1 This lesson is about 2 ways in which countries do improve their GDP Transnational Companies and Fair trade

2 Transnational corporation (TNCs) locate their manufacturing plants overseas as the labour is cheaper and also their markets are closer. More recently, some multinationals like Apple have become "virtual firms" outsourcing most of their production to other companies, mainly in Asia. Many service sector jobs are now under threat from outsourcing, as global companies try to save money by shifting many functions abroad. How many times have you answered the phone from someone calling from India to try and sell you things?

3 Lets look at

4 The company sells over 400 brands in over 312 countries or territories. 90 billion servings of Coke’s products each day

5 A transnational corporation is one that operates in more than one country across the world.

6 Apart from operating in more than one country, TNCs also have a number of other characteristics… Well known brands Huge Profits Large employers Headquarters mostly in HICs.

7 Apart from operating in more than one country, TNCs also have a number of other characteristics… Well known brands Huge Profits Large employers Headquarters mostly in HIC. Atlanta, Georgia, USA $24 billion dollars 71,000 people worldwide

8 An increase in the flow of goods, services, people, capital across national borders in order to create a more integrated and interdependent world economy. The term globalisation is contested, a general definition is… Basically the World is shrinking.

9 Improved transport means that people and goods can be moved around the world more quickly. Distance between places hasn’t changed, but the time needed to cover those distances has. 10 mph for boats and horses 65 mph for trains;36 mph for boats horses mph for planes 700 mph for jets

10 Improvement in technology, such as the internet, has meant that capital (money) can be transferred instantly between locations. People can also use telephones and the internet to communicate more easily in ‘real time’.

11 Improvements in technology have also lead to the development of a mass media, television, radio and internet, far off places now seem much closer… we can even see them in real time. These factors have lead to increased interdependence between places… they also seem much closer than they did.

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13 Bottled in 200 countries across the world.

14 Manufacturing your product in the country you sell it has a number of advantages. Labour costs may be lower in some countries, especially LICs. Low labour costs = higher profits.

15 Manufacturing your product in the country where it is sold reduces transport costs. Less transport = higher profits.

16 Legalisation on working conditions, workers’ rights, health and safety, and the environment may be less strict in some countries. Relaxed legalisation = lower overheads= more profit.

17 Some countries may try to encourage multinationals to invest in their country by offering lower tax rates and financial incentives. More favourable taxation = lower overheads= more profits.

18 It widens your market. More consumers= more profit. The status of your brand is raised. More status = more consumers = more profit

19 Producing your product in a country and adapting to the local market makes it seem more ‘local’. More local = more consumers = more profit

20 Does Coke show corporate responsibility?

21 Why do we need fair trade? Regular or unfair trade means that many producers in LICs get very little income and workers on plantations get poor pay and conditions, often working in dangerous situations with health threatening chemicals. Children who should be in scholl can also be employed.

22 Fairtrade The Fairtrade label (no space) means that the process by which food/goods are produced has been certified by Fairtrade Foundation. This means that the makers/producers undertake to follow a set of rules that have been established for that particular product or crop. As you can imagine, establishing fair rules on a product by product basis is a long process, so not all products can apply to carry the Fairtrade label just yet awhile

23 So what do you know a bout food or produce that carry the label? The farmers/produces get a guaranteed minimum that will give them a sustainable income – one that they can provide the basics of foods, housing, health and education. – if the world price of that commodity increases, then they too will get more. But they will never get less. They also receive another payment called ‘a social premium’. This is extra money that goes to the community as a whole. They can decide what to use it for, be that a well or a health centre or to pay another teacher. But it has to benefit everyone.

24 So what do you know a bout food or produce that carry the label? In return, the producers/farmers have to have sustainable policies with low inputs of chemicals and careful use of resources. E.g. coffee produces don’t use pesticides to kill the weeds around their bushes but have strimmers that keep the weeds cut down. These then break down and add to the humus in the soil, which helps the coffee bushes grow well and reduces soil erosion.

25 Not all Fairtrade growers are small farmers Fairtrade certifies large scale produces like flower growers in Kenya. Certification guarantees that the workers on these large-scale flower farms have decent wages and working conditions. These rights include fair wages, freedom from discrimination, no child labour, and a safe and healthy working environment. The negotiated price includes an additional payment called the Fairtrade premium, set at 10% of the negotiated price. This premium money is reserved specifically for investment in projects which benefit the workers and their wider communities. How this is spent is decided jointly by elected workers and management representatives.

26 What Fairtrade says about growing flowers Flowers need a lot of water. The Fairtrade minimum standards require certified farms to protect the nearby water supply. Several farms harvest rainwater or drill boreholes to give local communities access to water. All are committed to reducing pesticide and insecticide use in order to reduce pollution. For example, Longonot farm is located near Lake Naivasha where there are serious concerns about overuse of water and environmental destruction. The farm employs hydroponic techniques, dramatically reducing water use, and then recycles water for use on other crops, conserving even more.

27 And there are Fairtrade flowers At Finlay Flowers, the company has also constructed a wetland area which purifies water from the pack house and from cleaning chemical containers so that it can feed safely back into the water table. The Fairtrade committee also set up a tree nursery which employees requested that they run themselves, thereby gaining new skills. The project enables local farmers to buy tree saplings at a subsidised rate so that, as well as producing fruit to be sold at local markets, the trees are contributing to reforestation in the area. Approximately 90% of power used at Finlay is hydroelectric. A trial biological pest management project is being conducted in which insect predators are bred to control spider mites and other pests, reducing insecticide use. At Oserian Flowers, geothermal energy is used to heat some of the greenhouses. The vast majority of the land at Oserian is uncultivated or given over to forestry, and the company has established three wildlife corridors through which animals from Hells Gate National Park have access to Lake Naivasha.

28 Homework Find a Fair trade that interests you On 3 slides: Slide 1: Who (person or organisation)? Where (country)? What (are they producing)? – maybe a map and picture Slides 2: a bit more detail about what they do – no more than 6 points Slide 3: who gains and how? Again no more than 5 or 6 points

29 Example Who?Women Where ? Galle area of Sri Lanka What do they do? Fair Trade Coco-Fiber Twining

30 What has changed? Before they used to work in very poor, dangerous conditions for big companies with little security Now the women work for themselves They have safe conditions They sell their own products through the Siyath Foundation They earn better money

31 What else has changed? They have better housing They have received training to run a business Their children are looked after when they are at work Their children go to school, and are helped to find jobs when they leave They control their own lives