Objective: Understand how changes in communication costs influence the level of globalisation and the use of trade restrictions.
Communication costs are the expenses involved in sending information between businesses and consumers across borders. Think of it like the price of sending a letter 📧 versus a quick phone call 📞. The cheaper and faster the communication, the easier it is for companies to coordinate with partners worldwide.
When communication costs drop, businesses can:
This leads to more global supply chains and international trade.
Imagine sending a parcel of goods. Initially, you had to pay a high fee for a courier and wait days for a reply. Over time, the courier fee fell, and you could use email instead of letters. The same happened with communication technology:
As the cost curve \$Ct\$ (communication cost at time \$t\$) falls, the trade volume \$T\$ tends to rise: \$T \propto \frac{1}{Ct}\$ (simplified relationship).
Governments may impose tariffs, quotas, or export bans to protect domestic industries. However, when communication costs are low, these restrictions become more visible and harder to hide. Businesses can quickly spot unfair barriers and respond with:
E‑commerce giants like Amazon and Alibaba show how cheap communication (fast data transfer, low bandwidth costs) has enabled:
These features would have been impossible when communication was expensive and slow.
| Factor | Effect on Globalisation |
|---|---|
| Communication Cost ↓ | ↑ Global trade & supply chains |
| Communication Speed ↑ | Faster decision‑making, less risk |
| Digital Platforms | Bypass physical trade barriers |
Exam Tip: When answering questions about globalisation, remember to link communication costs to trade volume and trade restrictions. Use the formula \$T \propto \frac{1}{C_t}\$ as a quick reference, and illustrate with a real‑world example like e‑commerce or the internet boom.