Trade Vs Aid

Question 1

Overall structure trade v aud

Answer 1

Intro
Benefits of free trade
Barriers to econ development
Too much free trade- inc multinationals pros and cons
Aid for and against

Question 2

Intro trade v aid

Answer 2

Free trade- a policy by which govs eliminate trade barriers *through removing tarrifs or quotas for example_ allowingt he free maovement of the factors of production and goods and services
Econ development- imporvements in qq of output of gs that leads to improvments in living standards
Aid- transfer of resources (usually money) form one (usually more developed country) to another (often a less developed country

Question 3

Benefits of free trade

Answer 3

Free trade policcies sees removal of taridd lowering world supply price p1 to p2- increasing consumer surplus in area abcd (draw diagram)
Consumer suprlus created - excess dmeand created as prices are lower than at level consumers are willing and able to pay
Lower prices- income effect- additional income to spend dometsic gs- boost ad and increase consumer spending increasing living standards
May be cheaper to import raw materials benefitting producers, demestic goods at lower pirces more competitive, increaing exports , increasing ad, positive multiplier as exports net inection
Specialisation increase output gs- comparative ad- climate kenya tea and coffee- cheap labour enabling multinationals to expand and take advantage of
Increase varierty exotic fruits- esp developed

Question 4

Multinationals

Answer 4

May move into ledcs due to raw materials or cheap labour- comparative adv
Ethical investment from socially responsible multinationals can be benfeicial= unilever and nike check supplyu chain
Investment infrastructure- factories dyson malaysisa, increase qq
Trainig boost skills workforce, increase q output
Boost exports- increase bop development of output- positive multiplier
Growth employment fdi with factories
Real lliving standards rise as increasing employment-

Yet- can be exploitation if not checking supply chains, transparent- oil companies nigeria- 2021-2022- briebry to memebrs of presidential admin for rights to oil= corruption

Question 5

Barriers to econ development

Answer 5

War= destory productive capacity and kills labour
Poor gov- corruption, weak rule of law= lack kof property rights , contract law and accountability- may deter fdi as cant ensure return on investment esp if contract not honoured- not paid
Lack of investment
Infrastructure- road rail telecom network- effective transporta nd communication improve quality of life
Human capital— education and training- more skilled workforce better able innovate and increase production
Capital flight- esp by ruling elites siphen off funds, instead of into investors- increase since 200 as increainsg profits from exploit africa mineral resources

Question 6

Too much free trade

Answer 6

Develooped econ absolute adv (exist where country using given resource imnput able to produce more than other countries) in production most gs, due to more technically efficient and better educated
Developing ecomn strategic trade theory rather free trade- krugman- proetction infant industries enable free from agression and comp- japan did post ww2- cars and tech, china- manufacturing
Thus in order to impore eocn development not comp free trade so need to have some proettcionism strategic trade theorii=y in order to fully benefit

Question 7

For aid

Answer 7

Stiglitz- necessary to deal with global inequality and enable poorer developing econ to fully benefit from potential of trade- build infrastructure and tranport links- removing intenal barriers to trade
Aid esp needd post ocnflict recover from war- marshall plan post ww2 and humanistarian crisis yemen
Harrod bomar model increasing capital effecitivly increases rate econ growth
Carefully targetted air- expand porudctive capcity- 0.5% growth rate- duflo recommmend randmoised control trials to help increase efficiency

Question 8

against aid

Answer 8

Danger of dependency culture- micronesia 42% gdp from aid
Given bad motives- bilateral trade agreements- aid to india would expect increased demand british exports
Whilst prvate aid concerns gives power to unelected individ in decide porioities of growth- bill gates
Foriegn aid displace domestic gov incentive to invest public services- dont need effective tax system or helth system- gates- polio eradicated
Link back q- st in criisis and to increase capacity, lt damaging dependencyt culture

Question 9

Conclusion

Answer 9

Strategic trade theory
Targeting aid st- build productive capacity
Ethical investment socialy responsibly multnat also help buld infrastructure and skilled workforce