4.1.5 - WTO contd

Question 1

what are the two aims of WTO

Answer 1

• to bring about trade liberalisation and resolve trade disputes
• to ensure countries act according to the trade agreements they have signed.

Question 2

possible conflicts between WTO and regional trade agreements

Answer 2

Trade Discrimination: RTAs may discriminate against non-members, potentially violating WTO’s most-favored-nation principle.
Trade Diversion: If RTAs lead to trade diversion, they can be seen as contrary to the WTO’s goal of reducing trade barriers globally.
Inconsistent Rules: Conflicting rules between RTAs and WTO agreements can create legal and practical challenges.
Preferential Treatment: WTO rules generally favor non-discrimination, while RTAs provide preferential treatment to member countries.
Dispute Resolution: Disputes can arise when WTO and RTA rules conflict, requiring resolution mechanisms to reconcile differences.

Question 3

Whta is the difference betwee GATT and WTO

Answer 3

• gatt is a treaty whereas WTO is permanent organisation
  (GATT replaced by WTO in 1995 to reduce protectionism AS gatt has bad trade dispute mechanism)

Question 4

how does WTO disagree with trade diversion

Answer 4

• trade barriers on non members diverts trade from cheaper non members so non memebers can;t fully use comparative advantage by specialising as trade is restricted
• conflict WTO objectives as it interferes with competition and prevents the lowest cost, most efficient products from being traded

Question 5

ref 211 cgp about wto cap conflict

Question 6

equation for tariff revenue

Answer 6

quantity of imports x tariff rate

Question 7

deadweight loss definition

Answer 7

loss of economic efficiency that cna occur when the free market equilibrium for a good or service is not achieved

Question 8

What happens to consumer surplus following introduction/increase in tariff

Answer 8

fall

Question 9

What happens to deadweight loss following introduction/increase in tariff

Answer 9

rises

Question 10

What happens to gov revenue following introduction/increase in tariff

Answer 10

rises

Question 11

What happens to producer surplus following introduction/increase in tariff

Answer 11

rise

Question 12

why do tariffs cause deadweight losses

Answer 12

results in a fall in economic welfare - any loss in economic welfare caused by gov intervention is called deadweight loss

Question 13

two assumptions about the tariff diagram

Answer 13

• domestic producers have influence over the price of goods in their domestic markets (they are price makers in home markets)
• producers have no influence over the price of goods on the intl market (every producer is a price taker)

Question 14

what is the assumption behind the shape of the world supply curve

Answer 14

perfectly elastic (horizontal line) becuase producers have no influence over price - they are price takers in the world

Question 15

check out tariff sheet