| Trade creation | Transfer of consumption from high to low-cost producers |
|---|---|
| Trade diversion | Transfer of consumption from low to high-cost producers |
| Full economic union | A customs union which also co-ordinates a range of other economic policies among its members |
| Monetary union | A group of countries with a single currency, or different currencies having a fixed mutual exchange rate monitored and controlled by one central bank |
| Customs union | A group of countries that have free trade between members, but common external barriers |
| Free trade area | A group of countries that have few or no price controls in the form of tariffs or quotas between each other |
| Globalization | The expansion of world trade in goods and services, together with capital flows leading to greater international interdependence |
The spread of goods, technologies, information, and jobs across national borders and cultural boundaries is known as globalisation. In terms of economics, it refers to a global interdependence facilitated by free trade. Although there are many potential reasons for globalisation, the primary ones are listed in the table below.
| Cause | Explanation |
|---|---|
| Economies of scale | A domestic market will be insufficient to meet the selling demands of these businesses if the minimum efficient scale connected with that industry is increasing. Businesses will want to expand on a global scale to meet the minimum efficient scale and achieve economies of scale |
| MNCs | These corporations are ready to relocate wherever they may get the best benefits which enhances both labor and capital mobility |
| Communications | It is simpler to communicate and share information as a result of the expansion of the internet, eliminating scale-related managerial inefficiencies |
| Reduction in trade barriers | There has been a decline in trade barriers |
| Improved transport | Enables increased global movement of people and products |
| Containerisation | The decreased unit cost of shipping goods makes markets more competitive globally and helps to bring pricing in the country of manufacture closer to those in export markets |