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Sem 5 Prep
← Intl TradeWhat globalization actually is

Formulas for this chapter

Foreign content share

Foreign content share = imported input value / total factory cost

Whenever a question asks how globalized a product's production is, or asks what happens to that when a supplier is moved. Recompute the denominator whenever the total cost changes.

Imported input value
Cost of every component and service bought abroad
Total factory cost
Foreign plus domestic content, in the same currency

Re-export margin

Re-export margin = re-export value - original import value

When goods are imported and sent on without significant processing. Gross trade rises by the sum of both flows while value added is only the margin.

Re-export value
Price at which the unaltered goods leave the country
Import value
Price at which they entered
Step 1 of 25
The ideaTheory

Look at the back of your phone

The glass came from one country. The chip from another. The battery from a third. It was screwed together in a fourth and sold to you in a fifth.

Nobody planned that. It happened because goods, money, people and ideas got easier to move across borders than they used to be.

That is globalization. The rest of this chapter is the vocabulary for describing it precisely enough to write in an exam.

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