OxfordAQA International GCSE Economics: Globalisation: benefits, drawbacks and ethical issues (9214)

This study guide is aligned to the OxfordAQA International GCSE Economics (9214) specification, for exams from May/June 2025 onwards. It covers section 3.2.4.3, Globalisation: benefits and drawbacks, which sits in the topic International trade and the global economy and is assessed in Paper 2, How economies work. The course is not tiered. All data in the examples are invented and illustrative.

Find the course on the OxfordAQA IGCSE Economics hub and tick off progress on the printable checklist. Condensed recall is in the revision notes, and you can test yourself with the practice questions. To find weak spots first, try the free 10-minute diagnostics.

What the specification asks for

Specification point	What you must be able to do
Main features of globalisation	Describe what globalisation is and how it shows up
Factors behind its growth	Explain the part played by new technology and by multinational companies
Producers, workers, consumers in developed countries	Give benefits and drawbacks for each group
Producers, workers, consumers in less developed countries	Give benefits and drawbacks for each group
Moral, ethical and sustainability considerations	Explain the issues that arise when producers trade with other countries

1. Main features of globalisation

Globalisation is the process by which national economies become more closely linked and rely more on one another. Its main features are:

• more trade in goods and services between countries
• investment and money moving across borders
• production split across several countries in supply chains
• people, ideas and technology moving more freely
• the same brands and products sold in many countries

You can measure the trade feature with trade as a share of GDP: (exports + imports) / GDP x 100.

Worked example 1 (Country A, illustrative). Country A now has exports of 52, imports of 58 and GDP of 200 (currency units, billions). Ten years earlier the figures were 30, 34 and 160.

• Now: (52 + 58) / 200 x 100 = 110 / 200 = 55%
• Then: (30 + 34) / 160 x 100 = 64 / 160 = 40%
• Trade grew by (110 - 64) / 64 x 100 = 71.9%, while GDP grew by (200 - 160) / 160 x 100 = 25%

Trade grew faster than output, so Country A is more integrated with other economies. Its producers and workers now depend more on events abroad. That is interdependence.

2. Factors behind the growth of globalisation

New technology

• Communications. The internet and mobile networks let a firm manage factories, suppliers and customers in many countries at low cost.
• Transport. Faster and cheaper movement of goods lowers the cost of selling and sourcing abroad.
• Digital markets. Online selling lets even a small firm reach customers overseas, and digital services can be delivered across borders.

Chain of reasoning: lower communication and transport costs, so distance matters less, so it pays firms to buy, make and sell in more countries, so trade and investment grow.

Multinational companies (MNCs)

An MNC is a firm that operates in more than one country. MNCs spread production by building or buying plants abroad, which is foreign direct investment. They organise global supply chains, so a product may be designed in one country, made in a second and sold in a third. Their global brands also spread similar tastes across markets.

Worked example 2 (illustrative). A firm makes 20,000 jackets a year at home and sells each for 45. It compares costs per jacket.

Cost per jacket	Home	Offshore plant
Labour	14	4
Materials	9	9
Other	7	6
Shipping and import handling	0	2.50
Total	30	21.50

• Saving per jacket: 30 - 21.50 = 8.50, which is 8.50 / 30 x 100 = 28.3%
• Saving per year: 8.50 x 20,000 = 170,000
• Profit per jacket rises from 45 - 30 = 15 to 45 - 21.50 = 23.50, a rise of 56.7%

The saving explains why MNCs move production abroad. It also shows the drawback at home: if 120 home jobs are lost, those workers bear a cost the firm does not count.

Other factors, such as lower barriers to trade and rising incomes, also matter. The specification names technology and MNCs, so lead with those.

3. Benefits and drawbacks for producers, workers and consumers

Group	Developed countries	Less developed countries
Producers	Benefit: bigger export markets, cheaper inputs, economies of scale. Drawback: tougher competition from imports; some firms close.	Benefit: new markets, technology and finance; MNC suppliers get steady orders. Drawback: small local firms may be undercut by imports and MNCs.
Workers	Benefit: jobs in export and high-skill industries. Drawback: jobs lost where production moves abroad; pay pressure on low-skilled workers.	Benefit: new jobs, often paying more than local alternatives; skills gained. Drawback: low pay, long hours or poor safety; jobs may be insecure if the MNC leaves.
Consumers	Benefit: lower prices, more choice, higher real income. Drawback: loss of local brands; products made under poor conditions abroad.	Benefit: access to goods and technology. Drawback: imported goods may crowd out local products; limited gain if incomes stay low.

Worked example 3: workers in a less developed country (illustrative). An MNC factory in Country B pays 380 a month for a 60-hour week. The average local job pays 300 for a 44-hour week. Assume a 4-week month.

• Monthly pay is higher by (380 - 300) / 300 x 100 = 26.7%
• Hours: 60 x 4 = 240 and 44 x 4 = 176
• Pay per hour: 380 / 240 = 1.58 against 300 / 176 = 1.70

The MNC job pays more per month but less per hour. A good answer says both: the job raises household income, yet it demands more work for each unit earned, so the benefit is smaller than it first looks.

Worked example 4: developed country (illustrative). Country C’s manufacturing employment falls from 80,000 to 62,000, and its services employment rises from 150,000 to 171,000.

• Manufacturing: (62,000 - 80,000) / 80,000 x 100 = -22.5%
• Services: (171,000 - 150,000) / 150,000 x 100 = +14%
• Total jobs: 230,000 to 233,000, a net rise of 3,000 or 1.3%

In total, jobs rose slightly, so the economy as a whole did not lose. But the people who lost factory jobs may lack the skills for the new service jobs, and they may live in different places. That is structural unemployment, and it can be long lasting.

Consumers (illustrative). Suppose a clothing price index in Country C falls from 100 to 84 because imports are cheaper. A household spending 1,200 a year on clothing could buy goods that would have cost 1,200 / 0.84 = 1,428.57 at the old prices, 19.0% more. That is a gain in real income. The same households may also be the workers who lost factory jobs, so the gain is not shared evenly.

4. Moral, ethical and sustainability considerations

When producers trade across borders, people ask whether the way goods are made and sold is right, and whether it can continue. The main issues are:

• Working conditions. Low pay, unsafe workplaces and child labour in supply chains.
• Fair prices. Whether small producers get a fair share of the final price.
• Environmental damage. Pollution, loss of habitats and carbon emissions from production and transport.
• Resource depletion. Using up resources faster than they can be replaced.
• Power. Large MNCs can bargain hard with small suppliers and with governments.

Sustainability means producing and consuming in ways that still leave future generations able to meet their own needs. Economists link it to external costs: costs imposed on third parties that the producer does not pay.

Worked example 5: a fair price (illustrative). A farmer in Country B sells 5,000 kg of a crop. Retail price is 4.00 per kg. The farmer gets 0.60, or 15% of the retail price. Under a fair-trade scheme the farmer gets 0.90 per kg.

• Income: 5,000 x 0.60 = 3,000 and 5,000 x 0.90 = 4,500, a rise of 50%
• Share of retail price: 0.90 / 4.00 = 22.5%
• If the retail price rises to 4.30, consumers pay 0.30 / 4.00 x 100 = 7.5% more

Gain for the farmer, higher cost for consumers: a moral argument for paying more, set against the cost to lower-income buyers.

Worked example 6: an external cost (illustrative). An MNC mine produces 50,000 tonnes a year. It sells at 80 a tonne, with private cost of 60, so profit is 50,000 x 20 = 1,000,000. Pollution imposes an external cost of 12 a tonne on local people.

• External cost: 50,000 x 12 = 600,000
• A cleaner process costs 8 a tonne: 50,000 x 8 = 400,000, and removes the pollution
• Net gain to society: 600,000 - 400,000 = 200,000
• Profit would fall to 50,000 x 12 = 600,000, a fall of 40%

Society gains but the firm loses, so it may not act without regulation or pressure from consumers. See market failure and externalities for the underlying idea.

5. Evaluating globalisation

For a judgement question, set out both sides, then decide. Useful lines of evaluation:

• Who? A gain for consumers can come with a loss for some workers.
• Which country? Effects differ between developed and less developed countries.
• Short run or long run? Job losses are quick; new industries and skills take years.
• How big? Compare the size of gains and losses, as in worked example 4.
• What policy? Training, minimum standards and environmental rules change the result.

Common errors

• Giving a benefit with no consequence. “Lower prices” earns more when you add what consumers can do with the saving.
• Treating all MNC jobs as good or all as exploitation. Compare with local alternatives.
• Mixing up the two groups of countries. State which one your point applies to.
• Forgetting that firms in less developed countries can also lose from competition.
• Ending with a list. Finish with a reasoned judgement.
• Confusing the percentage change with the percentage-point change. A rise from 40% to 55% is 15 percentage points.

For the link to the balance of payments objective, see government objectives.

Official syllabus

OxfordAQA International GCSE Economics (9214), specification version 1.0, for International GCSE exams May/June 2025 onwards, published by OxfordAQA. Section 3.2.4.3, Globalisation: benefits and drawbacks.