4.4 trade policies and negotiations

Question 1

What is protectionism ?

Answer 1

Measures taken by a country to restrict international trade

Question 2

What is a trading bloc

Answer 2

Where a group of countries in a region agree to cooperate in international trade through some sort of free trad area or other form of association

Question 3

What is a tariff

Answer 3

A tax imposed on imported goods

Question 4

What is a quota ?

Answer 4

An agreement by a country to limit its exports to another country to an agreed quantity

Question 5

Draw a tariff diagram and explain effects of tariffs

Answer 5

Import image

Question 6

Draw a quota diagram and explains its effects

Answer 6

Import image

Question 7

What is economic integration

Answer 7

The process of becoming a member of a trading bloc

Question 8

What is a free trade area

Answer 8

Occurs when countries agree to remove import tariffs and other barriers to promote trade in goods and services

Question 9

What are the stages of economic integration

Answer 9

1. Free trade area
2. Customs union
3. Single market
4. Monetary union
5. Economic union

Question 10

What is a customs union

Answer 10

Agreement between member countries to abolish tariffs and quotas and adopt a common external tariff for non-member countries

Question 11

What is monetary union

Answer 11

Occurs when two or more countries share a common interest rate set by a common central bank

Question 12

What is the economic union

Answer 12

Occurs when two or more countries share a common monetary and fiscal policy

Question 13

What are the four freedoms at the heart of the concept of a single market ?

Answer 13

1. Free trade in goods: businesses can sell their products anywhere in the EU’s member states and consumers can but where they want with no penalty
2. Mobility of labour: citizens of EU member states can live and work in any other country
3. Free movement of capital: currencies and capital can flow freely between member states and EU citizens can use financial services in any member state
4. Free trade in services: professional services such as pensions,architecture, telecommunications, and advertising can be offered in any member state.

Question 14

What is trade creation

Answer 14

Occurs where economic integration results in high cost domestic production being replaced by imports from a more efficient source within the economically integrated area

Question 15

Draw and explain the diagram for trade creation

Answer 15

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Question 16

What is trade diversion

Answer 16

Occurs when economic integration results in trade switching from a low cost supplier outside the economically integrated area to a less efficient source within the area

Question 17

Draw and explain a trade diversion diagram

Answer 17

Import image

Question 18

Draw a graph to explain trade creation and trade diversion combined

Answer 18

Import image

Question 19

What are the advantages of protectionism ?

Answer 19

Question 20

What are the disadvantages of protectionism ?

Answer 20

Question 21

what is the Worlds Trade Organisation

Answer 21

An international organisation that seeks to promote free trade

Question 22

What is the role of the WTO?

Answer 22

they oversee trade between member states, provides a forum for trade negotiations, settles disputes and works to build agreements between member states while supporting the needs of developing countries

Question 23

what are the benefits of joining the WTO

Answer 23

Question 24

what are the risks of joining the WTO

Answer 24