Exercises: Globalisation: opportunities and risks

Define globalisation and describe its economic, cultural, and technological dimensions with an everyday example of each.

Name three factors that have driven globalisation (transport, communications, and trade liberalisation) and explain with an example how each contributes.

Explain what a multinational company is and describe the potential global supply chain of a T-shirt: where it is designed, where the cotton comes from, where it is sewn, and where it is sold. What does this journey show about modern production?

What is the offshoring of production? Give an example of a company that moves its factory to another country and explain what reasons it usually has (labour costs, regulations, proximity to suppliers) and what effects it produces in the country that loses the factory and in the one that receives it.

What is fair trade and how does it differ from conventional trade? Explain it with the example of a bag of coffee: what guarantees does it seek about the price paid to the producer, working conditions and the environment?

What is a supply chain? Describe the one for bread (growing the wheat, milling, the bakery, distribution, the shop) and explain what happens if one of its links fails: why are global chains efficient but fragile?

In the supermarket there are strawberries in December and grapes in May, brought from the other hemisphere. Explain what this phenomenon shows about the globalisation of food and name one advantage and one cost (environmental, of quality) of eating "in season all year round".

A conflict in a faraway region makes wheat and gas dearer, and a month later bread goes up in your neighbourhood. Use this example to explain what world economic interdependence is and why "no country is an island" in today's economy.

Present two opportunities and two risks of globalisation for a country like Spain, using concrete examples: markets for its firms, lower prices, offshoring, and external dependence.

A shoe factory in a town closes and moves production to another continent: $120$ people lose their jobs.

1. a) Analyse the direct and indirect local effects (businesses, local council, families).
2. b) What policies could help restructure the town? Propose two and assess their timelines.

Data shows that global poverty has fallen significantly over recent decades, but inequality within many countries has increased.

1. a) Explain how globalisation can produce both effects at the same time.
2. b) Who would be the "winners" and "losers" of globalisation within a rich country? Reason your answer.

Spain exports cars and components, and imports microchips and energy.

1. a) What does that pattern show about the country's productive specialisation?
2. b) Explain what risk the world chip crisis revealed for Spanish factories and what the expression "strategic autonomy" means.
3. c) In which sectors do you think a country should avoid total dependence on the outside? Justify two examples.

A T-shirt costs $5\ \text{€}$ in a fast-fashion shop.

1. a) Explain how that price is possible (very low wages in garment making, mass production, global logistics).
2. b) What costs does that price not include (pollution, working conditions, textile waste)? Relate it to the concept of externality.
3. c) What can an informed consumer do and what can regulation do (labelling, brand responsibility)? Reason both roles.

International tourism accounts for an enormous share of the economy of many Spanish areas.

1. a) What does globalised tourism bring (foreign currency, jobs, taxes)?
2. b) What dependency risks did the pandemic show (activity stopping dead, seasonal jobs)? Analyse the concept of diversification applied to those areas.
3. c) Propose two lines of action so that a tourist area depends less on a single sector without giving it up.

A multinational decides to close a Spanish plant that is profitable, but less so than another one it will open on another continent.

1. a) Who makes that decision and on what criteria (costs, margins, global strategy)? What room for manoeuvre does the local government have (aid, negotiation, closure rules)?
2. b) What does this case show about the asymmetry of power between large global companies and local areas? Reason what States can do, alone or coordinated.

Millions of people emigrate every year looking for better wages and opportunities.

1. a) Explain which factors "push" and which factors "pull" in economic migration.
2. b) Analyse its effects on the country of origin (remittances, brain drain, relief of unemployment) and on the destination country (social security contributions, entrepreneurship, filling of in-demand jobs).
3. c) Why are migrations considered part of globalisation, alongside trade and capital? Reason your answer.

The figure shows how the final price of a €100 pair of sneakers is distributed among the stages of its value chain.

The government of a developing country plans to allocate public funds to subsidise the establishment of assembly plants to double its industrial footwear production, trusting that this stage will enable it to capture most of the wealth generated in the sector.

1. a) Interpret the data from the graph applying the "smile curve" theory of the global value chain and critically evaluate the economic limitation of the government's plan to raise the country's average wages and GDP in the long run.
2. b) Assume that wage costs in the manufacturing stage increase by 25 % in the producing country. If the multinational corporation that owns the brand decides not to pass this cost increase on to the final retail price of €100, predict what organisational or offshoring adjustments it might adopt and how they would affect the country.
3. c) Design two public policies aimed at helping this country transition towards the higher value-added segments of the chain, justifying what barriers to entry it will face in each case.

A city council passes an ordinance requiring municipal school canteens to source 100 % of their food from within a 50 km radius, arguing that "buying local is always more efficient, cheaper, and ecologically more sustainable than importing".

1. a) Drawing on the theory of comparative advantage and economies of scale, technically refute the claim that strictly local procurement guarantees greater economic efficiency and lower prices for taxpayers.
2. b) From the perspective of product life cycle assessment, demonstrate with a specific case (for example, heated greenhouse vegetables versus imported outdoor crops) why a product transported thousands of kilometres can generate fewer greenhouse gas emissions per kilogram than its local alternative.
3. c) As a municipal economic advisor, design a set of sustainable public procurement criteria that combines support for the local productive fabric with the protection of families' purchasing power and the efficient use of public resources.

In the wake of recent global supply crises, it is proposed that Spain implement a generalised import substitution policy to domestically produce both cutting-edge microchips and essential medical supplies (masks, syringes, and generic drugs).

1. a) Apply the concepts of economies of scale, fixed costs, and factor endowments to compare the economic feasibility of manufacturing cutting-edge microchips in Spain versus manufacturing disposable medical supplies.
2. b) Predict the macroeconomic effects on cost-push inflation and on the competitiveness of Spanish exports if the State imposes tariffs or quotas to force the business fabric to consume strictly domestically manufactured inputs.
3. c) Design an "open strategic autonomy" strategy that strengthens supply security in critical sectors without incurring the efficiency losses of autarkic protectionism.

An industrial company based in Spain used to source entirely from a single supplier in Southeast Asia using the just-in-time system. After experiencing production shutdowns due to bottlenecks in maritime shipping, its board of directors is debating switching to the just-in-case model: hiring a second supplier within the European Union (with unit costs 30 % higher) and keeping a safety stock equivalent to three months of sales in a warehouse.

1. a) Analyse the impact of this transition on working capital, storage costs, and the company's average unit cost. Under what probabilistic conditions of logistical disruption is it economically rational to assume this permanent extra cost?
2. b) Using the concept of price elasticity of demand, predict to what extent the company will be able to pass on the extra cost of its resilience to the price charged to consumers, or whether it will have to absorb it by reducing its profit margins.
3. c) Justify what market failures prevent private companies from reaching a socially optimal level of resilience in strategic sectors (such as energy or essential medicines) and what public intervention instrument would correct this deficiency without disincentivising efficiency.

Ivory Coast and Ghana account for nearly 60 % of the global cocoa bean harvest, yet they retain less than 6 % of the total value generated in the chocolate industry, the bulk of which is captured in developed importing countries.

1. a) Analyse how the practice of "tariff escalation" (imposing very low tariffs on unprocessed raw materials and increasing tariffs on derived manufactured goods) contributes to perpetuating this trade pattern and blocking industrialisation in origin countries.
2. b) A report argues that it would be enough for these countries to build cocoa processing plants to capture most of the sector's profits. Critically evaluate this statement by analysing the importance of intangible assets (trademarks, global logistics networks, and access to final sales channels).
3. c) If producing countries were to form an export cartel to set quotas and substantially raise the international price of cocoa beans, predict the short- and long-term consequences of this measure on their fiscal revenues and on the incentives of processing multinationals.

The European Union has implemented the Carbon Border Adjustment Mechanism (CBAM), which requires importers in emission-intensive sectors (such as steel, aluminium, or fertilisers) to purchase emission certificates equivalent to those they would pay if they produced within EU territory under the EU Emissions Trading System (ETS).

1. a) Justify the economic rationale of the mechanism against the phenomenon of "carbon leakage". Why do EU companies argue that its absence leads to unfair competition (ecological dumping)?
2. b) Economists from developing countries describe this measure as "green neo-protectionism". Develop the trade and international distributive justice arguments (principle of common but differentiated responsibilities) supporting this critical stance.
3. c) Predict what strategic incentives the CBAM creates for governments of non-EU exporting countries: will it be more advantageous for them to litigate before the WTO, subsidise energy for their factories, or implement their own national carbon taxes and carbon markets? Justify your answer.

A Spanish agricultural region generates more than 80% of its income and employment from a single fruit and vegetable crop intended for European export. Over the last three years, the combination of recurrent drought, rising fertilizer prices, and increasing competition from non-EU countries with lower labor costs has led to the closure of 20% of its farms.

1. a) Analyze the vulnerability of the regional economy using the concepts of "deterioration of the terms of trade" and "dependence on static comparative advantages". Why can a model that was successful in the past lead to a stagnation trap in the face of changes in the global environment?
2. b) Design a medium-term strategic plan (five to ten years) that allows the region to diversify its sources of economic value without completely abandoning its accumulated agronomic knowledge.
3. c) Local agricultural associations demand guaranteed minimum prices and direct subsidies for operating losses. Evaluate the risks of market distortion and moral hazard associated with this proposal compared to alternatives such as crop yield insurance or productive restructuring funds.

In the debate on the future of the international economic order, some analysts argue that we are facing a process of "deglobalization", while others claim that it is merely a "profound reconfiguration" of international flows.

1. a) Interpret recent empirical trends to contrast both hypotheses: compare the evolution of global trade in physical goods and raw materials with the performance of trade in digitally delivered services, cross-border data flows, and patents.
2. b) Analyze the macroeconomic consequences on global productivity and on long-term inflationary pressures generated by the transition from cost-driven relocation (offshoring) to production in allied or geographically close countries (friendshoring and nearshoring).
3. c) Evaluate what specific opportunities and risks this new scenario poses for the Spanish economy, taking into account its productive structure (tourism, automotive, renewable energy, and knowledge-intensive services).