Global Economics 3

Question 1

What is free trade?

Answer 1

• The absence of government intervention of any kind in international trade
• Trade takes place without any restrictions between individuals or firms in different countries

Question 2

What is trade protection?

Answer 2

• Involves government intervention in international trade
• Imposition of trade restrictions to prevent the free entry of imports into a country or to protect the domestic economy from foreign competition

Question 3

Define tariffs and give a real world example.

Answer 3

Taxes on imported goods, which may be implemented to protect a domestic industry from foreign competition or raise revenue for the governement
E.g. Trump imposed a 25% tariff on all imported steel to the USA in 2018

Question 4

Define subsidies and give a real world example.

Answer 4

An amount of money paid by the government to firms for a variety of reasons. It results in a higher output level and lower price for consequences
E.g. In Australia, in 2020, fossil fuel subsidies reached $10.3 billion, and they are major recipients of government funds

Question 5

Define import quotas, give a real world example.

Answer 5

A type of trade protection taht involves setting a legal limit to the quantity of a good that can be imported over a particular time period (typically a year)
E.g. In January 2018, Trump imposed a 30% tariffs on imported solar panels from China to the USA

Question 6

Define administrative trade barriers, give a real world example.

Answer 6

Trade protection measures taking the form of administrative procedures that countries may use to prevent the free flow of imports into a country, often considered hidden protection
E.g. In Australia if you export food products, you must have the ingredients and nutritional panel on a sticker in English so Australians can read them