INTERNATIONAL

TRADE
GLOBALIZATION AND
SPECIALIZATION
OBJECTIVES
• DEFINITION OF GLOBALIZATION
• POSITIVE AND NNEGATIVE EFFECTS OF GLOBALIZATION
• CONCEPT OF SPECIALIZATION
• ADVANTAGES AND DISADVANTAGES OF SPECIALIZATION
GLOBALIZATION
The term is widely used to describe economic, social,
technological, cultural and political changes that
increase interactions and interdependencies between
people, firms and economies across the globe.
Globalization involves:
 Increase in international trade

 Sale of homogenous products by multinational

companies across many countries
 Adoption of a common language

 Movement of production to less industrialized

countries
 Increase in exposure to global media, making taste
and fashion similar
 Increase in interdependence of countries
EFFECTS: OPPORTUNITIES AND THREATS
Specialization of countries
Wider variety for consumers
Promotion of understanding and
relationship between countries
Knowledge and awareness to global issues
Investments and employment
opportunities
Advertising at lower cost yet known
Economic downturn in one country might
be offset by the economic growth in others
• Favours rich countries
• Increase in competition
• Financial issues in various
countries
• No guarantee of returns on
investment
• Demographic and ethical issues
• Threat to global and language
diversities.
CONCEPT OF SPECIALIZATION
The concept of specialization can
be explained using the theories of
• Comparative cost advantage, and
• Absolute cost advantage
Specialization implies the
concentration on a particular skill
or occupation in order to improve
quality, productivity and efficiency.
COMPARATIVE COST ADVANTAGE (David
Ricardo)
• This states that countries derive
mutual benefit from trade when
they specialize in the production
of those commodities in which
they have the greatest
comparative cost advantage over
others and exchange them for
other commodities in which they
have comparative cost
disadvantage.
ABSOLUTE COST ADVANTAGE (Adam Smith)

This states that a country

should specialize in the
production of
commodities in which it
has absolute advantage
over other countries. That
is if the country can
produce what others
cannot.
INTERNATIONAL SPECIALIZATION
ADVANTAGES
Higher output level
Increased income and
employment
Economic growth and improved
living standards
Increased international trade
opportunities
DISADVANTAGES
 Structural unemployment
encroachment
 Risk of over-specialization
 Limitation of consumers choice
 Over-exploitation of resources
 Over-reliance on other countries
for supply of essential
commodities.
ACTIVITIES
CLASS WORK ASSIGNMENT
IGCSE WORKBOOK 1. FIND OUT AND WRITE DOWN 10
PRODUCTS NIGERIA SPECIALIZES
IN PRODUCING OVER GHANA
2. WRITE DOWN THE NAMES OF
THE TOP 10 COUNTRIES NIGERIA
TRADES WITH