Globalisation is the process of growing economic integration between the world’s economies. Goods can be made anywhere, sold anywhere, and the profits kept anywhere.
As economies become more integrated, they become more interdependent: what happens in one country affects others.
It isn’t new. Trade between distant countries goes back thousands of years, but the pace has speeded up dramatically in the last century, and especially since the 1980s.
It is economic (trade, investment, production), but also social and cultural (travel, migration, global brands, media).
AQA uses the terms developed countries (relatively high incomes, mature institutions and infrastructure, e.g. the UK) and less developed countries (lower incomes, weaker institutions and infrastructure).
Exam tipFor a 2-mark definition, mention increasing integration or interdependence between national economies. ‘More trade’ on its own is only part of the answer.
Globalisation
The process of growing economic integration between the world’s economies.
Developed country
A country with relatively high income and growth and mature institutions and infrastructure.
Less developed country
A country with lower income and growth and weaker institutions and infrastructure.
3.2.4.4 Main features of globalisation
The main features of globalisation
Feature
What it looks like
More international trade
A growing share of what countries produce is exported
Global supply chains
A product’s parts are made in several countries and assembled in another
Outsourcing and offshoring
Firms pay others, often abroad, to do tasks such as manufacturing or customer service
Investment flows
Firms build factories and offices abroad (foreign direct investment); money moves between financial markets
Migration of workers
More people move between countries for work
Global brands
The same products and logos are sold all over the world
A global supply chain (invented example)
Outsourcing
Paying another firm, often abroad, to carry out part of the production process.
Supply chain
The series of firms and stages involved in making and delivering a product.
3.2.4.4 Factors that have contributed to the growth of globalisation
Why globalisation has grown
New communication technology: the internet, mobile phones, email and video calls make it cheap and quick to run a business across borders, sell online worldwide and manage suppliers far away.
Cheaper, faster transport: bigger ships, more air freight and better ports cut the cost and time of moving goods and people.
Containerisation: goods are packed in standard-sized containers that move straight between ships, trains and lorries, which cuts loading costs, damage and theft.
Lower trade barriers: tariffs and quotas have fallen through world trade rules and free-trade agreements (taught in International Trade and Free-trade Agreements).
Multinational companies: their factories, offices and supply chains connect many economies (next section).
Five factors behind the growth of globalisation
Exam tipWhen asked to explain a factor, say how it makes global trade cheaper or easier. ‘The internet’ alone is only an identification; ‘the internet lets a UK firm take orders from customers abroad at almost no cost’ explains it.
Containerisation
Moving goods in standard-sized containers that transfer easily between ships, trains and lorries.
3.2.4.4 The operations of multinational companies
Multinational companies
A multinational company (MNC) is a business with operations (factories, offices, shops) in at least one country other than its home country.
MNCs are often very large: some earn more revenue in a year than the whole output of smaller countries, which gives them bargaining power with governments.
Governments often compete to attract MNCs because they bring jobs, investment and technology.
Why MNCs locate abroad
Example
Lower costs: cheaper labour, land or energy
Assembling electronics where wages are lower
Closer to customers in big or growing markets
Building a car factory inside a large market
Avoiding trade barriers: producing inside a country avoids its tariffs
A Japanese car maker producing in Europe
Access to raw materials
Mining or oil firms working where the resources are
Skills and time zones
Call centres or software teams that cover customers around the clock
Lower taxes or lighter regulation
Registering parts of the business where tax rates are low
Exam tipA 2-mark definition: a business that operates in more than one country. Selling products abroad from home is exporting, not being a multinational.
Multinational company (MNC)
A business with operations in at least one country other than its home country.
Foreign direct investment (FDI)
A firm from one country investing in factories, offices or firms in another.
3.2.4.4 Benefits and drawbacks to producers, workers and consumers in developed countries
Benefits and drawbacks for the UK
The effects aren’t equal: workers in some industries and regions (for example older manufacturing towns) have lost more, while consumers and exporting firms have gained.
Group in the UK
Benefits
Drawbacks
Producers
Wider markets abroad; outsourcing to lower-cost countries; cheaper raw materials and parts
More competition from low-cost producers abroad; some industries can’t compete; skilled staff may move abroad
Workers
Jobs in firms that grow by exporting; jobs created by foreign MNCs locating in the UK
Job losses when production moves abroad; downward pressure on wages; structural unemployment in declining industries
Consumers
Lower prices; a much wider variety of products
Fewer locally made products; more exposed to price shocks and supply problems abroad
Winners and losers from globalisation
Exam tipApply the point to the group named. In one exam, only about half of students scored on a drawback for UK producers, often because answers weren’t about producers or weren’t developed: name the group and explain the effect on its sales, costs or profit.
3.2.4.4 Benefits and drawbacks to producers, workers and consumers in less developed countries
Benefits and drawbacks for less developed countries
Rising incomes: for many countries, joining global supply chains has raised GDP per head and lifted people out of poverty.
But who benefits? If profits flow back to the MNC’s home country and little tax is paid, the gains to the local economy are smaller.
Group
Benefits
Drawbacks
Producers
New export markets; orders from MNCs for local suppliers; learning MNCs’ technology and methods
Struggle to compete with large, efficient MNCs; MNCs compete for workers, so local firms must pay more
Workers
More jobs; wages may rise as demand for labour grows; training and skills
Poor working conditions, long hours, low pay, child labour where rules are weak; jobs can leave if costs rise
Consumers and society
More choice; government tax revenue can pay for roads, schools and health care
Environmental damage; resources overused; local cultures weakened; little tax if MNCs avoid it
3.2.4.4 Moral, ethical and sustainability considerations
Moral, ethical and sustainability questions
When UK producers trade with other countries, there are questions about what is right, not only what is profitable.
Responses: firms can audit suppliers, sign up to fair-trade schemes, cut packaging and use lower-carbon transport; governments can set and enforce rules; consumers can choose ethically made products.
Trade-offs: ethical choices often cost more, so prices may rise or profits fall. Some argue that factory jobs, even at low wages, are better than the alternatives available locally; others say minimum standards should apply everywhere.
Issue
What the concern is
Working conditions
Low pay, unsafe factories, long hours and child labour in some supply chains
Unfair treatment of suppliers
Large buyers may push small suppliers’ prices down so far that they struggle
Carbon emissions
Shipping and especially air freight burn fuel and add to climate change
Using up resources
Forests, water and minerals may be overused if governments can’t resist MNCs
Tax avoidance
MNCs may use legal schemes to pay little tax where they make their profits
Cultural effects
Global brands may replace local products and traditions
Exam tipEthical issues in trade are a newer area: in one exam, 4% of students didn’t attempt the question. Learn two or three issues with a clear example of each.
Sustainability
Meeting today’s needs without damaging the ability of future generations to meet theirs.
Tax avoidance
Legally arranging affairs to pay less tax, for example by recording profits in a low-tax country.
3.2.4.4 Factors affecting globalisation
Can globalisation go into reverse?
The factors that speed globalisation can also slow it if they reverse: higher tariffs and other barriers make trade dearer; higher transport or energy costs make long supply chains less attractive.
Supply shocks: conflict in the Middle East from February 2026 disrupted energy supplies, and Budget 2026 described the Strait of Hormuz as ‘effectively closed’. Oil reached about $95 a barrel in the second quarter of 2026. Long supply chains can carry such shocks around the world quickly.
Some firms respond by reshoring (bringing production home) or nearshoring (moving it to nearby countries), trading lower costs for more secure supply.
Most economists expect trade and investment links to stay large even if their pattern changes.
Dated factsThe 2026 energy disruption is described from the Bank of England and Budget 2026 (last checked November 2026). Use it as an example of interdependence, not as a prediction.
Reshoring
Bringing production back to a firm’s home country.
3.2.4.4 Benefits and drawbacks of globalisation
Weighing it up: who wins and who loses?
Winners and losers: globalisation creates both. The same person can gain as a consumer (cheaper goods) and lose as a worker (a job moved abroad).
Short run v long run: job losses are immediate and concentrated; gains from lower prices and new industries spread more slowly and widely.
It depends on policy: retraining, regulation of working conditions, environmental rules and tax collection affect how the gains are shared.
It depends on the country: a country with skilled workers and strong institutions is more likely to gain than one with weak rules and few skills.
Useful evaluation phrases
‘It depends on…’
how quickly workers can retrain; whether MNCs pay tax locally
‘In the short run… but in the long run…’
jobs lost now; new industries grow later
‘The most important factor is…’
pick one and say why it outweighs the others
Exam tipExaminers say conclusions to globalisation essays are often ‘very brief and not supported’. Plan briefly, then finish with a judgement that weighs the strongest point on each side and says what it depends on.
Genious