Unit 3 - GLOBAL INTERACTIONS : Power, Places and Networks Globalization The increasing connection between countries through trade, money and technology making them more dependent on each other As technology increase, countries become more interconnected on one another Foreign trade investment (FDI) When a company from one country builds or buys businesses (like factories or offices) in another country Example: Apple buying a factory in India → the company owns the business, not just it's stocks/shares Global Village The idea that world feels smaller due to technology and innovation Offshoring When a company moves their production to another country to reduce costs (the company still owns and controls production) Outsourcing A company hired another business to perform tasks instead of doing them internally (the work is done by an external company) Example: Apple hires Foxxmann to manufacturer the iphones Super power A country or a group of countries with major influence in global policies Has economic, military and cultural dominance Example: The US influencing international policies Part 1 - Global Interactions and Global Power Part 2 - Global Networks and Flows Part 3 - Human and Physical Influences on Global Interactions Part 1 Global Interactions and Global Power Key question: 1. Global interactions and global power Suggested teaching time 6–7 hours How global power and influence varies spatially Globalization indices showing how countries participate in global interactions Global superpowers and their economic, geopolitical and cultural influence Detailed examples of at least two actual or potential global superpowers Powerful organizations and global groups: G7/8, G20 and Organization for Economic Cooperation and Development (OECD) groups Organization of the Petroleum Exporting Countries’ (OPEC) influence over energy policies global lending institutions, including the International Monetary Fund (IMF) and New Development Bank (NDB) Synthesis, evaluation and skills opportunities How wealthy and powerful places exist at varying scales, and how the global map is complex and subject to change Global indices showing how countries participate in global interactions: Focusing on a countries policial, economic and social/cultural connections Economic globalization = looks at trade, investment and financial flows A country with high economic globalization has a lot of trade and financial transactions with other countries Social globalization = factors such as communication, personal contact, and the movement of people A country with a lot of foreign media, social connections or international tourism would rank has high social globalization Political globalization = looks at a countries political influence, international treaties and participation in global organizations Countries with high political globalization participate in more international treaties, like trade agreements and have ambassadors around the world KOF Index of Globalization Measures how globally connected a country is Uses 23 variables Breaking down globalization into 3 categories Economic Social Political Global Superpowers and their Influence Hard Power (Force and manipulation) The use of force or economic measures by countries to influence or disrupt others Characteristics → Military force, economic sanctions, trade restrictions Example: United States towards Iran Military sanctions Refusing to trade with other countries Soft Power (Influence and attraction) Cultural influences that countries have over other countries Characteristics → Cultural exports (movies, music, TV), Global branding, advertising, International sports and entertainment Examples: American TV, advertisements, and products influencing global culture international sports games promoting friendly competition and national pride Coca-Cola’s branding, which spreads Western ideas (e.g., Santa Claus and Christmas) TNCs (Transnational Corporations) play a major role in spreading soft power Smart power (Combination of soft and hard power) A combination of both hard power and soft power, balancing military and economic strength with cultural influence Hegemony means one country or group dominates others, often through military, political, or economic power (it brings stability or tension depending on how it's used) The U.S. is often seen as a hegemonic power because of its global influence USA as a global superpower CHINA as a global superpower Economic Power → Largest economy ($25T GDP), home to major TNCs, top global traders. Geopolitical power → Strong military, rich in resources, NATO leader Cultural power → American culture spreads worldwide (TV, movies, music, brands) Economic power → 2nd largest economy ($18T GDP), global manufacturing hub Geopolitical power → Largest army, advanced weapons Cultural power → Limited global influence due to language barriers China's strong economy and military give it major hard power, but its soft power is weaker than the USA's Unipolar → One superpower dominates with no major rivals After the USSR collapsed in 1991, the U.S. became the sole global superpower in a unipolar world Multipolar → Multiple countries share power, creating a balance The rise of China, Russia, and India is shifting the world toward a multipolar structure, challenging U.S. dominance Power Organizations and Groups (groups that influence economy and have global power) G7/8 Group of powerful groups of HICs that meet annually to talk about global economic issues, trade, security and international policies Russia recently joined in 1998 forming the G8 but it was later suspended due to its actions in Ukraine The G7 does not enforce policies but acts as a group that discusses to guide global economic trends About their power: Influence on global economic The G7 countries are some of the worlds largest economics and have a lot of power in finance and trade G20 Unlike the G7, the G20 includes both developed and emerging economics making it more representative of global economic power Consists of 19 countries + the EU Makes sure both developed and developing countries have a say in global financial decisions OPEC International organization of countries high in oil production → such as middle east, africa and south africa They come together to determines oil prices to make it suitable for all countries The World Bank Vs. IMF (Helping countries in financial crisis/poverty) Focuses on long-term economic development and poverty reduction through loans and grants IMF provides short term financial assistance to stabilize economics in financial crisis Part 2: Global Networks and Flows Key questions → How do different places become interconnected by global interactions? 2. Global networks and flows Suggested teaching time 6–7 hours How different places become interconnected by global interactions An overview of contemporary global networks and flows: global trade in materials, manufactured goods and services an overview of international aid, loans and debt relief international remittances from economic migrants illegal flows, such as trafficked people, counterfeit goods and narcotics Foreign Direct Investment (FDI) and outsourcing by transnational corporations (TNCs), and ways in which this network's places and markets Two contrasting detailed examples of TNCs and their global strategies and supply chains Synthesis, evaluation and skills opportunities The relative importance of different flows, and the suitability of different methods for graphically representing flows and interactions The Influence of Global Organizations, Groups and Global Lending Institutions An overview of contemporary global networks and flows: Global trade in materials, manufactured goods and services Trade connects economies by allowing countries to specialize in what they do best TNCs rely on global supply chains, where materials, components, and final products are sourced and assembled in multiple countries Export Restrictions (Mixed Impact on Globalization) Export restrictions limit globalization because they reduce trade flow How it increases globalization: Countries affected by restrictions seek alternative trade partners, increasing trade connections elsewhere Tariffs (Mixed Impact on Globalization) Tariffs are taxes on imports, making foreign goods more expensive to protect domestic industries Tariffs can reduce globalization by discouraging imports, but they can also redirect trade to new countries, increasing trade in different areas Free Trade (Strongest Increase in Globalization) Free trade means no tariffs or trade restrictions, making it easier for goods, services, and investments to move across borders NAFTA (now USMCA) allowed free trade between the U.S., Canada, and Mexico, increasing economic integration Global trade and free trade agreements strongly increase globalization by making economies more interconnected Tariffs and export restrictions can reduce trade in the short term, but they may also create new trade networks, leading to alternative globalization pathways An overview of internal aid, loans and debt relief Development Aid Strengthens Global Connections Wealthy countries (U.S., Japan) donate to poorer nations (Sub-Saharan Africa, Eastern Europe, Southeast Asia) to support infrastructure, healthcare, and economic growth Aid builds political and economic ties between donor and recipient nations, fostering long-term trade relationships Debt Relief Can Reduce Dependency and Encourage Trade Some countries receive debt relief from institutions like the IMF and World Bank to help them stabilize their economies Global Financial Institutions Shape Economic Policies G7/G20 influence economic decisions These institutions push for free trade, deregulation, and privatization, increasing the global reach of TNCs and investment from superpowers International remittances from economic migrants Migrant workers send money home (remittances), boosting local economies and reducing poverty in developing countries Example Remittances make up 2% of Mexico’s GDP, showing how migration connects economies Illegal flows, such as trafficked people, counterfeit goods, and narcotics Illegal flows (human trafficking, counterfeit goods, narcotics) connect countries through underground markets Illegal flows exploit globalization’s networks, using trade routes, weak regulations, and digital platforms to operate across borders, making crime a major unregulated global force Foreign direct investment (FDI) and outsourcing by transnational corporations (TNCs) FDI Large corporations invest in other countries (factories, offices, etc.) Outsourcing When companies move production/services to other countries for lower costs Creates jobs in developing countries but may reduce wages and labor protections Transnational companies: A transnational company (TNC) is an organization that operates in a large number of countries TNC headquarters are in HIC cities Research and development (R&D) and decision-making concentrated in growth areas of HICs Assembly and production located in LICs and NICs TNCs advantages for host country: Development of energy resources Investment and aid Provision of capital equipment Employment Improvement of educational and technical skills Development of resources and manufacturing Disadvantages for host country Reduced demand for labor through mechanization Exploitation of local laborers Exploitation of local resources A large proportion of the profits going overseas Manufactured products beyond the price range of local people Few skilled workers employed Increased imports, notably oil, leading to increased national debt TNC power: The large scale of the economic transactions that TNCs make around the world and the effect they have on urban, regional and national economies give them tremendous power TNCs have become planned economies with vast internal markets Up to a third of all trade is made up of internal transfers of TNCs which produce money for governments via taxes and levies Economic power comes from the ownership of assets Over 50 million people are employed by TNCs Although many governments in developing countries own their own resources, TNCs still control the marketing and transport of goods Reduced demand and increased competition create unfavourable economic conditions TNCs use three main strategies to "survive and prosper": Rationalization – slimming down the workforce, which involves replacing people with machines Reorganization – improvements in production, administration and marketing, such as increased subcontracting Diversification – developing new products Supply Chain - A supply chain is a complex logistics system that consists of facilities that convert raw materials into finished products which later are distributed to end-consumers. Meanwhile, supply chain management deals with the flow of goods within the supply chain in the most efficient manner. Now a days, many products are made out of products which have parts coming from many different parts of the world Products come from a network of factors in different countries involved in the production, delivery and sale to the final customers Supply chain (global): raw materials suppliers --> component manufacturers --> component vendors --> manufacturing --> distribution --> retail --> customer Phone for example made up of 600 components coming from different places Materials, design, manufacturing and distribution/retailing is global, including north america, europe and asia CASE STUDY: The Tata group The Tata Group comprises over 100 companies, encompassing cars and consulting, software and steel, tea and coffee, transport and power, chemicals and hotels Tata Consultancy Services (TCS) is Asia's largest software company India's largest steelmaker India's biggest luxury hotel group by far Power is the country's largest private electricity company In over 80 countries + employs ~600,000 people Vulnerable to competition as the companies were uncoordinated, overmanned and undermanaged 60% of its revenue comes from outside India CASE STUDY: Apple Apple is one of the world's richest companies Has a value of $247 billion in 2015 Apple faces a lot of backlash for human rights, environmental and ethical issues in it's supply chain → especially in China Global supply chain Apple has 785 suppliers in more than 130 countries with 349 in China Apple policies Claims supplies must provide safe working conditions, fair treatment and environmental responsibility foxxman is apple biggest supplied in China, employing about 1.6 million people Worker Exploitation Allegations Workers reportedly earn $50/month while working 15-hour shifts Chinese labor laws are weak and rarely enforced, offering little protection Impact on Sales Despite ethical concerns, Apple's sales remain unaffected Customer power Public pressure can sometimes create change, but not in this case Part 3 Human and physical influences on global interactions 3. Human and physical influences on global interactions Suggested teaching time 6–7 hours How political, technological and physical processes influence global interactions Political factors that affect global interactions: multi-governmental organizations (MGOs) and free trade zones economic migration controls and rules Our “shrinking world” and the forces driving technological innovation: changing global data flow patterns and trends transport developments over time patterns and trends in communication infrastructure and use The influence of the physical environment on global interactions: natural resource availability the potentially limiting effect of geographic isolation, at varying scales Synthesis, evaluation and skills opportunities How processes that influence spatial interactions are interlinked in complex ways that accelerate globalization Political factors that affect global interactions Multi governmental organizations (MGOs) and Free Trade Zones MGOs regulate trade and international relations World Trade Organization (WTO) International Monetary Fund (IMF) United Nations (UN) Free Trade Zones (FTZs) allow businesses to operate with fewer restrictions, boosting international trade Economic Migration control and rules Countries enforce migration controls to regulate labor markets and security The USA, for example, has strict border control policies for illegal immigration Economic migrants move for better job opportunities and living standards Trading Blocs Groups of countries remove trade barriers between themselves and negotiate as a single unit in global trade Types of trading blocs Free trade area No tariffs between members but restrictions on outsiders (e.g., NAFTA) Customs unions Free trade among members with a common external tariff (e.g., Mercosur) Common markets Free trade, plus free movement of labor and capital Economic unions Free trade, plus free movement of labor and capital Case Study: NAFTA (North American Free Trade Agreement) Formed in 1994 between the USA, Canada, and Mexico Eliminated trade barriers and encouraged economic growth Helped Mexico attract investment but also caused job losses in the USA Environmental concerns arose due to weak regulations in Mexico Export Processing Zones (EPZs) and Free Trade Zones (FTZs) EPZs are industrial areas that attract foreign investment with tax breaks and relaxed regulations Over 90 countries have EPZs to boost exports and job creation Example: South Korea’s Incheon Free Economic Zone (IFEZ) Designed to attract foreign direct investment (FDI) Offers tax breaks, foreign business incentives, and high-tech infrastructure 2. Our “Shrinking World” and the Forces Driving Technological Innovation Changing Global Data Flow Patterns and Trends Digitalization has made cross-border communication cheaper and faster HICs are the most connected, but NICs (Newly Industrialized Countries) and LICs (Low-Income Countries) are catching up Challenges of the digital age: Security risks and cybercrime Competition pressures for companies Misinformation and extremism spread through social media Transport Developments Over Time Friction of Distance The further away a service is, the less likely people are to use it Time-Space Convergence Travel time has decreased due to technological advancements Jet Engines & Containerization Jet engines revolutionized global travel, reducing time and costs Containerization simplified global shipping, making trade faster and more efficient Patterns and Trends in Communication Infrastructure and Use Mobile internet growth is fastest in NICs and LICs Internet access is highest in HICs, lowest in LICs Telecommunication networks allow global businesses to operate efficiently 3. The Influence of the Physical Environment on Global Interactions Natural Resource Availability Countries with abundant natural resources dominate global trade Examples: The middle east dominates oil exports Australia and Canada benefit from rich mineral reserves Brazil and South Africa use natural resources to fund economic diversification Countries dependent on a single resource (e.g., St. Lucia with bananas) are vulnerable to market fluctuations Geographic isolation Landlocked countries face higher transport costs and tariffs when exporting goods Example South Sudan must pay Sudan or Kenya to export oil Access to markets affects economic development at local, regional, and international scales