Free Trade & Protectionism

Question 0

What is a quota?

Answer 0

A quota is a limit in the supply if imported goods and services

The reduction in supply makes the products more expensive so foreign firms see no profit change

Question 1

What is a tariff?

Answer 1

Is a tax on imported goods.

They increase the price of imported goods to encourage demand for domestic goods

Raises revenue

Question 2

What is an Embargoe?

Answer 2

An embargo is a 100% ban on the imports of goods and services from a certain country

Used to solve political debate

Question 3

What is RED TAPE

Answer 3

They are administrative procedures put in place to increase import time and costs.

This will make the import more expensive and demand increases for domestic products

Question 4

What are foreign exchange restrictions

Answer 4

Limit on the exchange made available for consumption Of imports and foreign investment

Increases demand for domestic products

Question 5

What is voluntary export restraint?

Answer 5

Similar to quotas, where the limit of supply is decided by the two countries.

Can be used to protect GNP figures

Question 6

What are the pros and cons of free trade to the customer

Answer 6

Pros:

• cheaper prices as more competition
• higher quality goods more competition
• wider variety of goods, more supply

Cons:
-foreign firms may not have to pass same quality and safety tests as domestic goods

Question 7

What are the pros and cons of free trade to the Companies?

Answer 7

Pros:

• wider market to sell to, more demand
• raw materials are cheaper to import
• firms are more efficient to compete

Cons:

• prices have to be lower, due to competition so less profit
• foreign firms may have less legislation or corporation tax to work against

Question 8

What are the pros and cons of free trade to the workers

Answer 8

Pros:

• more jobs in the production
• more jobs in exports/imports

Cons:
-companies may move abroad due to lower wage limits

Question 9

What are the pros and cons of free trade to the environment?

Answer 9

Pros:
-transport in bulk so less co2 released

Cons:
- transport further so more co2 released

Question 10

Define:
Free trade
International trade

Answer 10

Free trade is an agreement between countries that allows the trade of goods and services with tax or protectionism

International trade is the exchange of goods and services with other countries economies