Economics Section D Part 2

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What are the benefits of international trade?
Helps raise living standards; higher output and income; more variety; greater efficiency.
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What are the reasons for international trade?
Obtaain non-domestic goods; obtain cheaper overseas goods; improve customer choice; sell surplus commodities.
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What is free trade?
Govs allow open access to markets, no restrictions on goods coming in.
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What are the advantages of free trade?
+ choice- goods that can't be produced locally can be obtained, raw materials, cheaper goods can be imported; + comp- pressure to lower costs, high quality goods, inventive; + growth- specialisation advs, efficiency, larger markets, lowest pos price.
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What are the disadvantages of free trade?
Overspecialisation (too dependent on narrow range of goods); unemployment (changing demand patterns); environmental damage (pollution, congestion, loss of NRRs); other (loss of culture and identity, loss sovereignty)
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What is protectionism?
A restriction in trade.
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What is a tariff?
A tax on imports. This makes them more expensive and so cuts demand. Improves BoP and raises revenue for government.
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What are quotas?
A physical limit on the amount of a good allowed into a country. Domestic producers will have a bigger share of the market.
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What are subsidies?
Giving financial support to exporters/domestic producers that face competition from imports. This lowers costs for the producer. The supply curve will shift and the equilibrium price will lower.
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What are administrative barriers?
Insisting that imports meet strict regulations and specifications.
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What are the reasons for protectionism?
Protect jobs, prevent dumping, ban harmful goods, improve BoP, domestic employment, raise revenue, protect strategic/infant industries, protect jobs
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What are the problems with protectionism?
Loss of free trade benefits- higher prices, less choice, lower growth, employment and LS. Retaliation (trade war). Other policies may be more effective. Inefficiency is allowed. Demand for imports may not reduce.
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Why has world trade grown rapidly in the past two decades?
Better transport and communications, relaxed trade barriers, MNC development, increased travel and consumer awareness, USSR break-up, new trade agreements.
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What are trading blocs?
Groups of countries in the same region that join together and form a free trading areas. trade between members is free of all barriers. May have a common tariff on imports from non-members. E.g. EU, NAFTA.
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What are the advantages of trading blocs?
Free trade so more jobs, more choice, faster growth, more quality and innovation. Firms can exploit EoS as larger markets. FDI increase (larger, barrier free market is attractive). Closer cooperation between members. Less conflict.
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What are the disadvantages of trading blocs for members?
Encourage regional free trade instead of global. Can be expensive. Some firms can be too powerful- monopolies and associated problems. Too reliant on bloc trade- vulnerable to price changes and demand patterns. Culture threatened by standardisation.
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What are the disadvantages of trading blocs for non-members?
Face trade barriers when selling inside bloc. In the long run, however, may find new markets.
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What is the WTO?
World Trade Organisation. Promoted free trade, persuades countries to abolish barriers. Closely associated with globalisation.
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What the the WTO's activities?
Reviewing members' policies; settling trade disputes; educating the public; admin and monitoring rules; publish trade and economic data; protect environment; reduce/eliminate trade barriers through negotiation.
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What type of organisations criticise the WTO?
Anti-globalisation or environmental groups.
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What are the criticisms of the WTO?
Undemocratic (rules written by and for firms with inside access. Other view often ignored); favours firms' rights over workers'; destroys environment;favours wealthy nations (poor countries not invited to meetings); causing hardship for poor nations?
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What are the characteristics of a developing nation?
High population growth, poor infrastructure, low labour productivity, poor health, low literacy levels; low life expectancy; low GDP per capita.
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What are the characteristics of trade in a developing nation?
Increase in net migration, increased FDI, less reliance on commodities, growth in recently opened economies, debt cancellation, reduction in barriers.
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What are the characteristics of trade in a developed nation?
Loss of manufacturing trade,more air travel, widening of development gap, increase in regional trade agreements, increase in size of EU, threat of recession.
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What are the advantages of being in the EU?
Association with high-growth performers would improve growth & open trade opportunities; increases FDI; free access to large market; advantages of specialisation & EoS; forces industry to innovate and increase productivity & efficiency; subsidies.
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What are the disadvantages of being in the EU?
High financial contributions to community budget; loss of sovereignty.
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Other cards in this set

Card 2

Front

What are the reasons for international trade?

Back

Obtaain non-domestic goods; obtain cheaper overseas goods; improve customer choice; sell surplus commodities.

Card 3

Front

What is free trade?

Back

Preview of the front of card 3

Card 4

Front

What are the advantages of free trade?

Back

Preview of the front of card 4

Card 5

Front

What are the disadvantages of free trade?

Back

Preview of the front of card 5
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