Advantages and Disadvantages of trade

Question 1

What is Protectionism by ACs?

Answer 1

Using trade barriers to protect domestic industries from cheap imports

Question 2

What are the advantages of Protectionism?

Answer 2

Secures jobs in industries under threat from foreign competition

Question 3

What are the disadvantages of Protectionism?

Answer 3

1. Producers/exporters in LIDCs cannot access large wealthy markets such as Europe & North America
2. Tariff escalation in ACs deters LIDCs from developing domestic industries to process and ‘add value’ to primary product exports
3. Consumers in countries with trade barriers pay higher price for products

Question 4

What are TNCs?

Answer 4

Companies with operations in more than one country

Question 5

What are the advantages of TNCs?

Answer 5

1. Can bring investment and new technology to less developed regions
2. Bring jobs to areas with little economic activity and unemployment

Question 6

What are the disadvantages of TNCs?

Answer 6

1. Take profit out of countries where they operate back to their home country
2. May take advantage of countries with weak environmental regulations and tax loopholes

Question 7

What is Trade Liberalisation?

Answer 7

Removing or lowering trade barriers such as import and export duties to encourage more international trade

Question 8

What are the advantages of Trade Liberalisation?

Answer 8

Local consumers can buy cheaper imported product

Question 9

What are the disadvantages of Trade Liberalisation?

Answer 9

Local industries cannot compete with cheap imports and go into decline

Question 10

What is a Dependence on Primary Products?

Answer 10

When the Primary industries (raw materials) account for a large proportion of a country’s export earnings

Question 11

What are the advantages of Dependence on Primary Products?

Answer 11

When prices of raw materials rise exporters of those products can benefit (oil can be very valuable)

Question 12

What are the disadvantages of Dependance on Primary Products?

Answer 12

1. Primary Products are relatively low in value (compared to manufactured goods)
2. LIDC’s tend to rely on a narrow range of exports which makes a economy vulnerable

Question 13

What is Unethical Trade?

Answer 13

Trade related to human rights abuses, social problems or environmental damage

Question 14

What are the advantages of Unethical trade

Answer 14

1. Industries exporting products such as weapons or drugs may be major employers and wealth creators

Question 15

What are the disadvantages of Unethical Trade

Answer 15

1. Trade with irresponsible governments/regimes may lead to human rights abuses
2. Trade may promote exploitative working conditions or child labour

Question 16

What is Intellectual Property Rights (IPRs)?

Answer 16

International law governing the protection of “trade secrets” and the rights to manufacture products such as patents

Question 17

What are the advantages of Intellectual Property Rights (IPRs)?

Answer 17

Rules about patents protect manufacturers that have invested heavily in Research and Development

Question 18

What are the disadvantages of Intellectual Property Rights (IPRs)?

Answer 18

1. Rules about patents are dominated by interests in ACs; IPRs are hard to establish by firms in LIDCs and EDCs limiting opportunities for trade
2. Developing countries can be prevented from producing genetic drugs that would generate trade and benefit public health & quality of life