4.1.3, 4.1.4, 4.1.5 Trade Flashcards
What are some protectionist policies
-tariffs
-quotas
-subsidies
-non tariff barriers - the use of rules and regulations to restrict market access to foreign firms e.g product standards
-controls of FDI and market access to strategic sectors - defence, telecoms and IT, and financial systems
-exchange rate manipulation - e.g China artificially deflating their currency
What are some justifications of protectionism
-protect domestic employment
-improve balance of payments by limiting foreign debt
-protection against dumping (where a country sells in a foreign market below cost of production to remove competition)
-national security (defence and food should be protected in case of conflict)
What are some problems with protectionism
-loss of economic welfare - firms have less foreign competition so may not prioritise lowering costs
- consumes will have less choice and higher prices
-retaliation - when one country imposes controls there is a threat of other countries retaliating leading to less world trade
-conflicts comparative advantage - if countries only produce goods they have comparative advantage in there may be a misallocation of world resources
-depends on the size of the tariff - may not have any effect depending on things like PED
What is trade creation
When a country moves from trading with a high cost producer to a lower cost producer
What is trade diversion
When a country moves from trading with a low cost producer to a higher cost producer
What are some reasons for the changing patterns of trade
-the theory of comparative advantage - it has led to many global supply chains
-emerging economies - globalisation means many countries have been drawn into the global trading system
-more trading blocs and bilateral agreements
-changes in relative exchange rates
Where is the uk for importing and exporting
4th largest
In 2023 what was the uk’s net trade balance
£15 billion deficit
What is a bilateral trade agreement
Rules of trade between two countries
What are trade blocs
Groups of countries that agree to remove trade barriers and operate as a free trade area
What is the role of the World Trade Organisation (WTO)
-monitor free trade agreements
-settle disputes between member countries
-promote trade liberalisation
What are the two main principles of the WTO
Most favoured country principle - if a country reduces tariffs or quotas for one country it must do so for all
National treatment - once imported goods have entered a country, they must be treated equally to domestically produced goods
What are some criticisms of the WTO
Single under-taking - every item is negotiated as an overall package so negotiations are very slow
Lacks democratic accountability - negotiations are between wealthier nations as LEDCs cannot afford a representative
Wealthier countries run it - wealthier countries have protectionist policies whereas LEDCs are expected to follow free trade
Infant industries in LEDCs cannot develop
What is a free trade area and an example
No trade barriers between members
NAFTA
What is a customs union and an example
No trade barriers between members and common external tariffs on non-states
MERCOSUR
