topic 1 the global economy

Question 1

global economy

Answer 1

ecos from individual countries linked, change in one eco affects others.

interconnected system of ecos of diff countries, encompass all eco activities & transactions across world

Question 2

distinguish between eco integration & globalisation

Answer 2

GLOBALISATION
integration betw diff ecos and increased ipact of int influences on all aspects life & eco activity
* bus, markets, ecos more integrated across borders

ECO INTEGRATION
liberalisation of trade betw 2/+ c’s within/betw region/s
* regional integration of c’s –> ^ intra-regional trade & intra-industry trade in EU, East Asia, North America dominate world output & trade
* main benefits ^ trade, investment flows, rising SOL
* ^ prop world trade from TNCs betw their international subsidiaries

Question 3

globalisation

Answer 3

integration betw diff c’s and ecos & ^ impact of int. influences on all aspects of life & eco activity

driven by
TTC
liberalisation of trade
investment policies**.
1980s phenomenon

Question 4

who is the leading eco rn

Answer 4

US but power increasingly constrainied by major ecos like China

Question 5

slowbalisation”

Answer 5

past decade low growth in trade volumes, ^ restrictions on trade and rising geopolitical tensions

Question 6

5 major indicators (measures) of integration betw ecos

Answer 6

1. international trade in g&s
2. international financial flows
   * gvts encouraged trade by removing barriers & joining international trade groups eg. WTO
3. international investment flows (mobility of capital from financial dereg & floating ERs –> & TNCs
4. tech, transport, communication
   -reduced cost trading goods betw ecos and provide services to customers in distant markets
5. labour mobility betw countries

Question 7

GWP

Answer 7

Gross World Product

sum of total output of g&S by all ecos in world over PIT

aggregate value of all g&S produced worlwide each year in global eco

Question 8

why are international trade in g&s important indicator of globalisation

Answer 8

measure how g&S produced in eco consumed in other ecos around world

Question 9

eco downturns affect on global trade vs eco output

Answer 9

(contracted faster than world eco output, (GWP) (GREATER VOLITILITY of trade compared with GWP)

Question 10

what does high volume of global trade reflect

Answer 10

ecos dont produce all items they need/produce them as efficiently as other ecos

have to import g&s

Question 11

subsidiary

Answer 11

company controlled/owned by parent company) which owns >50% of subsidiary’s voting shares –> sig influence on sub’s ops, decisions, management
* separate legal entities but under financial & strategic control of parent compayn

Question 12

what goods are global trade dominated by

Answer 12

manufactured (vehicles, clothes, electronics) but inflationary pressures recently soften growth

trade in services fastest growing catergory of trade, 2/3 global output but <1/4 global exports

Question 13

why is australai benefiting from growthi n services trade?

Answer 13

highly educated workforce best position to compete in growing global markets for services

less developed countriel ack workforce and infrastructure to capitalise on growth in digital service exports (ghihest)

Question 14

direction of china & aus trade flows recent decades (among countries)

Answer 14

strong growth chinese eco –> stronger trade relationships in global supply chains

however aus concerns too reliant on china exports (recent eco slowdown)

Question 15

why financial flows (international finance) have leading role in global eco

Answer 15

finance most globalised sector bc money moves betw countries quicker than g&s/ppl

Question 16

when did international financial flows start expanding

Answer 16

financial deregulation worldwide (1980s)
* controls on foreign currency markets, foreign capital flows, banking IRs and overseas investments in share markets lifted
* new tech & global communication networks link FMs

Question 17

what financial instruemtn has experienced most growth in GMFs?

Answer 17

exchange-traded derivatives

Question 18

financial flows relationship with global conditions

Answer 18

volume FFs fluctuates in resposne to global conditions. sharp falls in FF followed by strong recoveries

Question 19

foreign exchange (forex) markets as an important feature of international finance

definition

Answer 19

networks of buyers & sellers exchanging one currency for another to financial flows of finance betw countries
* most liquid FM
* for international trade, investment, finance
* decentralised unlike stock markets
* electronic transactions worldwide

-extraordinary growth recent

Question 20

exchange rate

Answer 20

value of a currency expressed in terms of another currency (ER betw 2 currencies)

• determined through forces supply & demand in forex markets

Question 21

main drivers of global financial flows

Answer 21

SPECULATORS & CURRENCY TRADERS shift billions dollars in & out FMs worlwide for ST investments in financial assets

• to derive ST profits from currency & asset price movements
• or for technical purpose (eg. hedging against future ER movements & swapping funds betw currencies. int. investment banks & hedge funds responsible for most these transactions. to gain from ST currency & share price fluctuations or hedge against future movements & minimise risk of losses

hedging manage risk against potential loss due to price fluctiations in IRs, currencies eg. buy futures, derivatives

Question 22

speculators

Answer 22

investors buy/sell financial assets to make profits from ST price movements –> volatility in FMs

Question 23

main benefit of greater global financial flows

Answer 23

enable countries obtain funds to finance domestic investment
* investors with low national savings lvls otherwise unable to finance large scale investment projects –> eco growth

Question 24

negative eco impacts of changes in global financial flows

Answer 24

• speculative behaviour creates sig volatility in forex & domestic FMs.
• ‘herd mentality’
• once upward/downward trend asset prices established, continues
• responsible for large falls currency & financial crises over decade

Question 25

difference betwee growth of global finance and global investment

Answer 25

FINANCE : shorter term, speculative shifts of money

INVESTMENTS: longer term flows of money to buy/establish bus

Question 26

expansion of Foreign Direct Investment (FDI) measure globalisation of investment

Answer 26

• movements of funds directly invested in eco activity/purchasing companies

movement of funds betw ecos to establish new company/buy large prop shares in existing company (≥10%)
* FDI LT investment, **investor **intends management role of bus

Question 27

portfolio investment

Answer 27

purchase financial assets (stocks, bonds, other securities) to generate returns through dividends, interest, or capital gains.

• Unlike FDI buy smaller stakes that do not result in managerial control.
• aim for diversification, invest in a variety of assets to reduce risk
• primary goal is financial return, appreciation in the value of the assets

Question 28

FDIs recent decades

Answer 28

• reforms developed+ing countries surge flows 1980s onwards
• storngly influenced by lvl eco activity
• uncertain eco conditions & greater geopolitical uncertainty reduced growth of global FDI recently

Question 29

how do FDI flows traditionally favour developed nations

Answer 29

greater industrial capacity & larger consumer markets make Europe, NA destination for foreign investment during globalisation 90s-most 2000s

• share of FDI for developing ecos exceeding developed since 2020
• most FDI inflows to developing c’s flow to asia due to stronger returns on FDI relative to returns investing in developed countries

Question 30

transnational corps (TNCs) role in global investment flows (apple, amazon, tesla)

Answer 30

80% global trade

• expand prod facilities –> bring foreign investment, new tech, skills & knowledge (capital & job opps) –> gvts encourage em in own c through supportive policies (Subsidies, tax concessions)
  * early 90s
• ^ international mergers & takeovers form companies worth hundreds of billions and reduce global companies in diff product markets but falling bc weaker eco conditions & low investor confidence

Question 31

in overall terms, where does msot investment in ecos around the world come from?

Answer 31

domestic sources
* FDI <20% total investment bc most within national ecos

Question 32

TNCs negative effect

Answer 32

• increase volume & significance, ^ cross-border cartels betw large corps –> reduce comp in ecos and harms local consumers

Question 33

FIIT

4 tech, transport and communication influence globalisation

Answer 33

ALLOWS INTEGRATION

• ecos adapt to new tech rapidly more closely integrated with other ecos

Driver of growth in TRADE & investment

• major trade opp for tech innovators & exporters (trade spreads new tech)
• other c’s import tech to develop own tech exports

^ FOREIGN INVESTMENT

corps developing new tech mvoe to overseas markets to sell g&s to local buyers directly
* corps invest in c’s they enter esp edu & training

INTERNET

• internet links ind, bus, nations for greater comm w/n & betw firms, reduce costs as barrier to integration betw ecos.

Question 34

examples of tech developments facilitating integration of ecos

Answer 34

• developments in freight tech eg. micro warehouses near customers to improve logistics
• cheaper, reliable int. communication via high-speed braodband for commercial services for customers around world
• secure, high speed networks for money to move quicker –> foreign investment
• smartphones & internet access changes structure of industries (retail, transport, edu)
• advs in transport eg. high speed rail networks for labour mobility betw ecos & ^ access to tourism for consumers

Question 35

international division of labour & migration for globalisation. how do their markets differ? Recent year trends

Answer 35

• LMs diff from product markets & FMs bc less internationalised (money move almost instantly, g&s move in days, investments made in weeks) bc ppl can’t move jobs as freely & recent yrs more restrictive abt immigration from poorer c’s
• still more ppl than before moving to diff countries to take adv of better work opp offered by other c’s

Question 36

how has the movement of labour betw ecos become more concetrated

Answer 36

• highl skilled workers attracted to larger, higher income ecos (eu, us greatest inflow migrant workers more opp & pay available)
• services sector hires more migrants
• low skilled labour high demand in adv eco difficult to attract locals (no language)

Question 37

international division of labour

Answer 37

how tasks in PP allocated to diff ppl in diff countries around world

• diff c’s specialise prod particular g&s based on their comparative advantage.
• ppl move to jobs where skills needed while globalisation of LM increasting but sig barriers to working in other C’s eg. immigration restrictions, language

Question 38

what do trends in migration reflect? what are barriers preventing ppl to work in other countries?

Answer 38

international division of labour.
* immigration restrictions, language
* many prefer staying where familiar with culture, languge, family

Question 39

brain drain

Answer 39

• prop of migrants highly skilled outnumbers low skilled most c’s
• net loss of skilled workers who attracted to emigrate to other c’s (job opps, rewards)
• high lvls skilled labour emigration ^ gap betw developed&ing ecos (development, welafre) as human capital flow towards more adv ecos & source c shortages of skilled workers
• ecos exp outwards igration benefit from remittance inflows, interconnected bus networks & shared tech developments
• usually smaller c’s w/ lower pop

Question 40

social media impact on globalisation

Answer 40

• create online communities, social media platforms connect individuals
• central to marketing consumer g&s,
• firms use prof networks eg. LinkedIn to sourceb est talent from global LM

Question 41

international division of labour evidenct in the shift of businesses between ecos (mroe than just ppl)

Answer 41

• shift prod betw ecos to search most cost-effective labour
• producers operate “GLOBAL SUPPLY CHAIN” w/ prod in several c’s ‘OFFSHORING’ allows shift prod betw countries to reduce costs

Question 42

comparative advantage (which is reflected by the international division of labour)

Answer 42

theory “ecos should specialise in prod of g&S they can produce at lowest opp cost”

• developing ecos have large pop of workers only basic labour skils & edu lvls give C.A. in labour-intensive manufacturing
• adv ecos shifted away from this to specialised services using highly skilled workers, greater supply in adv ecos.

Question 43

business cycle

Answer 43

flucatuations in lvl eco growth due to dom/international factors\

• caused by lvl of AS and AD

Question 44

GDP

Answer 44

total market value all g&s prod in eco over PIT

• ecos usually exp overall growth trends output

Question 45

international bus cycle

Answer 45

fluctuations in lvl eco activity in global eco over time

synchronised fluctuations in lvl eco activity across c’s due to int. trade, GFMs, geopolitical tensions

• synchronised BCs diff c’s exp similar eco fluctations lvl eco activity same time (trade & financial integration)
  sustaining steady rate of growth yearly, most ecos periods above avg growth –> periods below avg
• eco growth stronger when rest world growing strongly, weaker when rest downturn

Question 46

hoe do eco conditions overseas affect aus eco condtions?

Answer 46

AUS small open eco –> esp affected by eco overseas eco grwoth rates domestic factors have 1/2as much influence as international factors on eco grwoth every yr (60% changes in lvl output from changes in IRs, growth lvls, inflation in G7 largest industrialised c’s)

Question 47

TITTCGC

what makes the transmission of eco conditions bestween countries more immediate by increased integration during globalisation era?

Answer 47

1. trade flows
   * boom/recession 1 c affects demand for g&S in other c’s
   * growth in eco flow on effects on trading partners growth
2. investment flows
   * eco conditions affect if bus invest in operations in other c’s –> eco growth
3. transnational corps
   * global up/downturns spread throughout global eco
4. FM and confidence
   * consumer condience, investors influenced by conditions other c’s
   * strong correlation betw movements in share prices
5. global IR lvls
   * MP conditions in ind ecos strongly influenced by IR changes in other countries (central banks)
   * higher eco growth, ^ IR overseas, pressure on other ecos follow
6. commodity prices
   * energy, minerals, agri set by global markets (price) –. influence lvl inflation, investment, employment, growth

Question 48

**national **factors influence BC areflect the following despite links betw ecos, PACE of eco growth differ* betw c’s. AKA WEAKEN IMPACT IBC on DOM ECO

Answer 48

^ protection, capital controls, foreign invstment restrictions weaken impact but less integrated eco reduce eco grwoth (cant access global investment capital, cheaper goods via trade, CA)
1. IRs

• sig impact on eco activity,
• higher IRs dampen eco activity, lower IRs stimulate

2. GVT eco policy decisions

• FPs sig eco growth in S-MT
• if C1 ^tax while C2 vtax, eco growth move in opp directions

3. EXCHANGE RATES
   * impact **lvl **trade competitiveness & confidence w/n ecos –> influence eco growth
4. structural factors

• c’s diff lvls resilient Financial systems, diff lvls innovation, new tech, cons & save behaviour, training & edu emp, bus regulation
• influence competitiveness & growth

Question 49

regional business cycle

Answer 49

fluctuations in lvl eco activity in geographical region of global eco over time

• regions w/ higher prop developing/low income c’s less regionally integrated
• RBC dominated by most globalised, largest ecos
• smaller ecos affect perf of regional ecos indirectly
• some regions perf stronger than others and fluctuate more indepdendently, however RBC result from ^ cross-border integration
• since AUS trades extensively w/ asian ecos, its BC influenced by asian RBC

Question 50

FACTORS STRENGTHEN & WEAKEN INTERNATIONAL BUSINESS CYCLE

Answer 50

strengthen

• trade flows
• investment flows & investor sentiment
• TNCs
• financial flows
• tech
• global IRs
• commodity prices
• international orgs

weaken

• domestic IRs
• gvt fiscal policies
• exchange rates
• structural factors
• regional factors

Question 51

eg. Aus & China comparative advantage

Answer 51

eco principle that nations should specialise (produce and export) goods w/ lowest opp cost & trade (import goods that other c’s can produce more efficiently) w/ nations to maximise both nations’ SOL
* eg. AUS lower OC producing iron ore than China (to produce extra tonne of iron ore, AUS gives up producing smaller quantity smartphones than China) AUS would have comparative adv in iron ore production

Question 52

are trade barriers falling or rising in recent years? what has trade done (Summary)

Answer 52

rising! (although broad trend recent decades towards more free trade in global eco) world experienced LT trend towards greater free trade in global eco

Question 53

free trade

Answer 53

gvts impose no artificial barriers to trade restricting free exchange of g&s betw countries to shield domestic producers from foreign competitors

Question 54

7 adv of free trade

GCL

Answer 54

• allow countries to obtain g&s they cant produce themselves/ sufficient quantities to satisfy domestic demand (lack adequate resources eg. tech to produce manuf goods)
• countries can specialise in production of g&s comparative adv for better resource allocation –> ecos of scale lower avg costs of prod while ^ productivity & ^ production w/n countries & throughout world
• ^ international competitiveness as domestic bus face greater competitive pressures from foreign producers, gvts encourage domestic industrial efficiency
• encourages innovation & spread of new tech & PPs throughout world
• higher LS from lower prices, ^ prod g&S & ^consumer choice as countries access goods that lack of natural resources would’ve prevented
• open global markets –> ^ export opps & expand output –> ^ rates eco growth & ^real incomes) –> multiplier effect when ^ export income bc export industries hire more workers who spend income other industries –> ^output & emp…
  *

Question 55

effects of trade protectionism

Answer 55

S&LT effects on macroeco
1. consumers limited choice, pay more for g&s
* for quantity, quality, type product otherwise available w/o
* prot. policies to safeguard industries & jobs –> consumers settle for poor quality & pay more for limited quantity –> ^ inflation –> pay/purchase less of product/not –> hurt dom firms financially, needs prod costs to pass
2. TRADE WAR AMONG NATIONS
* Nations take reciprocal action, retaliate even if political & military allies –> consumers of c’s ^ costs & limited choice –> ^import costs (producers pay mroe for equip, commodities, intermediate goods from foreign markets) –> real GDP growth

Question 56

4 disadv of free trade UIDE

Answer 56

1. ^ unemployment as some domestic bus find it hard to compete w/ imports
   * ST rise u/e corrected in LT as domestic eco redirects resources to areas of prod w/ comparative adv
2. some industries, workers, regions neg aff LT
   more diff for less adv ecos to est new industries if not protected from larger foreign competitors
3. production surpluses from some c’s may be Dumped (company exporting a product to a foreign market at a price lower than normal value, below the cost of production/price it charges in its home marke to gain comp adve in the foreign market, drive out competitors, build market share.) on domestic market, hurt efficient domestic industries
4. encourage enviro irresponsible prod methods bc producers in some nations may win markets by undercutting comp’ prices bc they also undercut enviro standards
5. C’s persistent trade deficits –> ^reliance overseas borrowing/foreign investmnet –> foreign investors lose confidence
6. national security undermined if supply chains disrupted during war/pandemic, cant source defence equip/vaccines

Question 57

(gvt) protection

Answer 57

gvt policies give domestic producers artificial adv over foreign competitors DIED

Question 58

protection for infant industries

Answer 58

• new industries face many risks & difficulties early yrs, start small scale w/ costs relatively > est competitors in other c’s
• shield from competitors in short run to build capacity, establish markets, achieve ecos of scale to compete in global eco
• esp for emerging ecos recent decades w/ developing new industries
• gvts should provide direct temporary assistance only for industries likely to achieve some comparative advantage in LT to compete in global eco
• used to support many industries would’ve never survived, reluctant to accept bus seeking protection using this argument

Question 59

how do we test economic credibility of asking for protection using the infant industry argument

Answer 59

• whether industry protection removed over time: if protectionist policies not removed, no real incentive for industry to reach lvl efficiency that would enable it to compete w/o protection
• gvts temporary assistance only to industries likely achieve some comparative adv in LT to compete in global eco

Question 60

what is dumping?
how it harms domestic producers? why do foreign firms dump?

Answer 60

exporting goods to country at lower price than selling price in country of origin
* foreign firms try to sell their goods in another country’s market at unrealistically low prices (below price in home country market) too eliminate comp in foreign c
* usually temporary but harm domestic producers normally compete w/foreign firms forced out of bus and lose productive capacity of eco& higher u/e
* to gain market share in a foreign market, drive out local competitors, or dispose of surplus production.
* harm the importing country’s industries by undercutting domestic producers

Question 61

what protection is used for dumping? recently, what did the WTO question abt dumping accusations?

Answer 61

• using protectionist methods (restrictions on imports) to prevent dumping only reason for protection widely accepted
• recently WTO question whether countries may unfairly accuse efficient low cost foreign producers of dumping & abusing ‘anti-dumping’ processes to protect domestic industries

Question 62

what is the only gain from dumping (why we need to prevent using protection)

Answer 62

• only gain is results in lower prices for consumers in ST but doesn’t last bc foreign producers ^ prices once local comp eliminated

Question 63

check textbook

protection to (protect) domestic employment

Answer 63

• if local producers protected from competition w/ cheaper foreign imports, ^ demand for local goods –> create more domestic employment
• but during recession when ^ u/e, more bc tech & automation than trade contributing to job losses
• but protection would distort allocation of resources away from areas more eff production to less eff –> LT ^ u/e and lower eco grwoth
• phasing out protection better, lasting jobs in other sectors internationally competitive
• if c protects industries others can retaliate and adopt dimilar policies –> employment in less eff protected indutries but lower emp in more eff export industries

Question 64

protection for self-sufficiency for natioanl security & other essentials (Defence)

Answer 64

• retain own defence industries so during conflict able to produce equi needed for national security
• countries eg. US don’t buy crucial defence equipment from overseas countries, concern Chinese telecommunications networks monitored by gvt despite being cheaper, more adv than competitors
• shortages of emergency medical supplies during pandemic, 1/2 medical supplies manuf in China who prioritised domestic needs and others unable to obtain quickly enough compound spread
• vaccine shortages globalisation made many ecos too reliant on fragile global supply chains (despite fact made them available globally)
• must accept loer LS than if specialised CA & free trade

Question 65

global supply chains & trade protectionsit policies issue

Answer 65

• global supply chains create vulnerabilities for countries w/ limited manuf capacity eg. AUS (arnotts couldn’t make tim tams cause china didn’t have plastic biscuit trays even though they’re manuf locally)
• debate betw global supply chains vs self-sufficiency on how nations respond to globalisation
• implementing protectionist policies must accept higher costs involved producing goods locally compared to sourcing from countries w/ comparative adv in producing them

Question 66

why countries restrict own producers from selling to other ocuntries

Answer 66

• non-eco reasons eg. aus restricts uranium exports to reduce risk used to produce nuclear weapons
• normally impose trade restrictions on imports to prevent goods from overseas sold in their country

Question 67

trade protectionism

Answer 67

• gvt eco policies & measures to restrict amt foreign g&S entering domestic market
• protect local bus, indus, jobs from int. comp by making foreign products mroe expensive/less accessible

Question 68

other arguments in favour of protection of local industries

Answer 68

• wage differentials betw higher & lower income ecos, producers ‘should be’ protected from comp w/ c’s that produce goods w/ low cost labour bc developing ecos, weak labour standards eg. restrict worker rights to form unions, low safety standards
• growing awareness of modern slavery in global supply chains, gvts prohibit trade of goods produced using forced labour eg. prison workers, child labour
• prevent human rights abuse despite protectionist consequences
• enviro factors eg. enviro harm in prod some goods
• overseas producers produce cheaply bc don’t have to comply w/ strict enviro standards in adv ecos

Question 69

trend in methods of protection

Answer 69

• shift from traditional protectionist measures (tariffs, subsidies) towards less visible ones eg. subsidies,, tax concessions, LCRs, administrative barriers & industry assistance plans

Question 70

tariffs as method of protection (check 2025 for diagram)

Answer 70

taxes on imported goods to protect aus industries
* gvt imposed tax on imports, raises price of imported goods so domestic producer more competitive –> (Domestic) demand contracts, supply expands, imports fall
* no tariff = free trade

Question 71

5 economic effects of a tariff

Answer 71

1. domestic producers supply greater quantity of goods, stimulates domestic production & employment
2. more domestic resources attracted to protected industry –> reallocate resources towards less eff producers who unable to compete on equal footing w/ foreign producers
3. consumers pay higher price and receive fewer goods, redistributing income away from consumers & foreign firms to dom firms & gvt –> lower consumption & output
4. Raise gvt revenue but not primary objective, more successful as protectionist device (restricts more imports) raise less revenue
5. retaliation effect may occur
   * countries can respond to tariffs on imports by imposing tariffs on goods exported to them
   * ^ prod & employment gains for import-competing industries offset by losses by eco’s export industries

1.

Question 72

quota as a method of protection

Answer 72

restrictions on quantities of various goods thatcan be imported
* controls volume of goods allowed to be imported over given PIT
* guarantees domestic producers a share of the market
* raise price of imported goods, expand domestic supply

Question 73

compare quotas & tariffs

Answer 73

both used in international trade policy to regulate flow of imports

QUOTA
* direct limit on quantity of a good that can be imported/exported in PIT
* Once quota reached, no additional units of good can be imported until the quota period resets.
* restrict the supply of goods –> scarcity –> ^ price.
* dont generate gvt revenue but benefit domestic producers by limiting foreign competition

TARIFFS
* tax/duty imposed on imports, usually as % of good’s value/ fee per unit.
* make imports more expensive, –> price advantage to domestic goods
* generate gvt revenue
* can be adjusted flexibly (e.g., raised or lowered), whereas quotas are rigid limits

Question 74

tariff quotas, which sectors most common

Answer 74

protectionist method where quantity goods imported up to quota levied at standard tariff rate whereas additional goods imported above quota limit pay higher tariff rate
* common in agricultural trade, where countries want to protect their farmers while ensuring some foreign products enter the market at competitive prices
* AUS highly protected industries (textiles, footwear, motor vehicles) ​

Question 75

5 eco effects of a quota

Answer 75

• domestic produers supply greater quantity of good, stimulates domestic production & employment in protected industry
• resources in eco attracted to protected industry–> reallocate resources from other sectors where prod & employment fall
• consumers pay higher price and receive Fewer goods, redistribute income away from consumers to dom producers in protected industry –> lower lvls eco growth
• unlike tariffs Dont directly generate revenue for gvt but can sometimes raise small amt revenue by administering quoate by selling import licences, allow firms to import limited no. goods
• like tariffs invite retailiation from country whose exports reduced –> lower exports for country initiated import quota

Question 76

subsidies as method ofp rotection

Answer 76

gvt financial assistance/cash payments to bus to encourage production of g/s & influence allocation resources in eco, can be tax concessions/cheap loans than direct payments

• financial assistance for dom producers, reduce selling price and compete easily w/ imported goods
• lower market price rightward shift of supply, ^ quantity produced,
• lower production costs for dom firms, –> lower prices, –> more competitive dom & globally –> discourages consumers from purchasing imports,–> protect domestic industries from foreign competition
• RENT SEEKING BEHAVIOUR –> firms try ^ welath w/o contributing wealth society by lobbying gvt, resources to unproductive activity to maintain/^ protection than invest for output/efficiency

Question 77

eco effects of subsidy

Answer 77

• more rsources in eco attracted to protected industry–> reallocates resources from other sectors of eco where prod & employment falls, –> domestic producers supply greater quantity of goods, stimulates Domestic production & employment in protected industry
• consumers pay **lower price ** and receive mroe goods bc subsidy shifts supply curve for sector to right but consumers still indirectly pay for subsidies through higher taxes
• direct costs on gvt budgets bc gvt payments to producers of g&s –> ** fewer resources to allocate** for other priorities (edu, healthcare)
• many prefer subsidy > tariff bc subsidies abolished quicker since they impose costs on the budget than generate revenue

Question 78

local content rules as a method of protection (check over in 2025)

Answer 78

• industry regulations & gvt procurement policies
• goods must contain min % of domestically sourced labour, materials or parts to be sold in c
• imported components may not attract tariff if certain % of good locally made

Question 79

export incentives as method of protection

Answer 79

programs give domestic producers assistance (grants, loans, technical advice eg. marketing/legal info) & encourage bus to penetrate global markets/expand existing overseas market share
* popularity grown considerably recently bc nations moved greater focus to capture foreign markets > protecting import-competing bus as strat to achieve higher rates eco growth & employment
* don’t protect businesses from foreign comp in dom market but still artificial barrier to trade
* eg. grants for expenses entering int markets (AUS EMDG), concessional loans mroe favourable terms than market lenders

Question 80

overall eco effects of protectionism

Answer 80

• higher prices for ocnsumers + disrupt global supply chains ^ input costs bc fewer imports –> domestic prod less comp –> ^ prices
• trade wars as other c’s, trading partners retaliate & respond by impose own restrictions –> reduce access to export markets & hurt industries rely on int. trade
• over medium term, countries that raise tariffs experience lower output, weaker productivity, increase u/e & increased inequality by shielding ineff producers –> reduce global eco grwoth, lower LS
• more diff for ind ecos to specialise in production where most efficient
• negative eco impact of protectionsit policies larger relative to size of ecos for developing ecos, excluded from access to markets of adv ecos, most benefits of global trade liberalisation to developing countries

DOM ECO: LT lower output, emp, income, consumer choice –> LS, misallocate resources, prices

• weaker fiscal position (lower eco grwoth & incomes + ^expenditure industry assistance –> lower tax rev)
• lower productivity grwoth –> eco grwoth bc less int comp –> lack incentive to innovate, use outdated tech & work practices

GLOBAL ECO
lower GWP, LS, producitvity grwoth, ^u/e & prices from shielding ineff producers

Question 81

trade bloc & regional trade blocs

Answer 81

group of c’s join together & agree in formal preferential TA to the exclusion of other countries

• to reduce/eliminate trade barriers betw themselves
• >1/2 int. trade covered by RTAs, multiplied recent decades
• but concerns of trade diversion
• extent countries trade w/ other ecos w/n regional trade blocs varies betw regions
  regional trading bloc consist c’s located in geographical region
• can result in global trade fragmenting into self-contained regions, hinder spread of global free trade (some ^ lvl trade among themselves > outside trade area)

Question 82

(free) trade agreements, bileral trade agreement, multilateral, global

Answer 82

formal agreements betw countries to reduce trade barriers betw those nations
* agreement betw 2 countries is bilateral & betw 3/+ ecos, multilateral
* more accurate as preferential > free bc give more favourable access to g&s from 1 nation/group of em compared to another
* sometimes makes it harder for nations outside preferential TA esp developing ecos to trade (may not create better conditions for free trade as developing ecos struggle to access global markets)
* global conducted through WTO to remove barriers to trade uniformly across all ecos
* since 1980s profound ^ (non WTO), gvts choose preferential trade partners –> lucrative markets to develop export opps –> fragment & disrupt global supply chains

Question 83

trade diversion

Answer 83

• when imports/trade shifts from a more efficient (producer) exporter to a less efficient one (another country) due to the formation of a TA/bloc.
• when c’s inside trading bloc reduce/ eliminate trade barriers among themselves, but maintain barriers for non-member c’s. –> goods previously imported from the most cost-effective global producers outside bloc may now be sourced from less effi producers within bloc, bc of the preferential trade terms. eg. tariff lvls, import quotas
• trade usually ^s faster betw countries w/ trade agreements but this is an issue

Question 84

regional & bilateral trade agreements debate

Answer 84

extent regional & bilateral trade agreements assist/obstruct progress towards global free trade
* some say slices world into separate trading areas
* others say regional trade agreements step towards free trade –> convince ecos to reduce protection barriers against small group of ecos –> eventually remove barriers for world

Question 85

APEC forum (multilateral trade agreement)

Answer 85

Asia- Pacific Economic Cooperation forum

• 1989, 21 c’s response to trading blocs forming other areas eg. EU, NAFTA
• original vision est free trade among member countries by 2020 not achieved
• progress trade liberalisation, avg tariff rates reduced
• APEC meetings never resulted in regional trade agreement but still creates forum for annual meetings of member c’s leaders to discuss geopolitical priorities, help develop other TAs (cp-tpp)
• not preferential trade blocADOPTS NON-DISCRIMINATORY arrangements (nations trade with c’s outside grouping on same basis as forum members if prepared to give equal access to their markets) unlike EU which ^ trade barriers for external countries
• goal never formalised in a TA and most annual meeting of leaders focus on terrorism & climate change –> receded frin centre of AUS trade policy
• still indirectly supported trade liberalisation among members
• 62% GWP, 48% GLOBAL TRADE

Question 86

ASEAN multilateral agreement (check 2025)

Answer 86

association of South East Asian Nations

• est 1967 covers emerging & developing ecos in SE Asia, most effective for trade in Asia Pacific
• primarily trade with c’s outside their region bc they’re smaller emerging ecos & eco grwoth strats centre around exports to industrialised ecos
• 2007 ASEAN leaders create blueprint ASEAN Eco Community AEC to create single market of ~600 mill –> free flow of g, s, capital, labour & enhance attractiveness of SE Asia as foreign investment destination & improve lvl regional integration
• but substantially ^ lvl trade among themselves compared w/ to other c’s outside trade area (but continued to grow) –> risk that regional trade blocs result in global trade fragmenting into self-contained regions –> hinder spread of global free trade

Question 87

preferential vs free trade agreements

Answer 87

• PTAs offer partial reductions betw member c’s, while FTAs aim to eliminate most trade barriers.
• FTAs typically lead to a higher deg of eco integration betw c’s than PTAs.
• PTAs provides preferences, eg. lower tariffs for some products, compared to non-member c’s.
• Partial/limited trade liberalisation, less comprehensive and many trade barriers intact
• FTA more comprehensive agreement to eliminate most/all trade barriers between member c;s across wide range g&s, encourages broader eco integration
• near/Full trade liberalization for free movement of g&s, although some sectors excluded

integration, trade liberalisation, comprehensive,

Question 88

European Union

Answer 88

most important trade bloc in global eco
* 27 member countries across Europe
* 17% of global GDP, recently weakened by departure of UK
* Common External Tariff against non-member countries–> high rates of protection on agri products (Common Agricultural Policy, reduce market access for adv ecos for agri exports and dev c’s for agri products) –> trade diversion
* within EU 20 member countries participate in monetary union ‘eurozone’ adopting a common currency (euro) and common IRs & MP (Eur Central Bank), major role in eco integration among eurozone c’s, promoted trade & eco integration among member countries
* trade off reduce national sovereignty limited ability to make independent decisions eg. trade, immigration

Question 89

monetary union

Answer 89

agreement between 2/+ c’s/regions to adopt a shared currency & coord their MPs

• reduce cross-border transaction costs, eco integration among the member states, ^ trade & financial flows betw em
• share common IR

Question 90

bilateral trade agreements CERTA (not listed)

Answer 90

Closer Economic Relations Trade Agreement betw AUS & NZ in 1983
* one of most comprehensive FTAs in world
* prohibits all tariffs & export restrictions
* gradually extended in recent yrs to harmonise bus regs & tax laws betw NZ & AUS

Question 91

why have bilateral trade agreements experienced a resurgence in recent years? WP

Answer 91

• slower progress of WTO’s negotations –> Doha Round of WTO negotiations stalled for since 2001 –> c’s turn to BTAs bc quicker & easier to negotiate than multilateral w/ nations of divergent interests
• respond to rising protectionism using BTA to maintain/safeguard open trade betw c’s ensure free trade continues when protectionist measures globally rising
• easiest TA to negotiate bc only factor interests of 2 participants

Question 92

disadv of bilateral trade agreements

Answer 92

• impact smaller than gvts claim ‘large ^ trade’ bc costs establishing & implementing underestimated
• can contribute greater ‘trade diversion’ , not add to world trade but divert to nations in agreement
• do not guarantee harmonious relationship
• only reduce protection on country-by-country basis –> fewer eco wide benefits than trade liberalisation involving many c’s

Question 93

debate among economists abt effectiveness of bilateral trade agreements promoting global free trade

Answer 93

• may move towards global free trade but also hinder progress by focusing only 2 c’s than creating multilateral trade systems
• costs of est & maintaining BTAs underestimated, not provide as much eco benefit as promised bc expenses in negotiating & enforcing
• trade diversion, trade redirected to countries part of agreement than increase overall global trade ( may not expand total amt trade globally but just shift trade flows from 1 country to another)
• benefits of BTAs often overstated by gvts, who claim result in large increases in trade but often smaller than expected

Question 94

3 major institutions in global eco + 2 others

Answer 94

WTO, IMF, World Bank

others Org for Eco Coop & Dev (OECD), United Nations (UN)

Question 95

WTO

Answer 95

• global org enforces exisitng WTO agreement, resolves trade disputes & is major forum for global trade negotiations pursuing global free trade
• role to implement & advance global trade agreements
• formed 1 Jan 1995, 1st international org w/ powers to enforce trade agreements across world
• 1993 AGREEMENT TO FORM NEW GLOBAL TRADE ORG w/ enforcement powers reach beyond trade in goods & include trade in services (insurance, banking) & intellectual property (copyright, trademarks) after replacing GATT (general agreement on tariffs & trade)
• power extended beyond trade in goods to include trade in services which GATT didn’t
• 164 member countries, halved avg tariff rates among member ecos and negotiate agreements to free up world trade since, signed voluntary agreements to reduce trade barriers in financial services, info tech, telecoms, shipping

Question 96

before WTO, GATT and weakness

Answer 96

GATT (General Agreement on Tariffs & Trade) responsibility for developing TAs

• GATT process regular rounds of trade negotiations conducted but lacked an enforcement mechanism so many c’s only implemented parts of GATT agreements

Question 97

describe WTO’s role in settling dusputes betw countries

Answer 97

• if country believes it’s suffering harm from another’s failure to comply with its WTO obligations, lodge complaint w/ WTO
• Dispute resolution process commences, if no agreement reached directly, WTO panel hear complaint and issue decision
• if country doesn’t comply w/ WTO’s directive, other country/’s can impose trade sanctions (high tariffs on goods imported from offending nation)
• effective betw smaller c’s but less betw 2 largest forces in global eco (US and EU) who haven’t formally refused to comply but delayed & continued to lodge appeals than accept WTO decisions

Question 98

Doha Round of trade liberalisation talks (WTO)

Answer 98

began with goal to:
1. reduce agricultural protection,
2. lower tariffs on manuf goods
3. reduce restrictions on trade in services to lift millions out of poverty
* failed due to disagreements on access to agri markets, restrictions on producing pharmaceutical medicines, disputes betw developed & ing nations & arguments on manufacturing protection
* produced some results (voluntary agreement 2015 to reduce export subsidies for farm exports)

Question 99

why has WTO’s role weakaned after 25 years being estalbihsed

Answer 99

global rise in protectionist sentiment
* US historically leading advocate for free trade & WTO but Trump Admin accused WTO failing to stand up to China’s breach of trade rules threaten to leave WTO

Question 100

International Monetary Fund

Answer 100

international agency oversees stability of GF system.

• ensure stability of ERs, ER adjustment & convertibility
  role to maintain international financial stability esp in forex markets
• central role addressing financial crises in ind c’s
• early role to oversee system of fixed exchange rates to stabilise eco relations betw ecoes but collapsed in 1970s –> ensure global financial stability
• during financial crisis in eco, region, world, IMF minimises crisis
• LT support free trade of g&S & free movement of finance & cpatial throughout world markets
• often requires countries to change eco policies (adopt structural adjustment policies eg. reduce size of gvt, privatise GBEs, deregulate markets, balance gvt budgets) and open up their markets before receiving financial assistance
• many international banks & private lenders require countries adopt IMF-supported policies before willing to lend to them, often tailors policies to wider eco priorities focusing on climate risk more recently
• address financial crisis in mind countries, develop ‘rescue package’ to help stabilise eco
• 2010 altered gvt structure to give developing & emerging ecos greater say over IMF policies

Question 101

IMF criticism

Answer 101

during financial crisis where its policies made conditions worse for ecos
* neg impact of some reforms IMF demanded
* 2010s sovereign debt crisis in Europe IMF’s demands harmed most vulnerable groups in society while protecting FIs, disproportionately affected
* moving too slowly/cautiously during COVID

Question 102

World Bank (international bank for reconstruction & development) role & aim

Answer 102

role helping poorer countries w/ economic development by providing grants, loans, aid & assistance
* fund investment in infrastructure,
* reduce poverty,
* help c’s adjust ecos to demands of globalisation

Question 103

world bank 2 major goals

Answer 103

1. reduce rate of extreme poverty to <3% world’s pop by 2030, so most experiencing ‘frictional poverty’ related to ST disasters eg. extreme weather events
2. reduce inequality by fostering income growth for world’s bottom 40%

Question 104

world bank organisations providing specific assistance to lower income countries

Answer 104

1. provides ‘soft loans’ loans at low/0 interest to developing c’s

• funds used for projects on health, edu, infras

2. promote private sector investment & development by providing investment, advice, asset management
   * direct financial assistance to private sector projects in LI c’s to stim eco growth, job creation, private investment
3. provides conciliation & arbitration of investment disputes betw States & investors –> stable enviros for investment in LI c’s

• no direct financial assistance but crucial ensuring legal disputes handled fairly

5. risk insurance to private investors & ATTRACT FOREIGN investment

• with IFC stimualte private sector growth for eco development in low incoem nations
• promotes FDI by providing political risk insurance & credit enhancement to investors & lenders

Question 105

hwo is the World Bank funded & what does it make loans for (global importance as lender over recent decades)

Answer 105

by contributions from member c’s and from own borrowings in GFMs
* makes loans to developing nations at rates below standard commercial rates to fund infrastructure projects eg. power plants, roads
* funding in pandemic helped countries obtain vaccines, strengthen health systems & reduce eco damage from pandemic
* global importance as lender to developing countries declined as private lending markets expanded recent decades

Question 106

United Nations + limitation

Answer 106

global org whose membership covers 193 member states (mroe nations than any other political/eco org)

• primary role administer WTO, IMF
• develop several international agreements to enforce human rights & political freedoms which strengthen country’s prospects for eco growth & dev
• limited decision making powers bc LACK OF ENFORCEABILITY, relies on support of its member states & budgets for diff arms of UN are small compared to national gvts in adv ecos

Question 107

UN agencies

Answer 107

develop international standards easier for trade & investment flows betw nations
* World Health Org
* UN Children’s Fund (UNICEF)
* UNHCR/ UN Refugee Agency

Question 108

UN Global Goals/Sustainable Development Goals

Answer 108

• established to reduce global poverty & inequality 2015-2030,
  17 goals covering:
• global poverty,
  *hunger,
• wellbeing,
• education,
• gender equality,
• clean water & sanitation,
• clean energy,
• eco growth,
• sustainable cities,
• climate action,
• sustainable use of land & oceans

incorporate 169 targets that UN member states pledged to take action towards from 2015-2030
* only minor progress made on most goals since

Question 109

OECD Org for Eco Cooperation & Development

Answer 109

international eco org of 38 mostly adv ecos committed to democracy & open markets

• primary goal conduct & publish research on wide range eco policy issues and coord eco coop among member nations eg. develop common policy agendas
• advocate ‘inclusive growht’ starts challenged trad assumptions that policymakers must trade off inequality vs eco growth, bc many concerned lvl inequality ecos constraint on eco growth
• 2021 int agreement to reform corp tax rules min tax rate to reduce incentive for TNCs to divert revenues to offshore tax havens to avoid paying tax
• limited bc doesnt hold tangible powers for action

Question 110

gvt economic forums (G20, G7/8)

Answer 110

orgs as forums for world leaders imp coordinating policies betw major ecos esp eco/financial crisis

• aim to enable heads of state along w/ treasurers & central bank governors to discuss global eco issues w/ attention to eco stability & growth
• early 2020s fostered greater coop of F&MP responses to pandemic, align climate change policies, overhauling taxation of TNCs

Question 111

Group of Seven Nations (G7) as gvt eco forum

Answer 111

• recent decades most important
• 7 largest industrialised nations (US, UK, France, Germany, Canada, Japan, Italy)
• eco council of world’s wealthiest nations meet annually to discuss global eco conditions
• unofficial forum of industrialised democracies coordinating global macroeco policy bc influence over F&MPs of world’s largest adv ecos
• agenda often includes issues climate change, global poverty, (int) security

Question 112

criticism of G7

Answer 112

membership no longer represents most important forcesi n global eco as nations like China & India more important to global eco than Canada & Italy
* share of global GDP shrunk, cover only 10% WORLD’S POP
* DIDNT PROVIDE MAJOR LEADERSHIP ROLE WHEN GLOBal eco faced sudden onset of pandemic w/ dislocation of trade, travel, eco activity
* recent years attempt to expand to include 5 developing countries named Outreach Five (O5) Brazil, China, India, Mexico, South AFRICA
* nothing really happened out of it…

Question 113

G20 as gvt economic forum

Answer 113

19 world’s largest national ecos + EU, cover 80% worlds GDP and 2/3 world’s pop

• membership includes several emerging ecos become driving force behind world eco growth since 2008
• key role in global response to GFC( helped coordinate fiscal stimulus& improve supervision of global financial system & international FIs), less central addressing pandemic (mostly determined at national lvl)
• international eco coop weakened recent yrs due to US absence of leadership/other major ecos
• main activity rn is its annual summit dealing with range of current issues and doesn’t advance specific eco goals, relying on individual heads of state to provide leadership to advance shared goals but efforts towards international coop weaker recent yrs

Question 114

global eco large diff in LS of ppl around world

Answer 114

• opp life vary sig in health, edu, income, life expectancy
• despite tech progress, inequalities persist betw poor & wealthy c’s & within them
• but overall LS improving in most countries rich & poor

Question 115

most popular method for comparing LS betw diff ecos

Answer 115

income

• measures ability of nation’s citizens to satisfy material wants
• GNI sum of value added by all resident producers in an eco plus receipts of primary income from foreign sources/total income earned by domestically owned FOP over POT aka regardless earned within/across borders
• unlike GDP doesnt account income of foreign residents earned from dom production but includes income receieved by dom residents from overseas production
• IMF & WB classifies ecos as low/mid/high income c’s
• wealth available to c’s citizens esp w/ large pops working abroad/sig foreign investments
• if domestic eco (GDP) ^ but its citizens/companies have sig investments/workers earning income abroad, GNI > GDP
• if foreign investors make more money within C than domestic investors earn abroad, GNI COULD BE < GDP**
• Real GNI figures obtained by discountign GNI growth for effects of inflaiton
• broader measure by including int. income flows (mroe comprehensive)

Question 116

differences betw EG & ED

Answer 116

• EG ^ real GDP over POT
• quantitative –> measure ^GDP, income, emp, LS
• by ^AD/AS (usually both)
• ^AS expands eco’s productive capacity by 1. ^use resources (quantity) eg. unutilised land, LF^, adopt new tech & 2. ^productive use existing resources (quality) eg. capital ^productivity land & labour, edu & training programs ^ labour, capital productivity
• ^AS –> outward shift eco’s PPF (when producting at capacity, EG only if mroe resources available/tech adv/efficient use existing resources) –> current & future LS ^

ED improvements wellbeing of nation’s ppl

• qualitative –> measure life expectancy, mean yrs schooling & real GNIpc (measures income > output w/ GDP)
• outcome of EG, related to structural change which comes with sustained EG:

1. transform society from rural & agri based to urban & industrial/service based
2. change emp patterns (bc of it) & ^mechanisation
3. construct eco & social infrastructure (roads, ports, railways, power plants, schools, hospitals)
4. educated, healthy pops (mroe productive WF) w/ high disposable incomes (capacity to drive further growth via consumer expenditure)

Question 117

process of ED through links of S, I, resource use –> EG

Answer 117

1. savings channeled through FMs to bus for investment –>^quality LLC –> ^ productivity –> EG
2. benefits EG shared (VARY EXTENT) w/ distribution of income to workers, –> ^real LS -
3. higher incomes –> ^saving –> mroe investment & EG

Question 118

why do developing nations struggle to achieve & sustain consistent rates EG?

Answer 118

• lack SAVINGS to fund INVESTMENT
• obtain finance by borrowing overseas/attract foreign investment but both diff bc risk for lenders & must repay w/ interest & investment benefits repatriated (returned to c)
• lack DOMESTIC DEMAND to ^output & attract investment
• some pursue export-led growth to ^EG but msot developing c’s lack comparative adv

Question 119

how are ED & EG related

Answer 119

EG & ED related bc EG required for & leads to ED, ED creates conditions conducive to ^EG

Question 120

one limitation comparing size of ecos & how economists adjust to this

Answer 120

the exchange rate/currency used
* if use USD, inaccurate comparison LS comparisons esp developing c’s
* price of g&s in developing C low relative to prices in US, measuring GNI in USD terms underestimate true income of ppl in developing C’s (exchange rates tend to be undervalued)
* adjust by using PPP (purchasing power parity) before comparing GNI lvls betw c’s
* adjusts GNI (eco sizw) to reflect PP of currencies within nations , compare real income betw c’s

bc market ERs may not reflect true diffs (FLUCTUATE: driven by speculation, IRs, trade imbalances than just price lvls/SOL,, PRICE LVLS can vary dramatically betw c’s)
* if 2** c’s similar GNI at market ERs but 1 lower cost of living, PPP shows ppl in cheaper c have higher REAL PP**

Question 121

pURCHASING POWER PARITY

Answer 121

• rates of currency conversion that try to equalise the PP of diff currencies, by eliminating the diffs in price lvls betw c’s.
• to compare relative value of currencies based on prices of a standardised basket of g&s in diff c’s & adjust for diffs in cost of living & inflation rates across c’s
• measures how much a unit of a currency can buy in g&s in diff c’s
• compares the cost of a standardised basket of goods across c’s (if basket $50 US & $45 EU, PPP ER 50/45 = 1.11$EU worth)
• avoids issues caused by ST ER volatility –> measure real value of moeny in each c by focus PP than market ERs

Question 122

income between global eco but what must we also consider when comparing LS betw c’s?

Answer 122

• high lvl inequality as **high income ecos receive 2/3 world’s income in raw GNI but <1/2 PPP adjusted figures, 1.2bn ppl out of 8bn (low income ecos <1% size global eco)
• consider POPULATION SIZE of ind countries & rate of pop growth using real GNI per capita (divide by pop)
• ppl in high income regions 1/7 ppl enjoy income lvls ~5 times than low & middle income countries after adjusting PPP
• LS extremely low in sub-saharan Africa & south Asia regions 1/3 world’s pop

Question 123

what has been the trend in eco growth for most nations in recent decades?

Answer 123

almost all nations experienced eco growth –> higher incomes due to ^ in GDP

Question 124

is the gap in cinome betw richer & poorer countries closing quickly?

Answer 124

no although gap lessening reduction of income inequality in global eco very slow

Question 125

distrubtion of wealth as measure of global inequality

Answer 125

• wealth distributed more unevenly than income in global eco
• unlike income (flows vary over time when ind’s contribution to prod changes), weath is assets ind accumulate over time, can use to improve edu/other ways to generate income (purchase shares, bonds, real estate)
• 90%+ world’s wealth held by inds in NA(1), EUR, Asia-Pacific (China, Japan, AUS) but in Latin America, India, Africa (least) small shares global wealth.
• 2023 top 1% world pop owned 45% world’s wealth most in NA, EUR, China, Asia Pacific (eg. Japan & AUS)
• bottom 50% world pop owne <1% wealth

Question 126

economic development

Answer 126

broad measure of welfare in a nation includes** indicators** of health, edu, enviro quality, material LS

• measure improvements in wellbeing/welfare than how much extra money ppl have
• higher incomes crucial in improving wellbeing esp for those living in poverty (relative/absolute but accounts other QOL indicators (health standards, edu lvls, enviro quality, income inequality,
• demographic features (urbanisation rates, pop growth rates, fertility & mortality rates) vary betw developed&ing nations w/ others eg. dependence on foreign aid as % GDP, ratio agri prod to GDP

Question 127

measuring average incomes for ED

Answer 127

• GNIpc measures material LS residents in country but avg incomes dont account incoem distr/non material indicators of QOL
• growth in incomes pc sign EG, higher in med-low human dev c’s, now stalled since covid

Question 128

HDI human development index & 3 things it accounts for

Answer 128

measure eco development devised by UN Development Programme (UNDP) ,alt measure to GNI

• track progress ind c’s & global efforts to reduce extreme poverty over time
• more comprehensive measure human dev > GDP/GNIpc bc accounts nonmaterial QOL not always related to income
• score betw 0 (no human development) and 1 (max human development)
  accounts:
  1. life expectancy at birth,
• AVG lifespan inds in c –> health & QOL
• estimate based on current health conditions & LS

2. lvls edu attainment &
   * edu to develop skills of workforce & future development potential of an eco
   * measures mean yrs of schooling (avg no. yrs attended edu 25/+yo)& expected yrs total school attendance for school age children
3. material LS (measured by GNI per capita)
   * measures sum of gross value added by all resident producers in the eco + income from foreign sources on PPP basis
   * avg income per person in c, adjust for PPP –> ppl’s access to resources & ability decent SOL

Question 129

what does comparing HDI and GDP statistics reveal

Answer 129

differences betw growth & development across world (hence need broader measures of welfare > income/output)
* EG crucial for high lvls development still
* countries w/ similar HDI lvls but very diff income lvls/similar income lvls but diff HDI suggest some c’s, benefits of income not well distributed due to high lvls inequality, effectiveness of edu & hc systems not always determined by national income & armed conflicts devastate development lvls

Question 130

if ^HDI lvls, citizens greater opps to

Answer 130

• live longer, healthier lives (life expectancy)
• acquire knowledge & skills by accessing edu (mean yrs schooling)
• decent LS w/ higher earnings (^GNI pc)

buttt uneven eco & health impacts of pandemic w/ emerging & developing c’s severe

Question 131

main categories for countries according to stage of economic development (advanced ecos)

Answer 131

1. advanced ecos

• high lvls eco development
• high integrateion in GF system, diversified export base & liberal-democratic political & eco institutions
• established industries, highly developed FMs & typically service-oriented (tech, healthcare, finance) with stable governance & high SOL
• high income countries have GNI per capital lvls (PPP) above USD$12, 535 mostly in North American & Western Europe
• less in Asia Pacific eg. AUS, NZ & Latin American & Caribbean regions
• high GDP per capita, edu lvls, stable political sytems
• largest ecos/very small ecos and most in OECD

Question 132

main categories for countries according to stage of economic development (developing ecos)

Answer 132

• countries with low income lvls, less industrialisation, poor infrastructure & weak/unstable political institutions, poorer edu & health outcomes, many living in absolute poverty
• may depende heavily on agri/natural resources
• often divided into low income and middle income countries

Question 133

common characteristics between developing countries

Answer 133

• high lvls income inequality w/n their ecos
• dependence on agricultural production for income, employment, trade opps
• rely on foreign aid & development assistance as major source of income
• low lvls labour productivity, industrialisation, tech innovation & infrastructure development
• weak political nad eco institutions & high prevalence of corruption

Question 134

main categories for countries according to stage of economic development (emerging ecos)

Answer 134

• experiencing rapid industrialisation & sustained high lvls of eco growth
• strongest growth rates 5-10%
• income lvls vary but fast growth in income
• substantial manufacturing sectors
• neither high income/adv not share characteristics of developing ecos
• ecos previously known as newly industrialised ecos, transition ecos (from socialist ecos eg. China) and developing ecos w/ improved prospects (India)

Question 135

LDCs

Answer 135

45 nations w/ lowest GNI per capita lvls, weak human assets (health &Edu) & high eco vulnerability (eco structure, size, exposure to shocks)
* GNI per capita threshold <US$1018 per year based on 3 yr avg
* 33 of em in sub-saharan africa ‘Africanisation’ of poverty’

^ concentration of global poverty in Sub-Saharan Africa where majority Least Developed Countries LDCs located
* unlike East & SOuth Asia where sig poverty reductions occurred recent decades, much slower progress in Africa –> disprop large in relation to global poverty figures
* exacerbated by political instability, heavy dependence on agriculture hinder eco grwoth, fast growing population (pressure resources, health)

Question 136

limitations of classifications systems of types of eco (adv, developing, emerging)0

Answer 136

very broad, can group dissimilar ecos together eg. brazil & Indonesia both emerging but very diff LS
* some don’t fit into one category (Bulgaria better off than developing but not adv/emerging)
* but still impo for understanding reasons for eco ineq betw nations

Question 137

development economics & ‘development gap’

Answer 137

to explain conditions needed for sustainable EG&D improve eco & social conditions in low income & developing ecos to promote sustainable eco grwoth & dev, LS, welfare for ppl in regions
* structural problems prevent c’s from achieving high lvls development & policies for LT progress
* compare characteristics of high income & developing ecos to highlight problems faced by poor countries eg. high rates pop growth, low lvls skills development, weak legal & FIs, inequality, endemic corruption

development gap contrast lvl ED betw adv,emerging,developing c’s (dinstinguished by incomes pc, lvls S&I & capital formation, EG)

• leads to sig contrasts LS betw 3 groups. some emerging closing gap by sustaining ^EG, ^incomes pc & reducing overty, domestic S&I sometimes exceed most adv but still severe global inequalities
• incoem gap ‘North-South Divide’ majority emerging & developing south (eg. Asia, Africa), most adv north (eg. EUR, NA)
• poor c’s high rates pop growth (^ demands strained public services), low skills dev, weak legal & FIs, endemic corruption

Question 138

What two types of factors contribute to low levels of development and global inequalities?

Answer 138

Global factors (related to the structure of the global economy)
* global trade system
* global financial architecture
* global aid & assistance
* global tech flows

and domestic factors (within individual countries).
* eco resources (natural, labour supply & quality, access to capital & indebtedness, entrepreneurial culture)
* international factors (political & eco institutions, eco policies, gvt responses to globalisation)

Question 139

DARF

how does (global trade system) reinforce global inequalities instead of reducing them

Answer 139

1. developing c’s that export agri commodities severely affected by **high lvls protectionism in adv ecos agri sector (bc not competitive)
   * while total agri support to producers in OECD fallen by like half since mid 1980s, remained high in rich ecos
2. regional trading blocs (EU) can exclude developing nations from accessing global consumer markets

• excluded from trade opp bc bilateral agreements rarely as comprehensive as regional trading blocs
• eg. EU,

3. WTO’S Doha Round of trade negotiations in early 2000s promoted as ‘development round’ bc of focus on trade reforms to benefit poorer nations

• failed major reasons is high income nations resisted making concessions on issues would’ve provided greatest benefit to developing c’s
• recent WTO negotiations focus on smaller package only tries expand tariff-free access for exports from least developed countries & postpones complex trade negotiations

4. beenfits of FTAs often unaccessible to developing nations bc of substantial cost implementing international not reements & lodging appeals against other countries’ protectionist measures

• complexitiy of many trade agreements favours benefits of global trade system towards richer countries and entrench global inequ

Question 140

FIRSD

global financial architecture as global factor entrehcning global ineq (MINDMAP THIS)

Answer 140

deregulated GFMs & GF system enable free flow f funds around world to create development opp

1. historically, LT international investment flows favoured developed c’s

• BUT since 2000s developing ecos receive ~2/3 global FDI flows
• faster growing emerging & developing ecos (China, brazil, India, Russia) benefit most

2. ST financial inflows (eg. investments in currency & stock markets) favour prosperous emerging ecos bc offer higher financial returns for currency & stock market specul (investors)ators

• BUT these regions end up exposed to economic volatility, which set back eco development for years while GFM speculators simply move to invest in other countries

3. international financial rules haven’t kept pace w/ globalisation & tolerate loopholes that contribute to large flows of income/wealth to those already hold substantial wealth( minimise amt tax paid on it eg. profit shifting to tax havens, lost gvt revenue suffered by developing more disprop bc larger prop total revenue)
4. many dev c’s have LARGE FOREIGN DEBT BURDENS

• interest repayments on past loans reduce income available for gvts to promote grwoth & dev by spending on edu, healthcare, infrastructure –> many dev c’s spend more on debt servicing than public health

4. role of IMF (int org oversees GFS) under scrutiny recently bc impact on developing countries

• ‘structural adjustment’ policies criticised, advocates interests of rich countries and not appropriate to conditions of many developing c’s
• acknowledged concern w/ asistance packages in COVID eg. 0 interest loas to LI c’s, credit facilities tailored to diff needs dev c’s but still argue priority to protecting interests of adv c’s FIs & TNCs > LT eco interests of developing c’s

Question 141

TPDM

global aid & assistance as global factor contirubting to global inequality

Answer 141

developing c’s make tsmall-scale efforts to address global ineq, insuffto overcome large diff in LS
1. total lvl development aid provided by high income ecos only 1/2 lvl they promised since 1970s (0.7% of GDP), OECD said only 5 member countries met/exceeded target 2023

2. sig proportion of official development assistance is ‘phantom aid’, aid funds don’t improve lives of poor
   * OECD 1/6 dollars of foreign aid is ‘technical coop’ often paid to consultants in donor c’s, 11% aid debt-related eg. relieving/refinancing past loans don’t contribute to new development
   * foreign aid budget 5% spent on administration, reduce amt available for development projects & humanitarian relief
   * figures don’t reveal prop of aid that is ‘tied aid’ (aid must spend on overpriced/unnecessary g&s produced by donor country) (US provides food support sometimes buys American crops & ships to africa greater expense than buying crops in local region)
3. distribution of aid by HI countries can reflect strategic & military considerations than needs of poor c’s
   * multilateral aid agencies more effective than individual c’s who provide bilateral aid
4. multilateral development aid (distributed by WB, IMF, UN) better targeted at worlds poorest countries but < 1/3 value of total development assistance from Development Aisstance Committee members

Question 142

global tech flows as global factor contributing to -global ineq

Answer 142

• new tech adopted more quicker in ecos w/ better infrastructure, higher lvls edu & already high penetration rates of related techs eg. broadband infrastructure
• 1/2 worlds pop don’t use internet and most w/o lived in developing ecos –> bus & consumers limited access to online opps to sell & purchase g&s in a rapidly expanding market, reinforcing eco isolation from digitally connected & developed world
• ‘digital divide’ world increasingly reliant on digital tech
• new tech geared to needs of HI countries bc prioritise areas of scientific research w/ little benefit to poorer nations w/ abundant labour supplies, young pop whose main health risks are common infectious diseases & limited capital resources (labour-saving devices, pharmaceuticals for ageing in rich countries)
  3. developing nations find diff to gain access to new tech
• intellectual property rights restrict benefits of technological transfer to poorer countires bc cant pay developed c prices for tech

Question 143

domestic factors contributing to global inequ (natural resources) [eco resources]

Answer 143

• inputs for production (energy, fertile agricultural land, water supplies, minerals)
• ecos w/ abundant, reliable supply of natural resources better opps for ED (even if unsuccessful using opps)
• abundance also can hamper ED if leads to overvalued ER, narrow export base & overreliance on small no. industries to drive EG
• countries rely natural resource exports exposed to downturns in commodity prices –> sudden falls in national income

Question 144

domestic & global factors causing global inequalies (syllabus)

Answer 144

ECO RESOURCES (LLCEIC)

• natural resources
• labour supply & quality
• access to capital & indebtedness
• entrepreneurial culture
• lvls inequality
• exposure to impact of climate change

INSTITUTIONAL FACTORS (IEG)

• political & eco institutions
• eco policies
• gvt responses to globalisation

GLOBAL (FATT)

• global trade system
• global financial architecture
• global aid & assistance
• global tech flows

Question 145

labour supply & quantity for eco resources (domestic factors affecting global inequ) [eco resources]

Answer 145

• high income countries tend to have highly educated, skilled labour resources
• low income nations have high pop growth, lower lvls educational attainment, low health standards –> lower productivity lvls
  (reduce workforce participation & productivity –> underutilised resources –> maintain higher rates eco grwoth)

eg. inadequate edu facilities & high rates AIDS, barriers girls edu developing c’s vs sig investment & develop service-based eco

Question 146

access to capital & tech for eco resources (domestic factors affecting global inequ) [eco resources]

Answer 146

• difficult access to capital funds for investment –> lower EG&D
• low income lvls less opp for savings for investment diff gaining access to capital for investment & development –> lower rates eco growth & lower LS
• poorly developed financial systems diff for bus to access loans for investment
• small research orgs & limited funds for bus innovation fewer opp for dev c’sto develop new tech/pay for patents to use tech developed in other c’s –> perpetuate cycle poverty (low incomes pc –> low saving –> low investment & capital –> low productivity …)

Question 147

entrepreneurial culture for eco resources (domestic factors affecting global inequ) [eco resources]
* less imp

Answer 147

4. entrepreneurial culture

• diff to quantify diff in culture betw ecos and how impact eco perf but country’s history & social institutions impact eco success
• strong civil society institutions (eg. charities, trade unions), cultural disapproval of corruption, respect for rule of law (against will of elites) & aspirations towards work, enterprise & personal responsibility can support EG&D
• some trad cultures impede adoption new techs etc. to sustain ^EG&D

Question 148

high lvls ineuqliaty (domestic factors affecting global inequ) [eco resources]
* less imp

Answer 148

• in distr of income & wealth common in dev c’s esp w/ high concentrations of povertyin poorest countries but more in middle income countries
• high lvls wealth concentration –> lower rates EG&D since low&mid income HHs reduced spending power (lower AD) & access to edu opps & hc (lower AS & HDI)

Question 149

exposure to impact of climate change (Domestic factor causing global inequality) [eco resources]

Answer 149

• inequality betw c’s
• extreme weather events affect croy yields, rising sea lvls coast communities risk
• **warmer temps **expose pops tropical regions infectious diseases
• desertifiaction threaten access to water & resources
• developing c’s fewer resources to address CC through mitigation & adaptation measures,
• most exposed to CC Africa & Pacific lo-lower/middle income lvls

Question 150

political & eco institutions (institutional factors as domestic factor contr to global ineq)

Answer 150

political stability,
legal strucutres,
central bank independence,
strength of social institutions
gvt’s domestic & external eco policies

can affect ability nation to achieve eco development

1. political & eco institutions (residents –> eco development)
   * political instability, corruption & lack law enforcement by gvt agencies can undermine investor confidence, reluctant to take risks if bus interests threatened by inadequate structure for resolving legal disputes, corruption
   * diff to quantify impacts of weak political institutions on ED but can use Corruption Perception Index each yr by Transparency International
   * score 0 (c relatively high lvl corruption) to 100 (relatively low lvl corruption)
   * developed ecos lower lvls corruption than developing & emerging

Question 151

gvt responses to globalisation as** domestic institutional** factor affecting global inequ

Answer 151

• policies relating o trade, financial & investment flows, TNCs & country’s participation in regional & global eco orgs influence eco’s ability to take adv of benefits of integration
• eg. eco restructuring, efficiency, access to foreign capital & tech and access to overseas goods markets

Question 152

impact of globalisation of eco grwoth & development for developing (emerging) ecos

Answer 152

• developing economies greater opps to grow by producing goods for global consumer markets, –> greater access to new tech & foreign investment
• remarkable growth exp by emerging & developing ecos embraced international trade, foreign invecstment, participation of TNCs –> globalisation facilitates higher eco growth rates
• recent decades fastest growing ecos emergingecos (china, india) while slowest adv ecos
• since 1990s, emerging & developing ecos catching up to adv ecos but many dont when assessing income per capita

Question 153

eco policies as (domestic) institutional factor influencing in global ineq

Answer 153

• how gvts balance roles of market forces & gvt intervention in the eco
• if all major decisions left to market forces, can achieve high lvl o growth but not improve edu, healthcare,, QOL
• excessive gvt control over eco decision making can constrain entrepreneurship & innovation –> reduce eco growth
• countries highest lvls human development have both strong market eco and sig gvt investment in human development
• developing eco gvts less able to **reduce ineq bc collect less tax revenue & cant provide same lvl public services & social welfare, less able gvt spending to stimulte eco during downturn –> mroe vulnerable changes in BC & impede efforts sustain LT EG & reduce inequality

Question 154

impact of globalisation of eco grwoth & development for adv ecos

Answer 154

• high income ecos (esp through TNCs) growth opps in global supply chains & new global service markets
• most globally integrated ecos are adv, exp comparatively weak growth over last 2 decades esp since GFC, long period lacklustre growth despite record low IRs & very low inflation bc high lvls indebtedness constrained gvts from using fiscal policy to stimulate growth

Question 155

risk of globalisation & eco integration on c’s eco growth

Answer 155

• BUT globalisation & greater eco integration caused disruptive structural changes in some regions
• relatively free movement of ppl, goods, info across national borders increases risks (cybercrime, hack pc networks, pandemics)
• overall evidence accelerated eco growth but effect distributed unevenly across geographcial regions

Question 156

how globalisation imapcts eco development (pos & neg)

Answer 156

mainly bc link betw globalisation & eco growth

• globalisation lift eco growth rates ind ecos –> raise income lvls –> more resources for edu & healthcare, programs for natural enviro

globalisation –> growth ind countries –> ^ income inequalitiy, accelerate climate change & enviro damage

• **slow global resposne **to threat of climate change likely widen gap betw growth & development indicators in next decades as output in some sectors disrupted & countries forced to allocate more reousrces to address eg. extreme weather events

Question 157

what dotrends in the Human Development Index HDI (measure combo of material LS, edu, health outcomes) show?

Answer 157

over long PIT (1980-2018), almost all countries exp major improvements in eco development
* little evidence globalisation contributed negatively to it
* declines in eco dev restricted to some that experienced upheaval in transition to market ecos/seriosu political turmoil

Question 158

how globalisation impacts income inequality & waht this has resulted in

Answer 158

• WITHIN countries bc as trade & financial flows grow, changes structure of ecos
• ^trade liberalisation –> ^ export opps –> ^ incomes of agri workers in developing c’s
• lower tariffs on imports improve SOL for poor by reducing prices of goods
• adv ecos, higher lvls trade shift emp towards higher paid services industries but also depress incomes of workers in import-competing secotr eg. american emp vehicle industry bc US car producers comepte against cheaper imports from Asia
• ^ financial flows –> greater emp opps & fuel EG but concentrated in higher skill & tech sectors, favour those already better off
• financial globalisation ^inequality between c’s?
• income inequality ^ in emerging ecos bc global mobility of skilled labour –> highly skilled workers emigrate adv ecos w/ higher paying jobs unless receive higher pay
• large ^wages for highly skilled workers while incomes others grow slower rate
• ^ inequality reduce eco development, rising trend bc tech change shifting PPs away from low skilled labour towards higher skilled jobs, benefit ppl w/ higher lvls edu but ^ u/e for less skilled workers

Question 159

how globalisation affects (trade, investment) & transnational corps? why has this happened? what are TNCs btter and worse at w/ dom businesses?

Answer 159

• goods produced through multiple stages in diff ecos through GSCs (instead of traditional trade of finished goods from 1 country to another) where countries engage in vertical specialisation, focus on only 1 or 2 parts of PP based on comparative adv
• after pandemic finding alt options for sourcing materials/improving reliability of supply chains key focus forTNCs & gvts (delays & disruptions to agri, mining, pharmaceutical supply chains, ecos didnt have cpacity to manuf goods w/o supplies from China)
• remove restrictions on foreign ownership & development of global capital markets –>TNCs growth dominate world’s major industries (motor vehicles, telecommunciations, pharmaceuticals)
• merger activity concentrated
• perform better than domestic firms on productivity, sales, prod size, export market share but avg beenfits to local community lower bc foreign firms use less domestic capital & labour
• full adv of FDI inflow only realised if TNCs connected to local suppliers
• dont operate under laws of just 1 country and can move production facilities to other countries w/ weak laws & structure financial flows to avoid paying taxes, lower labour standards & enviro protection laws in developing nations –> rxploit workers and enviro degeneration

Question 160

how globalisation affected trade, investment! (and TNCs)

Answer 160

• globalisation of FMs increased reliance & access on foreign sources finance for investment aka more c’s greater access to overseas funds for investment than before
• FDI greater role eco activity every region
• large increases for high grwoth emerging ecos who relaxed barriers to foreign investment
• but benefits of ^ FDI flows concentrated on smaller no. ecos already favourable eco prospects, only little flowing to LDCs
• growth ST financial flows destabilising impact on many ecos
• 1st time investment expanding beyong physical capital into productivity training for labour and LT bus relationships

Question 161

how globalisation related to enviro sustainability (neg –> pos)

Answer 161

• low incoem countries desperate to attract foreign investment & earn higher export revenue –> eco behaviour harms enviro (deforestation for paper, deplete marine life w/ unsustainable fishing practices, poison water supplies by mining operations, manuf industries cause pollution, ^ CO2 emmissions from power plants –> global warming_
• growth global trade increase consumption of non renewable fuels for transport by air, road, rail, sea
• most sig enviro threat climate change warming of atmosphere irreversible impactson natural enviro (oceans, marine life, weather, wildlife, air quality, water supply)
• CO2 emmissions contributing to CC from ind countries but impacts affect world, nations must work together to address
• globalisation offers opps to protect world’s enviro from harm by forcing ind nations to address global responsibility for enviro preservation, costs shared & increase scrutiny of enviro practices for TNCs
• facilitated transfer new tech to improve energy efficiency & reduce enviro pollution
• over time create inernational mechanisms to enforce agreements preventing enviro damage

Question 162

efforts to reach agreemenets betw ecos on reducing carbon emissions (fisrst..) coordinated by (globalisation on enviro sustainability)

Answer 162

United Nations Framework Convention on Climate Change (UNFCCC)
* 1997 THE unfccc summit of world leaders produced Kyoto Protocol on Climate Change set carbon emission reduction targets for industrialised countries, expired 2012
* after, UN CC conference unable forge new deal so extended KP to 2020
* after was paris agreement

Question 163

paris agreement for CLIAMTE CHANGE

Answer 163

• after kyoto protocol
• scientists believe benchmark keep increase global avg temp <2 deg above pre-industrial lvls necessary to prevent CC imapcts, 2015 UNFCCC Conference in Paris agreeement w/ 197 countries included developing nations who refused to ratify Kyoto Protocol (China, India)
• Paris Agreement several inbuilt mechanisms for transparency & review process to increase global scrutiny encourage countries meet respsective contribution to global emissions reduction, came into force Nov 2016 w/ 195 countries ratified it by 2020

Question 164

positive influence of GFMs on ecos (globalisation on FMs)
what are GFMs driven by? how do gvts encourage GFMS? an efficient GFM should encourage

Answer 164

influence increased substantially during G era driven by global info & communications networks –> global FMs dominate finacnial flows around world

• gvts encouraged development GFMs by removing ‘capital controls’ on flow of finance, floating exchange rates & deregulating domestic banking sectors
• countries can conduct international transactions via forex markets
• bus easier to access loans/attract investors bc not confined to domestic FMs
• efficient international FMs encourage greater transparency of bus & gvt actions –> eco development

Question 165

bad influence of globalisation on FMs

Answer 165

financial marketsshift massive volumes money around world daily
* if investor sentiment turns agaisnt certain eco, collapse exchange rates, eco schok, recession, rising u/e

• eg. GFC collapse worldwide investor confidence & seized global financial system
• central banks flooded FMs with liquidity, gvts guaranteed banking deposits to improve confidence, gvts providedd ‘bail outs’ to prevent troubled banks & financial institutions from collapsing, world eco contracted
• pandemic cut irs record lows and high debt lvls

Question 166

the nature of the international business cycle (IBC)

Answer 166

• countries with higher lvl trade –> ^integration + specialise –> experience faster eco growth
• when world eco growth higher, ind ecos likely benefit from upturn
• simultaneous upswings in US & China propelled global eco to fastest growth rates in 3 decades (+ shocks)
• as extent TRADE & FINANCIAL INTEGRATION continue ^, likely greater synchronisation (convergence) of IBC, intensifying downturns & upswings in global eco (contagion, external/exogenous shock)
• whilst diff lvls growth, shape & direction of changes in BC synchronised w/ IBC ( changes 1 eco –>trade, financial flows, global supply chains for other eco)
• increase need for macroeco policies, ecos generally dont coord macroeco policies unless glbal crisis
• BC depend more on eco conditions & policies of larger interconnected ecos,

Question 167

net emigration

Answer 167

net loss in no. migrants in c

• no. ppl LEAVE exceeds arriving
• reduce human capital and lose skills
• c’s may benefit from ^ remittance flows, int bus networks and sharing tech developments

Question 168

net immigration

Answer 168

net gain in no. migrants in c
* no. ppl ARRIVING exceeds leaving
* ^ human capital and skills,

Question 169

global supply chain

Answer 169

diff parts of a supply chain operating in diff c’s based on comparative adv, allow bus reduce prod costs

• company source raw materials from developing ecos, manuf in emerging ecos and sales services in adv ecos
• c’s specialise in parts of PP they have comparative adv
• mid & low income ecos benefit employment & access cheaper g&s

Question 170

why do trade barriers have sig effects on AUS’ eco?

Answer 170

• distance from rest of world
• relatively high reliance on exports & imports

Question 171

history of AUS’ protectionism

Answer 171

• highly protectionist country bc gvts thought needed to protect AUS manufacturers who found diff to compete bc relatively small pop & low production lvls aka manufacturers in larger ecos overseas benefited from greater ecos of scale
• Whitlam Gvt 1973 first push to reduce protection but 1988 comprehensive program for trade liberalisation
• next decade AUS reduced tariffs faster than other adv ecos (beside NZ)

Question 172

4 gvt’s main aims in reducing protection

Answer 172

• make dom industries more internationally competitive by exposing to comp from imported goods
• encourage resources to concentrate the eco on areas where aus has comparative adv
• benefit from ^ integration w/ global eco by allowing consumers & bus’ access to g&S on global markets at low prices & high quality
• structural change in LT to encourage eff firms to produce what global eco demands

Question 173

today, how many AUS imported goods tariff free and what are the remaining ones?

Answer 173

~90%

• remaining are mostly manufactured goods w/ general tariff rate 5% or less (hsitorically motor vehicles, clothing, textiles manuf industries protected w/ tariffs)
• most remaining tariffs dont apply to imports from c’s AUS has FTA with
• despite closure of AUS car manuf industry, gvt still tariffs new cars & heavily restricts imported 2nd hand cars)

Question 174

nuisance tariffs

Answer 174

raise little revenue & AUS no longer produce them in material quantities
* 2024 removed tariffs almost 500 imported products

Question 175

AUS average tariff lvl

Answer 175

*weighted according to what g&S traded most
* 0.5%
* lower than many adv ecos
* less than 0.5% considered large by WTO (exceed 15%)

Question 176

Australia is one of the most/least/ protectionsit ecos in the world.

Answer 176

least

• far fewer subsidies for dom producers than NA, WE, EA (for their agri sectors)
• AUS lowest lvls agri protection OECD
• reductions typically beyong required by international TAs
• further lbieralise trade (tax luxury cars hurts exporters, foreign investment restrictions, prolific use of ANTI-DUMPING MEASURES sometimes no suffiecient eco justification)

Question 177

Austrade

Answer 177

AUS Trade & Investment Commission

• administers export assistance programs (which still exist)
• export assistance includes financial assistance, info on potential export markets, marketing advice
• main program Export Market Development Grants (EMDG) streamlined assistance for promotional activities, develop marketing skills, improve program design & access info for exporters

Question 178

hwo do gvts pursue free trade

Answer 178

reduce own lvls protection

• TAs to access overseas markets

Question 179

what is AUS most comprehensive bilatera agreement

Answer 179

ANZCERTA AUS NZ Closer Eco Relations TA

• led to ^ standardisation of laws , commercial structures, bus practices, free trade for both,

Question 180

what are BTAs mainly used for now

Answer 180

increasingly use less for new trade opps and more to shore up existing rules around free trade when protection rising

Question 181

challenges of havings so MANY BTAs

Answer 181

• overlapping & inconsistent trade rules for exporters & importers
• exporter need to comply with diff rules to sell same product in diff foreign markets –> inefficiency

Question 182

2 BTAs with AUS not NZ

Answer 182

AUSFTA

• tariff reductions esp agriculture & manufacturing
• removed entirely since 2015
• US is AUS’ 3rd largest trading partner

KAFTA

• improve access for AUS exporters, opps for AUS investors & investments in SK –> attract direct investment from SK into AUS
• faciltate services trade (legal, accounting, financial, engineering, telecomms, edu) very comprehensive
• 2023 SK was AUS’ 3rd largest export market

Question 183

multilateral TAs

Answer 183

free/preferential trade betw many c’s usually on regional basis

Question 184

Australia and ASEAN trade relationships

Answer 184

complementary ecos –> type of goods AUS exports (commodities from resource-based industries) heavily demanded in industrailising nations of SE Asia

• conversely, SE Asia export goods AUS cant produce competitively eg. simply trasnformed manufactures produced in labour-intensive industries

Question 185

AANZFTA

Answer 185

ASEAN-AUS-NZ FTA

• multilateral TA, 2022 extended to cover e-commerce, trade facilitation, coop on enviro & climate change

Question 186

implications of reduced protection on firms

Answer 186

LT beneficial but ST ind firms operating in marginal, import competing industries shrink unless improvec competitiveness

• production in some sectors cease bc competitively manufacturing needs high production volumes & large workforce & adv ecos cant comepte with low wage costs of emerging ecos

Question 187

how do some firms respond to phasing out protection

Answer 187

restructure ops to stay in bus/focus specialising in 1 aspect ofp roduction

• may consolidate manuf processes down to single plant,
• find opps for exporting (declined domestic market share),
• adopt **new production techs to reduce prod costs,
• reduce staffing lvls**

Question 188

what is the aim of removing protection for local industries

Answer 188

force them to develop innocation & efficiency to compete globally

• operate compettive dom market –> ^ investment for firms that survive bc they improve tech/expand

Question 189

how can lower tariffs benefit firms

Answer 189

reduce price of imports used as inputs in PP –> lower prod costs –> more int. competitive

• why aus agricultural industries not as protected (removed tariffs on inputs eg. farm machinery)

Question 190

how does reducing protection change aus exports?

Answer 190

affect composition of AUS exports

• 2000s global resources mining boom AUS commodity-focused export base (natural gas, minerals), pattern expected to remaing at least MT

substantial growth in EXPORT VOLUMES

• AUS mroe integrated with global eco
• higher prop of AUS production exported & higher prop of g&S AUS consume imported

Question 191

impact of reduced protection on AUS eco for firms, ind, gvt in SHORT TERM

Answer 191

IND:

• structural u/e ^ as ineff firms close
• consumers gain access to wider variety of goods at lower prices

FIRMS:

• import-competing industries go out of bus
• lower tariffs provide lower input costs for firms

GVTS:

• cutting tariffs reduce gvt revenue
• reducing protection has adverse political consequences
• gvt spending on structural adjustment programs may increase

Question 192

impacct of reduced protection on AUS eco for ind, firms, gvts in LONG TERM

Answer 192

IND

• ^ job opps in internationally competitive sectors

FIRMS

• efficient firms restructure operations to compete in global markets

GVTS

• sustainable eco grwoth should raise revenue

Question 193

effects on removing protection on individuals (negative side)

Answer 193

• u/e w/ resturcturing of industries & cuts in local prodcution
• job losses can be harsh for those worked in those industries long time w/ limited alternative job opportunities esp when overall no. ppl employed in many manuf industries has been declining > need retrain to develop relevant skills for current needs
• import-competing industries most affected with cuts in production concentrated in regions eg. manuf in SA
• jobs lost in manuf sector bc lower protection are relatively low skilled, production line jobs.
• AUS gvt funded many retraining programs tohelp redundant workers through tariff cuts to adapt skills to other industries
• not raise total lvl u/e but gains & losses from it are distributed unevenly throughout population - winners vs losers

Question 194

effects removing protection on individuals (positive)

Answer 194

^ LT employment

• lsot employment opps should be more than recouped by growth exp by efficient, int. competitive sectors from structural change
• as consumers able to buy more goods at lwoer prices
• wider variety of g&s available
• removal of tariff protection lowers Domestic price of products & ^ amt foreign products available

phasing out trade barriers & opening up AUS eco to glboal markets to improve living standards for ind

• quality of g&S higher bc globally comp bus enter AUS domestic markets, forcing domestic firms to perf better
• highly comp markets encourage greater innovtion as firms seek differentiate themselves from competitors
• domestic firms operating in global markets ensures innovations in other markets brought into AUS quickly

Question 195

effects of removing protection on gvts

Answer 195

cutting tariffs –> reduce (indirecttax) gvt revenue

• but only minor source revenue

lvls gvt spending

• gvts may need to assist structural adjustment process through ^ expenditure on u/e benefits & retraining programs to aid ppl who lsot job
• sometimes provide financial support to some industries to assist w/ adjustment process eg. indsutry-specific training

gvts affected by political consequences of tariff reductions

• costs of lwoer protection highly visisble - structural u/e, closure of factories & bus, damage to eco of regional AUS
• benefits less visible bc spread across eco & take long time
• gvts many countries reluctant to reduce protection lvls & recently increased them

Question 196

other economic effects of reducing protection

Answer 196

impact on eco growth & standards of living!!!!

• ST ^ u/e bc ^ imports dont create jobs/incoem in AUS, –> neg for LS in ST
• in LT as resources eg. labour, capital move to mroe productive areas of eco w/ higher rates of return, eco growth & LS should improve
• lower protection lvls in recent decades generally critical factor causing AUS stronger eco performance
• in ST, sig effects on AUS’ trade performance & CA DEFICIT , ca BALANCE LIKELY worsen as imports rise bc some imports will be cheaper due to lwoer tariffs & quotes/higher quality than local products
• BUT lower protection should improve international competitiveness & CA over LT as exports grow
• benefits grow over time, so AUS did over 3 decades than w/ small no. large cuts
• many trade lbieralising measures implemented through FTAs phased in gradually to help indsutries adjust to changing bus conditions
• S-MT problems of reducing protection far outweighed by LT benefits but gradual phasing out easier to manage structural changes

Question 197

impact of international protection on AUS

Answer 197

when other countries put tariffs on AUS g&s, AUS exports become less competitive in their overseas markets

• if other countries subsidies their exports, raise supply & reduce price of the goods on global markets –> AUS exporters sell similar products on global markets
  income reduced
• internaional protectionism reduces AUS output
• reduction in global protection lvls should ^ AUS’ national income
• as small eco w/ high lvl agri trade, AUS suffers disadv from protectionist policies of other nations & trading blocs
• EU several decades heavily subsidied agri production through Common Agricultural Policy, absorbs 1/3+ of EU’s budget
• AUS farmers competing in global markets at sig disadv to counterparts in rest of industrialised world (farmers receive subsidies)
• polies of other major export markets besides developed countries eg. FTA w/ China lifted AUS’ wine exports but China imposed tariffs major damange to AUS iwne industry, forced ot divert products to other markets

Question 198

global progress towards reducing agricultural protection has been fast/slow recent years, partly this reflects a trend towards…

Answer 198

slow

^ protectionist measures around world

• however agri trade remained more protected than other industries throughout several decades of trade liberalisation
• most protectionist agri trading nations took adv of complex loopholes in WTO regulations to avoid freeing up agri trade

Question 199

AUS firms exporting non-agri goods (mining & resources) generally face fewer/more barriers to trade compared w/ agri sector

Answer 199

fewer

• mining & resources sector largest shareo f AUS exports face very few trade barriers (coal, oil, natural gas, iron ore) in high demand worldwide –> mining companies likelier face export restrictions from AUS gvt to secure energy supplies for domestic eco than from foreign gvt trying to protect their minerals & resources industries
• countries importing AUS energy & minerla resources often dont have own resources to produce domestic alternatives
• if foreign gvt imposed tariffs on AUS resource exports, raise costs for own consumers & bus - many countries dont have a domestic resource sector to protect from trade

Question 200

AUS manufacturing industries generally face few/many barriers to trade bc of the

Answer 200

few

• substantial reduction in industrial tariffs in recent decades negotiated through multilateral & bilateral agreements
• msot industrialised ecos have **low manuf tariffs (eg. AUS) **
• some AUS exporters say non-tariff barriers to trade eg. licensing rules greater role creating barriers eg. inconsistent health regulations for processed food products in diff areas of country diff for AUS exporters to penetrate foreign markets –> why technical barriers to trade formally part of trade negotiations at WTO & bilateral TAs.

Question 201

AUS’ service industries which account for ~70% of aus eco but <1/4 of exports face the least/msot prohibitive barriers to international trade

Answer 201

most

• trade in services often not feasible bc natural barriers caused by geographu, transport costs, language differences, local tastes & preferences rather than protectionist trade policies in other countries eg. market for restaurant customers limited to ppl living in/visitng AUS diff to export services besides tourists hwo make up very small prop of global consumer market for food)

Question 202

protectionism plays a role in reducing/increasing services trade in global eco

Answer 202

• reducing
• main barriers not tariffs but gvt regulations restrict services trade
• many countries’ protect banking sectors by restricting licenses for foreign banks –> limits expansion of Aus financial services industry in overseas markets
• competitive AUS firms in electricity, communications industries face many overseas markets dominated by monopoly gvt providers/ procurement arrangements favour local providers
• international barreirs to AUS services trade costly esp restrictions on establishing commercial operatiosn in Asian markets (esp for AUS financial services)

Question 203

gvt procurement

Answer 203

policeis & procedures for purchasing g&S for gvt & public trading enterprises to use

Question 204

exmaples of many service industries & their potential trade barriers

Answer 204

• financial services –> restrictions on foreign ownership of banks & other FIs
• transport services –> restrictions on no. flight routes in anonother country
• utility services –> gvt monopoly provides electricity, gas, water
• professional services –> licensing laws only recognise own country’s edu qualifications
• construction services –> gvt procurement rules that mandate use of local suppliers

Question 205

the future of AUS industry in the global eco

Answer 205

• outlook for global trading enviro in 2020s more uncertain than for several decades
• increasing tension betw US & cHINA OVER TRADE DESTABILISED GLOBAL trading system –> knock on effects for small open ecos like AUS
• WTO’s role in global trading system weakened
• COVID & war in Ukraine strengthened protectionist sentiment overseas & in AUS –> likely trirggered structural changes in eco
• ^ focus on ‘net zero’ transfromation of ecos growing priorities for ecos, –> likely fossil fuel energy markets decline –> affect AUS trade patterns in coming yrs

Question 206

trends affecting the AUS economy

Answer 206

• slowing pace of globalisation
• elevated political tensions in Indo-Pacific region
• shortages of skilled workers
• population growth in cities & regions
• ageing population
• growing middle lcass of China & India
• automation & digital economy
• falling prices of manufactured goods
• policies to reduce emissions & address climate change

Question 207

___ will likely remain AUS’ most important export industry for future

Answer 207

mining (minerals and metals)

• rising trade tensions w/ China pose some risk to mining exports but few alternative reliable sources elsehwere
• production capacity continues ^ bc large-scale mining construction projects completed recent yrs
• global shift away from coal likely reduce AUS coal exports rapidly coming yrs but other commodities eg. iron ore remain strong bc no substitute available
• natural gas ‘transition’ source of energy c’s to reduce emissions (gas <coal emissions) –> support demand for LNG exports S-MT
• global demand for electric vehicles ^ demand for lithium (battery production) –> AUS wolrd’s largest lithium exporter

Question 208

AUS *agricultural indutries** future outlook

Answer 208

mixed

• global food prices increased significantly recent years –> ^ farm incomes
• return of AUD closer to historic avgs made farming exports more competitive
• AUS agri faces major LT challenges:
• extreme weather patterns from climate change
• ^ drought, bushfires, floods
  threatens livestock
• access to overseas markets affected by trade barriers & ^ lvls of agri effeiciency among competitors
• processed food indutries that add value to trad agr (wine, dairy) greater role in exports as afforded greater market access under AUS’ recent TAs than trad areas of agri
• global market for high quality processed foods expected continue growth coming yrs fuelled by growth of middle classi n China & India

Question 209

aus outlook on manufacturing sector exports

Answer 209

although gradual reduction in older, import-competing manufacturing sector, simultaneously smaller, export-oriented manufacturing has continuedto grow at slower pace as specialsied manufacturers expand their markets by producign high quality goods aimed at specific market niches

• futrue shifts in ER alos important for future competitiveness of AUS manufacturers
• stronger AUD make domestic manufactuers less competitive in global markets while weaker AUD would help them perform in global markets

Question 210

services exports in AUS expectations

Answer 210

• fell sharply after COVID but by 2023 (except travel) recovered to pre pandemic lvls
• recovery in tourism held back by limited capacity on overseas routes & ongoing high costs for airfares & accommodation
• international edu but facing restrictions on growth (albanese gvt imposed caps on international student enrolments concerned housing shortages)

other key areas of services exports:

• digital services: info & comms tech/digital g&s 4th largest export
• enviro services: LT growth potential eg. renewable energy sector, historically aus innovator
• other sector exports may grow: professional, financial services and services related to infrastructure