaper as production costs fall. It may also drive companies
to become more eco friendly which would benefit the environment. The opportunity that the
reduction on international trade barriers would give to a company would be opening up to a new
market or allowing for price penetration due to the reduced labour costs.