NJC 2009 Question Analysis

d) With reference to Extract 6 and your own knowledge, discuss how globalisation has affe
Thought process
What is the trade pattern, what happened to exports? The type of exports as well as who a
How has increase movement of capital, labour, goods and services as well as exchange of
Explain from the view of developed world
Explain from the view of the developing world
To what extent does CA explain this observation
Yes
Due to gain in CA, lower Opportunity cost
No
Other reasons such as changes in demand
No
CA assumes Factor immobility but changing trade patterns is due to moveme

Key Words
Trade PatternTheory of Comparative Advantage
Globalisation
Command woDiscuss how
Whether
Globalisation -> changing trade patterns, evidence from extract
Evidence
Increased in manufactured exports as compared to agricultural products
Reason
increased in FDI and industrial productions in developing countries, domesti

Evidence
Increased share of manufactured exports by developing countries
Reason for EvIncreased in flow of Capital (FDI) to developing countries from developed cou
Why?
To take advantage of relative low labour and operating costs
Link
Hence, increase in manufactured products in developing countries
Evidence

decline in developed countries' share of world manufactured exports

Fragmentation of world supply chain
Reason for it upstream activities to be done in developed countries
Labour intensive and lower value added processes such as production and as
Link
Hence, decrease in manufactured products in developed countries
Evidence
Reason

increase in share of world argicultural exports by developed countries

More markets to be opened with rapid growth in emerging economies who ar

Yes
Why
No
Why
No

Does theory of comparative advantage explains this observation

Developing countries are able to acquire comparative advantage in labour in
Due to flow of capital and technology flows from developed countries
Changing trade patterns may be due to demand factors instead of comparat
Increase in developed countries' share of agricultiral exports could be due to
CA assumes factor immobility between countries. Yet, the changing trade pa

obalisation has affected trade patterns in the world and whether the changing patterns are consiste

orts as well as who are importing or exporting

well as exchange of technology caused this to happen?

s is due to movement of K between countries

ultural products
countries, domestic consumption of primary products and minerals used as raw materials is likely t

from developed countries

red exports

s production and assembly to be done at low-cost developing countries.

ed countries
g economies who are unable to satisfy domestic demand of agricultural products and require import

vantage in labour intensive and some even capital intensive manufactures

ed countries
nstead of comparative advantage
orts could be due to increase overall global demand for processed food, rather than any change in co
changing trade patterns are due to increased movement of capital, labour and technology between

atterns are consistent with the theory of comparative advantage.

materials is likely to be higher, hence reducing the quantity of such goods exported.

and require imports from developed countries.

an any change in comparative advantage

technology between countries. Hence comparative advantage does not explain the observation.

he observation.

e) Evaluate the possible opportunities and challenges that globalisation could bring to an
Thought process
Opportunties and Challenges --> 4 main macro aims as well as 2 micro aims
Globalisation - movement of g&S, capital and labour as well as exchange of technology
Developed country: Japan
Developing country: South Africa
Developing (-)
(+)
BOP
May be spendi
Increased exports due to expansion of market (increased move
Ev
Temporary, imTOT may be unfavourable especially for primary products
Unemploymen
Structural un More jobs created due to inflow of FDI
Ev
Upgrade of ski
Over-dependence on FDI could cause greater instability and ma
Stifle development of local enterprise
Growth
Trade can be used as engine of growth and increase inflow of ca
Ev
Efficiency gains may be localised in specific industries or geogr
Inflation
Growth may lead to demand pull inflation
Material standard of living may fall due to fall in real income from rising infla
Efficiency
Negative externalities due to environmental degradation and faster depletion
Would require government to closely monitor the effects of pollution and def
Equity
Benefits of globalisation may be accrue only to the minority, asset owners an
There can be a trickle down effect, as increased income and consumption sp
Developed (-)
BOP
Ev
Unemployment
Ev
Growth
Ev
Inflation
Efficiency
Equity

(+)

n could bring to an emerging economy like South Africa and a developed country like Japan.

ge of technology

et (increased movemenr of goods and service).

mary products

r instability and makes the country more vulnerable.

ncrease inflow of capital helps with potential growth

industries or geographical area, with little improvement in general standard of living

me from rising inflation

and faster depletion of resources.
of pollution and deforestation.
ty, asset owners and skilled professionals.
nd consumption spread across various sectors and raise general income levels.

like Japan.