Governments, trade blocs and IGOs: who promotes globalisation?

Governments and trade blocs

• Trade blocs and agreements: the EU (single market), ASEAN (South-East Asia) and proposals such as TTIP (an EU-US agreement). Members cut tariffs and barriers between them.
• Free-market liberalisation: removing controls on trade, investment and currency.
• Privatisation: selling state-owned firms to private investors, often including foreign companies.
• Encouraging business start-ups: tax breaks, simpler regulation, grants.

Special economic zones and FDI

Special economic zones (SEZs) offer incentives to attract foreign investment. China designated Shenzhen, Zhuhai and Shantou (August 1980) and Xiamen (October 1980). Incentives included concessionary tax (15% corporate tax for FDI firms against 30% for domestic firms), one-stop shops, good infrastructure, rapid customs clearance and flexible hiring (World Bank, 2015).

Government subsidies and a welcoming attitude to FDI spread globalisation into new emerging regions; hostile attitudes or sanctions can keep regions switched off.

IGOs: the IMF, World Bank and WTO

• IMF: lends to countries with financial crises; loans have often required policies such as cutting spending, privatisation and opening markets.
• World Bank: lends for development projects and has promoted market reforms. (Do not confuse it with the WTO: the June 2025 examiners noted this was common.)
• WTO (from 1 January 1995, after the GATT years from 1948): negotiates and enforces trade rules. GATT held eight rounds; the Tokyo Round (1973 to 1979) cut duties by an average of one third in nine major industrial markets, bringing the average industrial tariff to 4.7%; the Uruguay Round (1986 to 1994) involved 123 countries and created the WTO (WTO).
• Protectionism still exists: tariffs, quotas and subsidies to domestic producers.

Why IGOs are controversial

Supporters: free trade and investment raise growth and cut poverty; rules make trade predictable.

Critics: loan conditions forced cuts to health and education; rules may favour rich countries and TNCs; developing countries may be locked into exporting primary products; decision-making power reflects wealthy members. A Level 3 answer must address the controversy, not only describe roles (June 2025 mark scheme).

Worked example

The Tokyo Round cut tariffs by about one third, bringing the average industrial tariff to 4.7%. Estimate the average before the round.

1. After = before x (1 - 1/3) = before x 2/3
2. Before = 4.7 / (2/3)

Answer: About 7.1%.

Check yourself

1. The Tokyo Round cut average industrial tariffs by one third to 4.7%. What was the average before, to 2 decimal places?
   Show answer

   7.05 %. 4.7 / (2/3) = 7.05%.

2. In early SEZs, FDI firms paid 15% corporate tax against 30% for domestic firms. On profits of US$4 million, how much tax (US$ million) does the FDI firm save?
   Show answer

   0.6 US$ million. 4 x 0.15 = US$0.6 million.

3. Which organisation negotiates and enforces rules on international trade?
   • WTO
   • World Bank
   • IMF
   • ASEAN
   Show answer

   WTO. The WTO replaced GATT in 1995.

4. Which was one of China's first special economic zones in 1980?
   • Beijing
   • Chongqing
   • Lhasa
   • Shenzhen
   Show answer

   Shenzhen. Shenzhen, Zhuhai, Shantou and Xiamen were designated in 1980.

5. Why do countries join trade blocs such as ASEAN?
   • To stop all imports
   • To reduce tariffs and barriers to trade between members
   • To share a single army
   • To end migration
   Show answer

   To reduce tariffs and barriers to trade between members. Freer trade within the bloc expands markets.

6. Which is an example of protectionism?
   • Joining a free trade area
   • Privatising a state airline
   • Opening an SEZ
   • A tariff on imported steel
   Show answer

   A tariff on imported steel. Tariffs protect domestic producers from imports.

7. Explain why the role of IGOs such as the IMF and WTO is controversial.
   Show answer

   Supporters say they promote growth through free trade, but critics argue loan conditions forced cuts to health and education and that trade rules favour rich countries and TNCs.. Show both sides: growth versus harmful conditions and unequal power.

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Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Geography specification (Issue 3, September 2025)
• World Bank: Global experiences with special economic zones, with a focus on China and Africa (February 2015)
• WTO: Understanding the WTO, the GATT years
• Pearson WGE01 mark scheme, June 2025 (copy hosted by Physics and Maths Tutor)
• Pearson principal examiner report, WGE01 Global Challenges, June 2025

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