What globalisation is

Definition

Globalisation is the increasing integration of economies through trade in goods and services, flows of capital, movement of people, and the spread of technology and ideas. Production is increasingly organised across borders in global supply chains: a single product may be designed in one country, use parts from several, and be assembled in another.

The three characteristics in the specification

1. Trade growing as a share of GDP: exports plus imports as a percentage of GDP (often called trade openness) has risen over the long run, so more of what countries produce and consume crosses borders.

2. More transnational companies (TNCs) and foreign direct investment (FDI): a TNC owns or controls production in more than one country. FDI is investment by a firm in one country in productive assets (factories, offices, mines) in another, giving lasting control. It differs from portfolio investment, which is buying shares or bonds without control.

3. Increased migration: more people move between countries for work, which affects labour supply, wages and remittances (money sent home).

Recent data to quote

• The WTO (October 2025) reported that world merchandise trade volume grew 2.8% in 2024, and commercial services exports grew 6.8% in 2024. In the first half of 2025 merchandise trade volume was up 4.9% year on year, and trade in AI-related goods rose about 20% in value, close to half of the expansion.
• UNCTAD's World Investment Report 2025 reported that global FDI fell 11% in 2024, the second annual fall in a row; the headline figure rose about 4% to around $1.5 trillion only because of volatile 'conduit' flows through a few European economies.

These show that globalisation is not smooth: trade and FDI can slow or reverse, sometimes called slowbalisation or fragmentation.

Using indicators in the exam

When an extract gives trade or FDI data, say what it shows about integration and compare over time. Remember: a rise in the value of trade can come from higher prices rather than more goods; volume figures strip out price changes.

Worked example

A country's exports are $240 bn, imports $260 bn and GDP $800 bn. Calculate trade as a percentage of GDP.

1. Trade = exports + imports = 240 + 260 = $500 bn
2. 500 / 800 x 100 = 62.5%

Answer: 62.5% of GDP

Check yourself

1. Exports are $150 bn, imports $170 bn and GDP is $640 bn. Calculate trade as a percentage of GDP.
   Show answer

   50 %. (150 + 170) / 640 x 100 = 50.0%.

2. Which of these is foreign direct investment?
   • A Japanese car maker building a factory in Thailand
   • A pension fund in Canada buying 0.1% of a German company's shares
   • A tourist from Kenya spending money in Dubai
   • A UK household buying US government bonds
   Show answer

   A Japanese car maker building a factory in Thailand. FDI means investing in productive assets abroad with lasting control.

3. A transnational company is best defined as a firm that
   • sells its products in more than one country
   • is owned by more than one government
   • owns or controls production in more than one country
   • imports its raw materials
   Show answer

   owns or controls production in more than one country. Exporting alone does not make a firm a TNC; it must operate production abroad.

4. The WTO reported world merchandise trade volume growth of 2.8% in 2024. If an index of trade volume was 100 in 2023, what was it in 2024?
   Show answer

   102.8. 100 x 1.028 = 102.8.

5. Explain why a rise in the value of world trade does not necessarily mean more goods are being traded.
   Show answer

   The value of trade is price times quantity, so it can rise because prices (or exchange rates) rise even if the volume of goods traded is unchanged or falling.. Value = price x volume. Economists use volume (real) figures to see changes in the quantity traded.

6. Which is an example of the 'migration' characteristic of globalisation?
   • A Chinese firm buying a port in Greece
   • Nurses from the Philippines working in the Gulf states
   • Coffee exported from Ethiopia
   • A rise in a currency's value
   Show answer

   Nurses from the Philippines working in the Gulf states. Migration is the movement of people across borders, often for work.

7. According to UNCTAD's World Investment Report 2025, what happened to global FDI in 2024, excluding conduit flows?
   • It rose by 11%
   • It doubled
   • It was unchanged
   • It fell by 11%
   Show answer

   It fell by 11%. Global FDI fell 11% in 2024, the second annual fall in a row.

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Sources

• Pearson Edexcel International Advanced Level in Economics specification (issue 2)
• WTO press release: Global trade outlook and statistics, 7 October 2025
• UNCTAD: Global foreign direct investment falls for second consecutive year (World Investment Report 2025)

Last updated 8 November 2026. Spotted a mistake? Tell us.