The extract also states that America can compete to provide goods and services
which China’s growing middle class might demand. Globalisation, by increasing
competition, helps to promote efficiency as firms strive to remain price competitive in
global markets. A rise in efficiency will promote potential growth for the US economy.
Extract A states that further trade liberalisation, created by removing non-tariff
barriers across the Atlantic which would lead to further globalisation, would increase
GDP in the US by up to 3 per cent. This is likely to be due to both efficiency gains
and export-led gains.
Figure 1 in the Students’ book shows that economic growth, although generally
positive between 1990 and 2018, has been consistently lower than China. This might
suggest China has gained more from globalisation than the USA. This is not
surprising since China has gained significantly from export-led growth, as a result of
globalisation, due to its lower wage costs.
However, the impact of globalisation may have some negative impact on economic
growth in the USA. Cheap imports from China increases consumers’ purchasing
power but can cause structural unemployment in some US industries. If some US
industries cannot compete, then this might lead to unemployment, particularly when
workers are occupationally and geographically immobile. So actual growth may be
constrained by globalisation, at least in the short run. If government policies are in
place to retrain workers, the impact on reducing economic growth can be minimised.
(e)
Introduction
• Costs of globalisation often include displacement of workers, exploitation of workers,
environmental impact of increased trade, loss of tax revenue from transfer pricing,
increased income inequality and the influence of TNCs on domestic policy.
First point
• Extract B states that about 1 million out of 5.5 million manufacturing jobs were lost in
the USA between 1999 and 2011 to Chinese competition. In some industries,
Chinese firms can produce almost identical products, but at a lower cost. In this case,
US firms would be forced to close. The transfer of many manufacturing production
activities to low-cost countries has caused structural unemployment in traditional
manufacturing industries in the USA.
Evaluation
• Critics argue that many of these job losses are caused by technological advances in
production, rather than globalisation.
• This might only be a short run cost. The US government should have resources
available to retrain workers and provide an education system which helps people
have a range of skills.
Second point – An increase in inequality
• Extract A states that more complex tasks are done in the USA. This increases the
demand for skilled labour and pushes up wages for skilled workers. At the same
time, if unskilled workers in the USA are effectively having to compete with workers in
© Pearson Education Ltd 2019. Copying permitted for purchasing institution only. This material is not copyright free. 10
