Trade

Question 1

3 Types of protectionism

Answer 1

Tariffs/tax
Quota’s
Non-tariff/Administrative barriers

Question 2

3 Periods of globalisation

Answer 2

1870-1913
1945-1973
1980-2008

Question 3

Role of GATT and WTO (3)

Answer 3

GATT initially established guidelines in 1945
WOT has taken over with 153 member countries
Average tariff down form 40% to 4%

Question 4

Why is negotiating trade slow (2)

Answer 4

Unequal distribution of gains from trade agreements among countries
‘Most favoured nation’ rule

Question 5

Regional trade barriers?

Answer 5

Trade deals set up among smaller groups of countries to make negotiation easier

Question 6

6 types of RTA

Answer 6

Independence- a country with many bi-lateral deals
Free trade area- independent of non-member countries
Customs Union- FTA + Common tariff
Common market- CU + Free movement of K+L
Economic union- Common market + shared currency
One nation- All parliamentary controls centralised

Question 7

Change in trade roles

Answer 7

Developing countries take on higher share of manufacturing exports
Developed countries increase service exports

Question 8

3 causes for DC exports increasing

Answer 8

Reduced barriers
FDI
Transport and Communications costs down

Question 9

4 LR gains of trade

Answer 9

As less developed countries share the same market as developed countries their wages should climb to the same equilibrium
Foreign trader multiplier acts as injection to circular flow
Higher competition= Higher efficiency
Higher production= Economies of scale

Question 10

2 SR costs

Answer 10

Rising inequality

Structural unemployment from shifts in competitive advantage

Question 11

Challenges for LDC’s

Answer 11

FDI can fail to employ many local resources (worse the more local population lacks skills, infrastructure or legal institutions are weak)
Infant industries need protection

Question 12

Flying Geese Paradigm (3)

Answer 12

Starts with import substitution
When leader moves onto higher value added production then a follower fills the gap left
e.g. East-Asian countries copied Japanese economic policies creating regional externalities

Question 13

5 Problems with trade in primary products

Answer 13

Lack of export diversity
Export price volatility 
Low income elasticity of exports
Resource curse
Downward trend in price

Question 14

Prebisch-Singer hypothesis (2)

Answer 14

DC process primary exports into higher value product and therefore have incomes than grow quicker than LDC’s
Can use technology advantage to gain market power and reduce primary god consumption

Question 15

The resource curse (3)

Answer 15

Dutch disease
Rent seekig and Corruption
Conflict

Question 16

The Dutch disease (3)

Answer 16

The ER increases making non-export less competitive
Increased domestic demand increases I
Capital is reallocated to export sector

Question 17

Rent seeking and corruption (3)

Answer 17

Sudden resource wealth can be poorly allocated
Resource wealth is much easily ‘spirited away’
Private gains are localised therefore there can be conflict over control

Question 18

Conflict over natural resources

Answer 18

Natural resources are often localised, therefore great gains to those who control locality