What Is Trade?
Trade is the exchange of goods and services between countries.
- Exports: goods/services sold to other countries (money flows in)
- Imports: goods/services bought from other countries (money flows out)
- Trade balance: value of exports minus value of imports
A trade surplus (exports > imports) means more money flowing in. A trade deficit means more flowing out.
What Is Globalisation?
Globalisation is the increasing interconnection of the world's economies, cultures, and populations through trade, communication, and movement of people.
Drivers of globalisation:
- Transport improvements: container ships, cheaper air freight
- Communications: internet, mobile phones allow global coordination
- Trade agreements: WTO and bilateral deals reducing tariffs
- Transnational corporations (TNCs): companies operating across many countries
Transnational Corporations (TNCs)
TNCs are companies with operations in multiple countries. Examples: Apple, Nike, Toyota, Shell.
Benefits to host countries (usually low-income):
- Jobs and income for workers
- Technology transfer
- Infrastructure development
Disadvantages:
- Low wages and poor conditions (to keep costs low)
- Profits leave the country
- Exploitation of lax environmental regulations
Unequal trade: higher-income countries often trade manufactured goods (high value), while lower-income countries export raw materials and agricultural products (lower value). This can keep poorer countries dependent and limits economic development. Fair trade schemes aim to give producers in lower-income countries a better price.
Trade Patterns
| Country/region | Key exports |
|---|---|
| China | Electronics, machinery, clothing |
| USA | Machinery, aircraft, financial services |
| Germany | Cars, machinery, chemicals |
| Saudi Arabia | Oil, petroleum products |
| Brazil | Soya, iron ore, petroleum, beef |
| Kenya | Tea, coffee, cut flowers, tourism |
Environmental Impact of Trade
- Food miles: the distance food travels from farm to table. Long-distance trade releases CO₂.
- Outsourcing pollution: manufacturing in countries with weaker environmental rules
- Ocean shipping: accounts for ~3% of global greenhouse gas emissions
Is Globalisation Positive?
Arguments for:
- Raises living standards and reduces poverty (hundreds of millions lifted out of poverty in China and India)
- Brings diverse goods and cultural exchange
Arguments against:
- Worsens inequality; benefits often go to wealthy companies and shareholders
- Local industries destroyed by cheap imports
- Environmental damage
The shirt you are wearing may have been grown as cotton in India, spun in China, woven in Vietnam, and assembled in Bangladesh before being shipped to a European warehouse and trucked to a shop. Globalisation makes tracking product origins complex — and raises questions about who benefits at each step.
Real world: Apple's supply chain — globalisation in a smartphone
An iPhone is one of the most globalised products ever made. It contains minerals mined in the DRC (cobalt), Australia (lithium), China (rare earth metals), and dozens of other countries. Components are manufactured in Taiwan (TSMC chips), Japan (display glass), South Korea (Samsung screens), and Germany (optics). Final assembly takes place in China (Foxconn factories). Design and software are done in the USA (Apple, California). This supply chain spans over 40 countries and hundreds of companies — making a single iPhone a physical map of globalised production. When US-China trade tensions rise, the entire supply chain is at risk.
Real world: Fairtrade coffee — tackling unequal trade
Coffee is the world's second most-traded commodity (after oil). A cup of coffee in a London café might cost £3.50. Of that, the farmer in Ethiopia or Colombia who grew the beans may receive as little as a few pence. The rest goes to traders, processors, shippers, roasters, and retailers — mostly in rich countries. Fairtrade certification guarantees farmers a minimum price floor and an additional premium for community investment. Around 2 million farmers across 70 countries are Fairtrade certified. Critics argue the system is imperfect — certification costs can be high, and the price premium reaches farmers inconsistently — but it represents one attempt to make trade more equitable.
Real world: COVID-19 — when global supply chains broke down
The COVID-19 pandemic (2020–2021) exposed the fragility of globalised supply chains. When demand for personal protective equipment (PPE) surged globally, hospitals in the UK and USA discovered that almost all masks, gloves, and gowns were manufactured in China — and Chinese factories had first claim on their own output. Semiconductor shortages shut down car factories from Germany to the USA. The Suez Canal blockage (2021) — when a single container ship ran aground — showed how a chokepoint in global shipping could disrupt supply chains for weeks. Governments began diversifying supply chains and reshoring some manufacturing — a sign of doubt about the wisdom of extreme global specialisation.
Where do you see this in real life? Check where the products around you were made. Your phone, clothes, food, and electronics likely came from multiple countries. What does this tell you about how interconnected the global economy is? Think also about what happens when those connections break — as we saw with pandemic shortages and post-Brexit supply disruptions.