Theme 4

Question 1

what is protectionism?

Answer 1

where governments introduce policies to try and protect domestic firms at the expense of overseas companies looking to import into the market

Question 2

why might governments introduce protectionist policies?

Answer 2

-to protect jobs inside the nation
-could raise additional revenue through tariffs
-encourage demand for domestic goods and services
-prevent dumping

Question 3

what are the forms of protectionism?

Answer 3

-tariffs
-quotas
-subsidies and loans
-technical barriers to trade

Question 4

what is a tariff?

Answer 4

a tax on imported goods overseas firms have to pay

Question 5

what is a quota?

Answer 5

it sets a limit on how many goods can be imported in a given time period

Question 6

what are technical barriers to trade?

Answer 6

laws on goods and services sold in the country; this could increase the costs for foreign businesses as they could have to change their product to meet the standards

Question 7

what are the positive impacts on domestic firms of protectionist policies?

Answer 7

-helps competitiveness; it allows them to be more price competitive with overseas rivals. this could increase the demand for their goods and services which could make them more profitable

Question 8

what are the negative impacts on domestic firms of protectionist policies?

Answer 8

many of them rely on components and raw materials imported form abroad. this could damage the domestic firms as a tariff could increase their costs

Question 9

what are the impacts of protectionist policies on overseas businesses?

Answer 9

they can avoid protectionist policies by setting up production in overseas countries making them exempt as they become a domestic producer. although this could be expensive so the firm would have to be confident that the market is lucrative enough

Question 10

what is free trade?

Answer 10

the idea that a government isnt going to discriminate against goods imported in its economy which should increase trade between nations

Question 11

what is specialisation?

Answer 11

when an economy specialises in a narrower range of goods and services that employment will centre around.

Question 12

what does specialisation allow?

Answer 12

it allows countries to trade with nations that specialise in something that they do not specialise in themselves

Question 13

what are the benefits of free trade?

Answer 13

-gives consumers access to lower price goods
-gives consumers a greater choice of goods
-gives businesses access to foreign markets; they can sell overseas without tariffs or quotas
-business could take advantage of cheaper raw materials without protectionist costs

Question 14

what are the drawbacks of free trade?

Answer 14

the benefits might not be experienced by all businesses-e.g. small businesses face more competition from imported goods.
-they might also not be able to remain competitive as they can produce as cheaply

Question 15

what is a trading bloc?

Answer 15

a group of nations that have agreed to work together to reduce protectionist policies between all nations in the bloc to increase free trade.

Question 16

what are the different types of trading bloc?

Answer 16

-preferential trade area
-free trade area
-customs union
-economic union

Question 17

what is a preferential trade area?

Answer 17

where countries decide protectionist policies like tariffs or quotas, but only on specific goods and services

Question 18

what is a free trade area?

Answer 18

where countries in the bloc agree to remove all barriers to trade allowing nations to trade freely with all goods and services. However they have the power to make trade agreements with nations outside the bloc

Question 19

what is a customs union?

Answer 19

it allows free trade between nations in the bloc where all nations develop a common external barrier, which means that all countries inside the bloc have an agreed level of protectionism with countries outside the bloc

Question 20

what feature might a customs union have?

Answer 20

they might have a common external tariff, where every nation inside the bloc has the same trading deal with countries outside the bloc

Question 21

what is a common market?

Answer 21

where there is free trade between all the members of the bloc and common external barrier to nations outside the bloc, but also free movement of capital and labour as well as goods and services

Question 22

what is an economic union?

Answer 22

there is free trade between all countries in the bloc with shared external barriers and tariffs to countries outside the bloc. they have free movement of goods, labour and capital but also share policies such as currencies, setting interest rates for every nation inside the bloc