4.2 Global networks and flows

Learning objectives

• Describe the size, composition and direction of contemporary global flows of trade, aid, loans, remittances and illegal goods and people.

• Explain why many low-income countries depend on exports of primary commodities, and how terms of trade affect them.

• Distinguish between bilateral, multilateral, tied, humanitarian and development aid, and evaluate the effects of aid, loans and debt relief.

• Explain the causes and effects of international remittances for migrants’ home countries, households and places.

• Examine why illegal flows of trafficked people, counterfeit goods and narcotics are hard to measure and control.

• Analyse how foreign direct investment, outsourcing and offshoring by TNCs connect places into global supply chains and value chains.

• Compare the global strategies and supply chains of two contrasting TNCs, Apple and Inditex.

• Evaluate the relative importance of different global flows for different places.

• Evaluate the suitability of flow maps, Sankey diagrams, choropleths and topological maps for representing flows, and construct a simple flow diagram from data.

Introduction

Places are connected to one another by flows of goods, money, people and information. A garment worker in Morocco, a nurse from the Philippines working in Dubai, a smartphone assembled in Zhengzhou and sold in São Paulo, and a shipment of cocaine crossing the Atlantic are all parts of the same interconnected system of global networks and flows.

The emphasis is on spatial interactions and place: which places are linked, how strongly, and in which direction, and how those links change the places at each end. Flows are rarely one-way. Remittances move from the Gulf states and the USA to South Asia and Central America, Chinese and Indian firms invest in Europe, and South–South trade between Asia, Africa and Latin America is growing faster than trade between high-income countries.

The flows build on globalisation and the global shift of manufacturing, and they connect to the migration of people between countries, to the global interactions and power of global institutions, and forward to the risks that flows create, such as supply chain risk.

Global flows and networks

A global flow is a movement of something between places in different countries: goods, services, money, people, data or ideas. A network is the set of places (nodes) and the connections between them (links) along which flows travel. A port, a capital city or a factory is a node; a shipping route, a submarine cable or a migration corridor is a link. The pattern of nodes and links decides which places are central and which are peripheral.

Networks can be very centralised, with a few hubs through which most flows pass, or more evenly spread. Dubai and Singapore are hubs for shipping, air travel and finance; most small Pacific islands are linked to the rest of the world by a few routes only.

Flows can be grouped into five broad types. Trade moves physical goods and services. Financial flows move money as aid, loans, investment and remittances.

Flows of people include economic migrants, refugees, students and tourists. Illegal flows move goods and people outside the law, and information flows carry data and ideas. Each type has its own geography, but the types overlap: a migrant (a flow of people) sends money home (a financial flow) by mobile phone (an information flow).

Three characteristics describe any flow. Its volume is how much moves, measured in tonnes, US dollars, people or terabits. Its direction shows where it starts and ends, and whether it is balanced by a flow the other way. Its change over time shows whether the link is strengthening, weakening or shifting to new places. A complete geographical description of a flow uses all three, with figures and named places.

Why flows link some places more than others

Flows follow differences between places. Goods move from where they are cheap to produce to where they are in demand; money moves to where it earns a higher return or where it is needed; migrants move from places with low wages and few jobs to places with labour shortages. Geographers call these differences disparities, and they explain why most flows connect places of contrasting income or resources.

Distance, cost and rules then shape which flows actually happen. A link is stronger when transport is cheap, when the two places share a language or colonial history, when a trade agreement removes tariffs, or when a large diaspora (a community of migrants and their descendants living outside their country of origin) already lives in the destination. India’s remittance links with the Gulf states, the United Kingdom and the USA follow paths opened by earlier migration, and Mexico’s trade and remittance links with the USA follow a 3,145 km land border.

Global trade

Trade is the exchange of goods and services between countries. Exports are goods and services sold to other countries; imports are those bought from them. The difference between the value of exports and imports is the balance of trade. Trade is the largest and most visible of all global flows, and it has grown much faster than world output since the 1950s.

The size of world trade

World exports of goods and services were worth about US$32.5 trillion in 2024, four times their value in 2000. Growth has not been smooth. Trade fell by about a fifth in 2009 during the global financial crisis, dipped again in 2015–2016 when commodity prices fell, and dropped in 2020 when COVID-19 closed factories and borders, before rebounding to record values in 2022.

The chart shows two features of trade’s geography. Trade is very sensitive to global shocks, because a recession in importing countries reduces demand for exports everywhere at once. Services trade has grown more steadily than trade in goods, from US$1.7 trillion in 2000 to US$8.9 trillion in 2024, and was less affected by the 2009 crisis.

What is traded

Trade is usually divided into three groups. Materials or primary commodities are raw or barely processed products of farming, fishing, forestry and mining: crude oil, natural gas, copper ore, soybeans, coffee and cocoa. Manufactured goods are processed and assembled products, from steel and chemicals to cars, clothing and electronics, and they make up the largest share of trade in goods. Services are intangible: finance and insurance, shipping, tourism, education, telecommunications and computer services.

Services trade includes business process outsourcing, in which a firm in one country pays a firm in another to run call centres, payroll or software development. India exported about US$374 billion of services in 2024, much of it computer and business services from Bengaluru, Hyderabad and Pune, equal to about 85% of the value of its merchandise exports (US$443 billion).

The direction of trade

The direction of trade has changed greatly since 2000. In 2024 China exported about US$3.58 trillion of merchandise, 14.5% of the world total and far more than the USA (US$2.06 trillion) or Germany (US$1.68 trillion). This is a result of the global shift of manufacturing to East Asia since the 1980s. Trade between high-income countries, once dominant, has grown more slowly than South–South trade between emerging economies and lower-income countries, such as China’s imports of Brazilian soy, Chilean copper and Angolan oil.

Africa’s share of world trade remains small: sub-Saharan Africa supplied only 1.8% of world merchandise exports in 2024. Most African exports leave the continent as unprocessed commodities, and only about 15% of Africa’s trade in 2023 was with other African countries, compared with more than 55% within Asia and more than 70% within Europe. The African Continental Free Trade Area (AfCFTA), a free trade area in force since 2019, aims to change this pattern.

Sources: World Bank, World Development Indicators (exports of goods and services, merchandise exports, service exports), 2026; Afreximbank, African Trade Report 2024 (via PACCI, June 2024).

Terms of trade and commodity dependence

Many low-income countries depend on one or two primary commodities for most of their export earnings. Zambia, a landlocked country in southern Africa, earned 73% of its merchandise export income from ores and metals, mainly copper, in 2024. Côte d’Ivoire depends on cocoa, Chad and Angola on crude oil, and Burundi and Ethiopia on coffee. This dependence makes their incomes rise and fall with world prices that they cannot control.

Terms of trade measure the price of a country’s exports relative to the price of its imports. If the price of copper falls while the price of imported machinery and fuel stays the same, Zambia must export more copper to buy the same imports: its terms of trade have worsened. Over the long run, prices of many primary commodities have tended to rise more slowly and fluctuate more than prices of manufactured goods, which is one reason why countries try to diversify into processing and manufacturing.

Trade is carried mostly by sea. About 90% of non-bulk cargo moves in standard steel boxes on container ships, so the growth of trade is closely linked to containerisation, the system of moving goods in standard containers that can be transferred between ships, trains and trucks without unpacking. Containerisation and other transport changes are among the technological influences that speed up global interactions.

Aid, loans and debt relief

Financial flows from governments and international organisations to lower-income countries take three main forms: aid that does not have to be repaid, loans that do, and debt relief that cancels or reduces loans already made. They are much smaller than trade, but for many low-income countries they are a large share of government spending.

Official development assistance

Official development assistance (ODA) is the aid that governments give to promote the economic development and welfare of lower-income countries. To count as ODA, a flow must come from the official sector, have development as its main aim, and be concessional: grants, or loans on terms much softer than a bank would offer. Most ODA is measured by the Development Assistance Committee (DAC) of the OECD, a group of mainly high-income donor countries.

In 1970 the UN General Assembly set a target that donor countries should give 0.7% of their gross national product as aid. Sweden and the Netherlands were the first to reach it, in 1974, but most donors never have. In 2025 DAC donors gave 0.26% of their combined GNI, and only four countries, Norway, Luxembourg, Sweden and Denmark, met the 0.7% target.

Aid budgets have fallen sharply. After a peak in 2023, ODA fell by 6.1% in 2024, and preliminary OECD figures published in April 2026 showed a fall of 23.1% in real terms in 2025, to US$174.3 billion, the largest drop on record. US aid fell by 57% as the United States withdrew from most of its aid programme, German aid fell by 17%, and Germany (US$29.1 billion) replaced the USA (US$29 billion) as the largest donor by volume. The United Kingdom had already cut its target from 0.7% to 0.5% of GNI in 2021, and other European donors moved money to defence and to hosting refugees.

Sources: OECD, preliminary ODA data for 2025, April 2026 (via Focus 2030 and Health Policy Watch); Wikipedia, “Official development assistance”, 2026.

Types of aid

Aid is classified by who gives it, the conditions attached and its purpose.

Humanitarian aid is assistance that meets immediate needs during and after a crisis, such as food, clean water, shelter and medical care, and it is usually given according to need rather than the donor’s interests. Development aid works on longer timescales. The distinction matters because a country can receive large amounts of humanitarian aid during a war and still receive little help with the investment that would make it less vulnerable to the next crisis.

Tied aid was common in the past and has declined, but it has not disappeared. DAC donors reported about 20% of their bilateral aid as tied in 2019, and almost 40% of US aid was tied. Official figures understate the effect, because untied contracts often still go to firms in the donor country.

China is now a major provider of finance to lower-income countries but is not a member of the DAC, and most of its lending is not counted as ODA. Its policy banks lend for roads, railways, ports and power stations, often as part of the Belt and Road Initiative, on terms closer to commercial loans than to aid. This gives recipients a choice of lender, but it also raises questions about transparency and debt.

Loans and the debt problem

Governments borrow to pay for infrastructure, to cover budget deficits or to survive a crisis. Debt is the total amount owed, and the cost of repaying it, the debt service, takes money away from schools and hospitals. Debt becomes a crisis when a country cannot earn enough foreign currency from exports to make its repayments, which often happens when export prices fall, interest rates rise or the local currency loses value.

Lenders to lower-income countries include other governments, multilateral lenders such as the World Bank and the International Monetary Fund (IMF), and private bondholders and banks. IMF loans usually come with conditionality: the borrower must cut spending, raise taxes or change policies. Loans and debt therefore link to the power of the global lending institutions as well as to the flows of money themselves.

Debt relief

Debt relief is the cancellation, reduction or rescheduling of a country’s debt by its lenders. After the debt crises of the 1980s and 1990s, many low-income countries were spending more on repaying debts than on health and education. Campaigns by NGOs and churches, such as Jubilee 2000, put pressure on lenders to act.

The Heavily Indebted Poor Countries Initiative (HIPC), launched by the IMF and the World Bank in 1996, cancels debt in two steps. At the decision point, a country that is poor enough and has unsustainable debts agrees a poverty reduction strategy and starts to receive interim relief. At the completion point, after showing a track record of reforms, it receives full relief. The Multilateral Debt Relief Initiative of 2005 added 100% cancellation of eligible debts to the IMF, the World Bank and the African Development Fund. Of the 39 eligible countries, most of them in sub-Saharan Africa, more than 35 have completed the process.

Debt problems returned after 2015, as countries borrowed from new lenders, including China and private bondholders, and then faced the COVID-19 pandemic and higher interest rates. In November 2020 the G20 agreed the Common Framework, so that all major creditors, including China, would negotiate together.

Zambia: a test of the Common Framework

Zambia defaulted in November 2020, when it missed a US$42.5 million payment on a bond, the first African default of the pandemic. Because ores and metals, mainly copper, provide about three-quarters of its merchandise exports, its ability to repay depended on copper prices, which had been volatile. An official creditor committee co-chaired by China and France agreed to provide assurances in July 2022, which allowed the IMF to approve a loan of about US$1.3 billion. Zambia reached agreement in June 2023 to restructure US$6.3 billion owed to other governments, and in March 2024 agreed a deal with private bondholders, who gave up about US$840 million.

The case shows both the strengths and the weaknesses of debt relief. Agreement was eventually reached among very different creditors, but it took more than three years, during which Zambia had little access to new finance. Critics argue that relief remains slow, that it comes with conditions set by the lenders, and that it does not change the commodity dependence that made the debt hard to repay.

Sources: IMF, HIPC factsheet, 2023; Wikipedia, “Heavily indebted poor countries” and “Economy of Zambia”, 2026.

Evaluating aid, loans and debt relief

Whether aid “works” is one of the most contested questions in development geography, and the answer depends on the type of aid, the place and the perspective of the person judging it.

Evidence suggests that some forms of aid have clear benefits. Vaccination, disease control and humanitarian relief have saved millions of lives, and debt relief under HIPC was followed by higher spending on health and education in many countries. Large, tied or politically motivated aid has a weaker record. The cuts of 2025 also show that aid is an unreliable flow: it depends on the politics of donor countries, so places that rely on it are vulnerable to decisions made far away.

International remittances

A remittance is money sent home by a migrant worker to family or friends in their country of origin. Most remittances are small, regular transfers to pay for food, rent, school fees and medical care, but together they form one of the largest financial flows in the world. They are the clearest example of how a flow of people creates a flow of money in the opposite direction.

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The size and growth of remittances

Personal remittances recorded worldwide reached US$870 billion in 2024, and US$665 billion of this went to low- and middle-income countries. The true total is larger, because money carried by hand or sent through informal channels such as the hawala system is not recorded.

The chart shows why remittances are so important to lower-income countries. They grew from US$73 billion in 2000 to US$665 billion in 2024, more than nine times as much, and they fell only slightly in 2009 and not at all in 2020, when FDI and trade fell. Remittances are counter-cyclical: when a home country suffers a disaster or a recession, migrants often send more, not less. FDI, by contrast, rose to US$724 billion in 2021 and fell to US$408 billion in 2023, and ODA received in 2023 (US$252 billion) was about two-fifths of the value of remittances.

Where remittances go

The largest recipients by value are populous countries with large numbers of workers abroad. India received US$137.7 billion in 2024, the most ever recorded for one country, followed by Mexico (US$67.9 billion), the Philippines (US$40.3 billion) and Pakistan (US$34.9 billion).

The countries that depend most on remittances are different. Measured as a share of GDP, small and landlocked countries lead: remittances were 47.2% of Tajikistan’s GDP in 2024, 39.4% of Tonga’s and 26.0% of Nepal’s. For these countries, remittances are the most important link to the global economy, and a fall in demand for migrant workers abroad, such as in Russia (for Tajikistan) or in the Gulf states (for Nepal), affects almost every household.

Remittance corridors

Remittances follow migration corridors, the routes along which large numbers of migrants have moved. The largest corridors run from the USA to Mexico and Central America; from the Gulf states (Saudi Arabia, the United Arab Emirates, Qatar, Kuwait) to India, Pakistan, Bangladesh, Nepal, the Philippines and Egypt; from Russia to Central Asia; and from Western Europe to North and West Africa. Some corridors are South–South: Gulf states and Malaysia are high-income or upper-middle-income destinations for workers from lower-income Asian countries.

The effects of remittances

For households, remittances raise income and smooth it over time. Studies in many countries find that households receiving remittances spend more on education and health and are more likely to build better houses. Remittances also act as private insurance, rising after floods, earthquakes and harvest failures.

For countries, remittances are a source of foreign currency that helps to pay for imports and to service debt. Unlike aid, they go directly to families rather than through governments, so they are less exposed to corruption, but they are also harder to tax or direct towards public investment.

The costs are real too. Migration of young adults can cause brain drain, the loss of skilled and educated people, such as nurses and doctors from the Philippines and Nigeria. Families may become dependent on money from abroad, and young people may plan to migrate rather than to work locally. When remittances are spent mainly on consumption and imported goods, they do little to build local industries. Women left behind may gain decision-making power in the household but also carry more work.

The cost of sending money

Sending money home has traditionally been expensive, with fees and poor exchange rates taking a large share of small transfers. The Sustainable Development Goals include a target (SDG 10.c) to reduce the average cost of a remittance to less than 3% of the amount sent by 2030, and to close corridors costing more than 5%. Digital transfers and mobile money are reducing costs. M-Pesa, launched by Safaricom in Kenya in 2007, allows money to be sent by text message to a mobile phone, so families in rural areas can receive transfers from relatives in Nairobi or abroad without visiting a bank.

Sources: World Bank, World Development Indicators (personal remittances received, current US$ and % of GDP), 2026.

Illegal flows

An illegal flow is a movement of people, goods or money across borders that breaks the law of the countries involved. Illegal flows use the same networks as legal ones (container ports, airports, roads, the internet and the banking system) and often hide inside them. Three of the largest are the trafficking of people, the trade in counterfeit goods and the trade in narcotics.

Trafficked people

Human trafficking is the recruitment, transport or holding of people by force, fraud or coercion in order to exploit them. It differs from people smuggling, in which migrants pay to be moved across a border and are free on arrival. The UN Office on Drugs and Crime (UNODC) collects data on the victims detected by national authorities.

The UNODC’s 2024 global report found that the number of detected victims in 2022 was 25% higher than in 2019, before the pandemic. Children made up 38% of detected victims, and the number of child victims had risen by 31%. Girls are mostly trafficked for sexual exploitation; boys and men are more often found in forced labour and forced criminality. Most victims (58%) were trafficked within their own country, so this illegal flow is as much national as international. UNODC links the rise to poverty, conflict and climate-related disasters, but also says that part of the increase reflects better detection.

The international routes follow disparities in wealth and in the rule of law. Victims detected in Western and Southern Europe include people from sub-Saharan Africa and other lower-income regions, and the Middle East and Western and Southern Europe are the regions most affected by cross-border trafficking. The policies used against trafficking, such as laws, border controls, victim protection and international co-operation, are part of the population policies that governments use to manage migration.

Counterfeit goods

Counterfeit goods are copies of branded products sold as if they were genuine, from handbags, watches and trainers to medicines, car parts and electronics. The OECD and the EU Intellectual Property Office estimate the trade from customs seizures. Their estimate for 2019 was about US$464 billion, or 2.5% of world trade, up from 1.8% in 2007, and counterfeits were up to 5.8% of the goods imported into the EU.

Most seized counterfeits are traced to mainland China and Hong Kong, often passing through transit hubs where goods are repackaged and relabelled to hide their origin. Small parcels sent by post and courier after online sales are now a major route, because each parcel is too small to check economically. Counterfeit medicines and car parts endanger lives, and the trade costs brand owners and governments revenue.

Narcotics

The narcotics trade is the illegal production, transport and sale of drugs such as cocaine, heroin, cannabis and synthetic drugs. It links a few producing regions with consumer markets across the world, through routes that change quickly when police and armies close them.

Cocaine is the clearest example of a global illegal network. Almost all coca is grown in three Andean countries, Colombia, Peru and Bolivia. The UNODC’s World Drug Report 2025 estimated that production reached a record 3,708 tonnes in 2023, more than a third higher than in 2022, mainly because coca cultivation in Colombia expanded. The number of cocaine users worldwide rose from 17 million in 2013 to 25 million in 2023, and the market is spreading beyond North America: Western and Central Europe have seized more cocaine than North America for several years.

The routes use the infrastructure of legal trade. Cocaine is hidden among legal cargo in shipping containers, carried through the Caribbean, and moved through West African states with weak policing on its way to Europe. Heroin follows different routes. Afghanistan produced about 84% of the world’s opium in 2019, but the Taliban banned opium production on 3 April 2022, and cultivation fell by more than 95% by 2023. Production then grew in Myanmar, mainly in Shan State, which overtook Afghanistan as the world’s largest opium producer in 2023. The shift shows how an illegal flow moves to a new place when it is suppressed in one.

Synthetic drugs have a different geography, because they are made from chemicals in laboratories rather than grown on land. Fentanyl, a synthetic opioid many times stronger than heroin, is made mainly in Mexico from precursor chemicals imported from China and India, and smuggled into the USA, where synthetic opioids cause most drug overdose deaths. A small volume of powder can supply a very large market, so the flow is hard to detect at borders and does not depend on growing regions that can be mapped by satellite.

Why illegal flows are hard to measure and control

Illegal flows are designed to be invisible. Every figure is an estimate built from indirect evidence, such as seizures, surveys of drug users, satellite images of coca fields or victims detected by police. A rise in seizures may mean that more is being smuggled, or that police are working harder. This uncertainty affects every comparison between illegal and legal flows.

Sources: UNODC, Global Report on Trafficking in Persons 2024 (via UNRIC, December 2024); UNODC, World Drug Report 2025 (via blue News, June 2025); OECD/EUIPO estimates via Wikipedia, “Counterfeit consumer good”; Wikipedia, “Opium production in Afghanistan”, 2026.

The relative importance of different flows

Which flow matters most depends on the measure used and on the place. By value, trade is by far the largest: world exports of goods and services (US$32.5 trillion in 2024) were about 37 times larger than world remittances (US$870 billion) and about 24 times larger than world FDI inflows (US$1.37 trillion). Value alone, however, does not show how much a flow matters to the people and places it reaches.

Three criteria help to judge relative importance. Size relative to the economy shows dependence: remittances are almost half of Tajikistan’s GDP, while trade is more than three times Singapore’s GDP. Stability matters for planning: remittances are steady, FDI swings with business conditions, and aid depends on donors’ politics. Who benefits matters for equity: remittances reach households directly, FDI benefits workers and suppliers in particular regions, and illegal flows enrich criminal networks while harming communities.

For high-income countries, trade and investment flows dominate. For many low-income and lower-middle-income countries, remittances and aid are more important than FDI, and for fragile states affected by conflict, humanitarian aid and illegal flows may be the main links with the rest of the world. The relative importance of flows is therefore a matter of place and scale as well as of value.

Representing flows graphically

Flows are movements, so they are harder to map than static patterns. Geographers use several methods, and each suits different questions.

Flow maps and proportional arrows

A flow map (also called a flow-line map) shows movement with lines or arrows drawn from origin to destination, with the width of each arrow proportional to the size of the flow. It shows direction, size and geography together, and it is the standard way to show migration, trade and remittance corridors. The remittance map shows the corridors from the Gulf states and the USA, with the widest arrow leading to India.

Flow maps have limits. Many arrows crossing in the same area become cluttered, so only the largest flows can be shown. The arrows show straight or curved lines between places, not the real routes, and an arrow from a region (“the Gulf states”) hides the countries within it. The scale of arrow widths must be shown in a key, or readers cannot compare them.

Sankey diagrams

A Sankey diagram shows flows as bands whose widths are proportional to their size, branching or merging to show how a total is divided or combined. It is ideal for showing the composition of a total, such as where a country’s energy comes from or the sources of a country’s external finance. Unlike a flow map, it does not show where the flows go on a map.

Choropleth and topological maps

A choropleth map shades countries according to a rate, such as remittances as a percentage of GDP or trade as a percentage of GDP. It shows dependence on a flow very clearly, but it shows no movement at all: it cannot say where the money comes from. It must use rates or percentages, not absolute values, because large countries would otherwise look important simply because they are large.

A topological map shows the connections between places but not their real distances or shapes, like the London Underground map or a diagram of an airline’s routes. It is good for showing networks of nodes and links, such as shipping routes between major ports or submarine cables, and for showing how central each node is. It distorts geography deliberately, which can mislead readers about distance.

The best method depends on the question. To show where money goes, a flow map is best; to show how dependent places are, a choropleth; to show how a total is made up, a Sankey diagram; and to show how flows have changed, a line chart. Many studies combine two: a choropleth of remittances as a share of GDP with proportional arrows for the largest corridors on top.

Foreign direct investment

Foreign direct investment (FDI) is investment by a firm in one country in a business in another country that gives it a lasting interest and a significant degree of control, conventionally ownership of at least 10% of the voting shares. FDI is how transnational corporations (TNCs) build factories, offices, mines and shops abroad. It differs from portfolio investment, in which investors buy shares or bonds for a financial return without taking part in managing the business.

Greenfield investment and mergers and acquisitions

FDI takes two forms. Greenfield investment creates a new facility from scratch, such as a new car plant or data centre on an empty site. Mergers and acquisitions (M&A) involve buying or combining with an existing foreign firm. Greenfield investment usually creates more new jobs and capacity in the host country, while M&A transfers ownership of existing assets and may lead to job cuts as the new owner reorganises.

The choice between the two depends on the investor’s aims. Building new capacity suits a firm that wants a modern plant designed for its own methods; buying an existing firm gives immediate access to a brand, customers and staff.

Examples of both are common. Hyundai’s car plant in Chennai, India, opened in 1998, and Tesla’s Gigafactory in Shanghai, opened in 2019, were greenfield investments. The Chinese firm Geely’s purchase of the Swedish carmaker Volvo Cars from Ford in 2010 was an acquisition, and an example of investment flowing from an emerging economy to Europe.

Global patterns of FDI

World FDI net inflows were about US$1.37 trillion in 2024. The largest recipient was the United States, with US$248.6 billion, followed by Singapore and Hong Kong, which act as regional headquarters and financial hubs for Asia. Among emerging economies, Brazil, Mexico, India and Vietnam received large inflows.

The chart shows that FDI patterns are changing fast. Net FDI inflows to mainland China fell from US$344 billion in 2021 to US$42.6 billion in 2024, as some foreign firms moved production elsewhere because of rising wages, US–China trade tensions and tariffs, and pandemic disruptions. Vietnam, Mexico and India have gained some of this investment. Mexico’s inflows of US$45.5 billion in 2024 reflect near-shoring, the relocation of production closer to the market, in this case to supply the USA under a free trade agreement. The direction of FDI is also changing: Chinese, Indian and Gulf firms are now major investors abroad, not only recipients.

Benefits and costs of FDI for host countries

Governments compete to attract FDI with tax breaks, subsidies and special economic zones, because it can bring capital, jobs and technology that local firms cannot provide. The effects depend on the type of investment and the conditions the host government negotiates.

Vietnam shows the benefits at their strongest. Electronics firms such as Samsung invested heavily after 2008, and electronics made up 38% of Vietnam’s exports by 2020, helping to reduce poverty. The costs show in places where plants close quickly: when factories leave, towns that grew around them lose their main employer, as in many former maquiladora towns on Mexico’s northern border after the 2001 recession.

Outsourcing, offshoring and supply chains

TNCs no longer make most of their products themselves in one place. They divide production into tasks, place each task where it can be done most cheaply or most effectively, and decide whether to do it themselves or to pay another firm. These decisions create the networks that link design studios, mines, component factories, assembly plants, warehouses and shops across the world.

Outsourcing and offshoring

Outsourcing is contracting another firm to carry out a task that the firm could do itself, such as manufacturing, cleaning, payroll or customer service. Offshoring means moving a task to another country, either to the firm’s own subsidiary abroad or to a foreign contractor. The two ideas answer different questions: outsourcing is about who does the work, offshoring about where it is done.

A subsidiary is a company owned and controlled by a parent company, often in another country. Toyota Motor Manufacturing Kentucky is a subsidiary of Toyota in Japan; when Toyota builds cars there it is offshoring but not outsourcing. Apple, by contrast, owns almost none of the factories that make its products: it outsources assembly to contract manufacturers such as Foxconn, a Taiwanese firm whose largest plants are in mainland China.

Why TNCs outsource and offshore

• Lower costs: wages for factory workers in Vietnam or Bangladesh are a small fraction of those in the USA or Western Europe.

• Access to markets: producing inside a large market (China, India, the EU) avoids tariffs and transport costs and helps to win government contracts.

• Skills and specialisation: contract manufacturers such as Foxconn can build millions of devices more efficiently than the brand itself; Bengaluru offers large numbers of software engineers.

• Flexibility: contracts can be expanded or ended without the cost of owning factories.

• Time zones: offshore software and support teams allow work to continue around the clock.

• Tax and incentives: special economic zones and low tax rates attract investment.

Supply chains and value chains

A supply chain is the network of firms, places and flows that turns raw materials into a finished product and delivers it to customers. A smartphone’s supply chain begins with mines for cobalt, lithium and rare earths, continues through factories for chips, screens and batteries in several countries, then final assembly, then shipping, warehouses and shops. A value chain describes the same sequence in terms of the value added at each stage.

Supply chains are often drawn as maps of places and flows; value chains as a sequence of stages, each adding to the price of the final product.

The value added at each stage is very unequal. The smile curve, first proposed by Stan Shih, the founder of the Taiwanese computer firm Acer, shows that most value is captured at the two ends of the chain, in research, design and branding upstream and in marketing, retail and services downstream. Manufacturing and assembly in the middle add the least value per unit, because many firms and countries compete to do them.

The smile curve explains a key part of the geography of TNC networks. High-value stages stay in core regions with universities, skilled workers and large consumer markets, such as California, Tokyo and Seoul, while lower-value stages move to places with lower costs. Countries such as South Korea and Taiwan show that the curve is not fixed: firms that began as low-cost assemblers in the 1970s now design and manufacture the most advanced chips and screens. China is following the same path, with its own brands such as Huawei, Xiaomi and BYD.

Vertical and horizontal integration

TNCs also grow by taking over other stages or other firms. Vertical integration is ownership of several stages of the same supply chain, such as a clothing firm that owns its own factories, warehouses and shops. Horizontal integration is ownership of several firms at the same stage, such as a hotel group that buys rival hotel chains. Vertically integrated firms control quality and timing but carry the costs of owning factories; outsourced firms are more flexible but depend on their suppliers.

Glocalisation as a market strategy

Glocalisation is the adaptation of a global product or service to suit local tastes, laws or cultures. Apple, for example, sold iPhone models with two physical SIM-card slots in mainland China from 2018, to suit users there who often carry two phone numbers, which meant a separate product version within the same supply chain; global streaming services commission local-language series for the same reason. For TNCs it is a way to enter new markets, and it shows that global flows are adapted by the places they reach rather than simply adopted. The same idea, applied to cultures and identities, is central to the study of cultural diffusion and hybridity.

How TNCs network places into hierarchies

The result of these decisions is a hierarchy of places within each TNC’s network. At the top are the headquarters and main research centres, usually in the home country’s largest cities or technology clusters. Below them are regional headquarters, often in global cities such as Singapore, Dubai, London or Miami, which co-ordinate operations across a continent. Then come research and development centres (Bengaluru, Shenzhen), production and assembly sites (Zhengzhou, the Pearl River Delta, northern Mexico, Bangladesh) and finally markets, where products are sold and where the TNC earns most of its revenue.

This hierarchy shapes development. Places at the top capture high incomes, tax revenue and decision-making power, while places at the bottom compete for investment with low costs and can lose it when costs rise. Power in global networks therefore lies with the firms and places that control the high-value stages and the brands.

Sources: World Bank, World Development Indicators (FDI net inflows), 2026; Wikipedia, “Inditex”, “Apple Inc.”, 2026; Wikipedia, “Economy of Vietnam” (electronics share of exports, 2020), 2026.

Case study: Apple, an outsourced supply chain centred on China

Apple is a technology TNC headquartered in Cupertino, California, in Silicon Valley. In its 2025 financial year, which ended on 27 September 2025, it had revenue of US$416 billion and net income of US$112 billion, and in October 2025 it was valued at just over US$4 trillion, more than the GDP of all but a handful of countries. The iPhone provides more than half of its revenue. Apple employs about 166,000 people directly, most of them in its 540 retail stores, but around a million more work for its suppliers.

A strategy of design at home and outsourced assembly

Apple’s global strategy is to keep the high-value stages of the value chain and to outsource almost all manufacturing. Research, design, software, chip design and marketing are carried out in-house, mostly in California. The physical products are made by independent contract manufacturers, mainly Taiwanese firms such as Foxconn (Hon Hai), Pegatron, Wistron and Quanta, which built enormous factories in mainland China from the 1990s onwards. By 2021 Apple had more suppliers based in mainland China than in Taiwan, with Chinese firms such as Luxshare, BYD Electronic and Goertek taking a growing share of orders.

The scale of the network is very large. By 2018 Apple used hardware components from 43 countries. Chips designed by Apple are fabricated in Taiwan, displays and memory come mainly from South Korea and Japan, and final assembly takes place in China and, increasingly, India. The largest single site is the Foxconn complex in Zhengzhou, Henan province, often called “iPhone City”, where about 350,000 workers have assembled iPhones.

Who captures the value

The distribution of value along Apple’s chain is a clear example of the smile curve. A study of the iPhone 4, which sold for US$549 in 2010, estimated that Apple captured about 58.5% of the price as profit, while the wages of the Chinese workers who assembled it were only about 1.8%. Component suppliers in Japan, South Korea and Taiwan captured most of the rest. China’s share of the value of an iPhone was therefore small, even though every iPhone was exported from China.

Apple earns that value from markets around the world. In its 2024 financial year the Americas provided 42.7% of its net sales, Europe (a segment that Apple reports together with India, the Middle East and Africa) 25.9% and Greater China 17.1%, so China is both Apple’s main production base and its third-largest market.

Diversifying the supply chain to India and beyond

Apple’s dependence on China became a risk after 2018. US tariffs on Chinese goods, pandemic lockdowns and rising labour costs all disrupted production. In November 2022, during COVID-19 restrictions, workers at the Zhengzhou plant protested over pay and conditions, and iPhone shipments were delayed in the busiest season. Apple responded by asking its suppliers to expand production in other countries.

India has been the main beneficiary. Apple’s contract manufacturer Wistron began assembling iPhones near Bengaluru in 2017, and suppliers including Foxconn, Pegatron and the Indian firm Tata Electronics have since opened or expanded plants in Tamil Nadu and Karnataka, supported by Indian government production-linked incentives.

About 55 million iPhones were assembled in India in 2025, up from about 36 million in 2024, or roughly a quarter of world output; these are industry estimates, because Apple does not publish production figures. Vietnam has gained the assembly of other Apple products. In 2025, faced with new US tariffs, Apple also pledged to invest more than US$500 billion in the United States over four years.

YouTube

The shift is slow and partial. Most components are still made in China, and India’s plants import many of them; the skills, supplier networks and infrastructure that grew around Zhengzhou and Shenzhen over 25 years cannot be moved quickly. The change shows how geopolitical tension can redirect FDI and supply chains, a theme developed in the study of supply chain risk and re-shoring.

Impacts on different groups

What the case shows

Apple shows how one TNC networks places into a hierarchy. Power lies with the firm and the place that control design, software and the brand: Cupertino captures most of the profit, while the places that do the assembly capture little of the value. Place matters, because Zhengzhou’s scale and Shenzhen’s supplier clusters are hard to reproduce, and spatial interactions connect dozens of countries for every device. The shift to India shows that networks change, but slowly and only partly, and that the flows are shaped by government policy as well as by cost.

Sources: Apple, Form 10-K, fiscal 2024; Wikipedia, “Apple Inc.” (Apple annual reports, 2024–2025) and “Criticism of Apple Inc.” (Kraemer, Linden and Dedrick, 2011), 2026; Bloomberg, March 2026 (via ETV Bharat and AppleInsider).

Analysis questions

• Explain why Apple outsources assembly but keeps design and software in-house.

• To what extent is India replacing China in Apple’s supply chain?

• Examine who gains and who loses from the distribution of value in Apple’s value chain.

Detailed example: Inditex and proximity sourcing

Inditex, the owner of Zara, is the largest fast-fashion group in the world. Amancio Ortega and Rosalía Mera opened the first Zara shop in A Coruña, Galicia, in north-west Spain, in 1975, and Inditex was created in 1985 as the holding company for Zara and its factories; its headquarters are still at Arteixo, near A Coruña.

In 2024 it had sales of €38.63 billion and net income of €5.86 billion, employed 162,083 people and sold through brands including Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Lefties. Europe outside Spain provided 53.5% of its sales, the Americas 18.2%, Spain 16.1% and Asia and the rest of the world 12.2%.

Inditex’s strategy contrasts with Apple’s. Instead of placing production wherever costs are lowest, it sources much of its clothing from proximity suppliers in Spain, Portugal, Morocco and Türkiye, close to its design centre and its main European markets. A large share of its fashion items is made in these four countries, within a few days’ truck journey of its logistics centres in Spain.

Fashionable items can go from design to shop in as little as 15 days, so Zara can respond to what customers are buying within a season and produce small batches that sell out, rather than large orders placed months in advance. Basic, less time-sensitive items are sourced from lower-cost suppliers in Asia, such as Bangladesh, China and Vietnam. Design, logistics and distribution are kept in-house, centred on Galicia, and sales data from the stores flow back to the designers regularly, so the network is driven by demand rather than by forecasts. The table sets the two strategies side by side.

The comparison shows that there is no single TNC strategy. The location of production depends on the product: electronics reward scale and specialised suppliers, while fashion rewards speed. Both firms keep the high-value stages of the smile curve, design and the brand, in their home regions, and both outsource most manufacturing, but they network different places for different reasons.

Sources: Wikipedia, “Inditex” (Inditex annual report 2024), 2026; Modaes, Inditex sourcing, 2025.

Exam practice

Global networks and flows appear in Paper 3, where you answer one question from a choice of three, one on each HL unit. The Unit 4 question has two parts on the same unit: part (a) [12 marks] asks you to analyse or explain, and part (b) [16 marks] gives a statement to discuss. There are no short stimulus questions, so the marks come from structured, evidenced extended writing. With 28 marks in one hour, allow about 25 minutes for part (a) and 35 minutes for part (b), including planning.

Part (b) is worth more marks and asks for more: the top band needs both synthesis and evaluation.

Part (a): analysis

A second part (a) question tests the other half of the subtopic.

Part (b): discussion

Summary

• Global flows of goods, services, money, people, illegal goods and data link places into networks of nodes and links; flows are described by their volume, direction and change over time.

• World exports of goods and services reached about US$32.5 trillion in 2024; services are about 27%, and China supplied 14.5% of world merchandise exports.

• Many low-income countries depend on primary commodities (Zambia: ores and metals, mainly copper, 73% of merchandise exports in 2024), so falling terms of trade and price swings make their incomes unstable.

• ODA is concessional government aid; it fell 23.1% in 2025 to US$174.3 billion, as US aid fell by 57%. Aid may be bilateral or multilateral, tied or untied, humanitarian or developmental.

• Debt relief through HIPC (1996), the MDRI (2005) and the G20 Common Framework (2020) has cancelled debts, but slowly and with conditions, as Zambia’s restructuring in 2023–2024 shows.

• Remittances (US$870 billion recorded in 2024) are larger than FDI and ODA to low- and middle-income countries, stable during crises, and up to 47% of GDP in Tajikistan.

• Illegal flows of trafficked people, counterfeit goods and narcotics use legal networks and are known only from estimates; cocaine production reached a record 3,708 tonnes in 2023.

• FDI (greenfield or M&A) and outsourcing let TNCs place each stage of the value chain where it is cheapest or most effective; the smile curve shows that design and brands capture most value.

• Apple outsources assembly to contract manufacturers in China and increasingly India; Inditex uses proximity sourcing near Spain for speed. The product shapes the network.

• The relative importance of flows depends on the measure and the place; flow maps, Sankey diagrams, choropleths and topological maps each show a different aspect of flows.

Self-check

• To do:

  I can describe the size, composition and direction of world trade, aid, remittances and illegal flows with recent figures.

• To do:

  I can explain commodity dependence and determine a country’s terms of trade from price indices.

• To do:

  I can distinguish bilateral, multilateral, tied, humanitarian and development aid, and evaluate aid and debt relief using Zambia.

• To do:

  I can explain why remittances matter more to Tajikistan or Nepal than to India, using absolute values and shares of GDP.

• To do:

  I can examine why illegal flows are hard to measure and control, with examples of trafficking, counterfeits and cocaine.

• To do:

  I can distinguish outsourcing from offshoring and greenfield investment from M&A, and explain supply chains, value chains and the smile curve.

• To do:

  I can compare the global strategies and supply chains of Apple and Inditex.

• To do:

  I can evaluate the relative importance of different flows for different places.

• To do:

  I can choose and construct a suitable flow map, Sankey diagram or choropleth for a given set of flow data.