Syllabus Topic
HSC Topic One - The Global Economy
Globalisation and economic development
trade, investment and transnational corporations
Trade and Its Role in Economic Development
Trade has long served as a central pillar of globalisation. In 2024, global trade in goods and services reached an estimated US$33 trillion, with merchandise trade making up about US$25 trillion and services trade accounting for US$8 trillion (UNCTAD, 2024). While global trade rebounded after the pandemic-related slowdown, it now faces new challenges including geopolitical conflicts and rising protectionism. These tensions have disrupted supply chains and influenced trade flows between major economies like the United States and China.
Despite these uncertainties, trade continues to stimulate economic development. Vietnam, for example, experienced over 5% GDP growth in 2024, largely driven by its integration into global value chains. Its export-led growth, particularly in textiles and electronics, demonstrates the developmental benefits of engaging in international trade. In Africa, the African Continental Free Trade Area (AfCFTA) has started to show positive results in enhancing intra-regional commerce, supporting industrial development and job creation across the continent.
Foreign Direct Investment Trends
Investment, particularly foreign direct investment (FDI), has also shaped development trajectories. FDI brings not only capital but also technology, management practices, and access to international markets. However, the World Bank’s 2025 Global Economic Prospects report indicated a decline in FDI inflows to developing economies due to tighter monetary conditions and growing political uncertainty.
Even so, countries like India have attracted significant investment. In 2024, India received over US$70 billion in FDI, thanks to its business-friendly reforms and investment in manufacturing and digital services under the “Make in India” campaign. This inflow of capital has helped create jobs, expand infrastructure, and stimulate broader economic development.
Influence of Transnational Corporations
Transnational corporations (TNCs) play a dominant role in the global economy by managing production networks across multiple countries. In 2025, TNCs such as Apple, Nestlé, and Toyota continue to shape international trade and investment patterns. For instance, Apple’s expansion of iPhone production in India signals a strategic shift away from overreliance on Chinese manufacturing, which in turn impacts labour markets, export volumes, and regional development.
However, TNCs are not without criticism. Concerns over labour exploitation, environmental degradation, and tax avoidance are widespread. Critics argue that some TNCs use their global footprint to minimise taxation and regulatory compliance while maximising profits, often at the expense of host country development. This has led to greater calls for international regulation and mechanisms to ensure corporate accountability.
Conclusion
Trade, investment, and the global operations of TNCs remain foundational to globalisation and its effects on economic development. While they offer opportunities for income growth, technology transfer, and employment, they also pose significant policy and regulatory challenges. As we move further into an era of economic uncertainty, it is essential that global and national strategies balance openness with fair and sustainable development practices.
Sources
1. UNCTAD – Key Statistics and Trends in International Trade 2024 https://unctad.org/publication/key-statistics-and-trends-international-trade-2024
2. OECD Economic Outlook https://www.oecd.org/economic-outlook/march-2025/
3. World Bank – Global Economic Prospects https://www.worldbank.org/en/publication/global-economic-prospects
4. New World Bank Report: Reforms Needed to Boost Growth, Create Jobs, and Reduce Poverty in the CEMAC Region
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