Global Shift in Manufacturing GCSE Geography

1.        The global shift: Why manufacturing has moved to MICs and LICs

Manufacturing has moved to MICs and LICs from HICs for many reasons. TNCs have played a key role in the process of globalisation; they have been the main drivers of global shift. This has been done to cut costs so they go to areas with a comparative advantage over more expensive locations. These comparative advantages can be a variety of things. These can include: nearness to raw materials; cheap labour or cheap land; Unregulated labour; absence of anti pollution regulations. In the last 50 years a new international division of labour (NIDL) has emerged. The lowering of trade barriers and the growth of trading blocs such as the EU and NAFTA. There is more global trade. The development of modern transport networks capable of moving people and commodities quickly and efficiently. We live in a shrinking world. Advances in IT and communication mean the important data and decisions can be transported in seconds, decisions can be quickly transmitted.  

2. Why the global shift is good news for LICs and MICs (e.g. China)

Foreign direct investment by TNCs can bring a number of advantages to the countries in which they operate.  Most countries encourage TNC investment. New TNC factories can create a large number of jobs, and these jobs generally have higher wages than local companies. The local population will develop a much wider range of skills and set of the multiplier effect. Most of the TNC produce will be exported which would benefit the host country’s trading position.

3. Why the global shift is bad news for LICs and MICs (e.g. China)

  One concern that LICs and MICs have is the speed at which TNCs can close factories  in one country and open in another. Such factories may employ thousands of people so closure can have a hige negative impact on the local economy. There is also a danger that countries can become too dependent on TNCs. TNCs can also become so powerful that they can influence government decisions. When TNCs come into a poorer country they bring aspects of “Western” culture, Islamic countries in particular seem concerned about this.

4. The new China: where the global shift is going next

So far there has only been one company that has moved their manufacturing operations from China to Africa, but that was 6 years ago. Africa’s manufacturing sector faces numerous challenges, including a shortage of skills; rigid labour laws; inadequate electricity supply; cumbersome and expensive transport within the continent; low levels of productivity; political instability; and corruption.