Paper 1- Theme 4.1- Globalisation

Question 1

Define protectionism

Key aim of protectionism

Answer 1

• any attempt by a country to impose restrictions on trade of goods and services
• main aim is to protect domestic business from overseas competition

Question 2

Types of protectionism

Answer 2

• tariffs
• import quotas
• domestic subsidies
• government legislation

Question 3

Reasons for protectionism

Answer 3

• protect jobs in domestic industries
• protect new developing industries (government may need to protect them while they develop)
• protection of strategic industries (in future will be profitable)

Question 4

Define tariff

Answer 4

tariff is a duty that raises the price of imported goods to make domestic products more appealing

Question 5

Pros and cons of tariff

Answer 5

PROS:

• create revenue of imported goods
• protects declining and infant industries from foreign comp.

CONS:

• imported more expensive for consumers (lower $OL)
• firms may become reliant on tariff and so won’t drive for efficiency
• quality of domestic products may be lower than imports
• damage international relationships (possible trade war)

Question 6

Define a quota

Answer 6

annual limit on the quantity or value of imports allowed into a country to be sold

Question 7

Pros and cons of quotas

Answer 7

PROS:

• protect domestic suppliers & their workers
• government receive more tax capital as employment rate is higher

CONS:

• limit consumer choice
• because supply decrease, foreign products become more expensive
• restricting competition means less renovation and improvements in the industry

Question 8

Define government legislation

Answer 8

rules and laws set out by government in order to protect the businesses, environment and health

Question 9

Define domestic subsidies

Answer 9

-sum of money given by the government to the producers of a certain product or in a certain industry

Question 10

pros are cons of domestic subsidies

Answer 10

PROS:

• encourage domestic production as unit costs lowered
• improve a country’s balance of payments as increases exports (due to being able to lower the prices but maintain the same profitability
• help inefficient firms by stimulating demand for them

CONS:

• finance has to come from somewhere else (e.g. possibility higher tax)
• other factors affect what consumers buy, not just lower price
• reliance

Question 11

define an embargo

Answer 11

official ban of any commercial trade with another country

Question 12

Define a trade bloc

Answer 12

a group of countries from specific regions that form an agreement to promote and allow free trade

Question 13

Positives to businesses of joining a trade bloc

Answer 13

• beneficial pressures of widespread competition in the trade bloc (pressures to be efficient)
• increased specialisation of countries due to access to different services across borders
• smaller countries get a say in global trade agreements about how their businesses are affected
• free movement of labour (access to workforce) and goods (ease of travel)
• external tariff walls to the trade bloc protect businesses from worldwide competition

Question 14

Negatives to businesses of joining a trade bloc

Answer 14

• increased competition due to freer trade
• increased dependence on other countries performance
• countries outside of trade bloc may impose retaliation tariffs
• reduction of member and non member tariffs due to external tariff
• domestic businesses can be exploited by large MNCS within the trade bloc
• rules to govern the market may be bureaucratic (slow growth)

Question 15

Describe the rules of a free trade area

Answer 15

• no tariff between members
• no external tariff
• increase trade of goods and services between each other
• free to negotiate own trade deals with non member countries

Question 16

Describe the rules of a single market

Answer 16

• no tariff between members
• common external tariff
• common rules and regulations
• freedom of moving goods and people

Question 17

Describe the rules of a customs union

Answer 17

• no tariff between members
• common external tariff
• trade deals with non members apply for all countries in the union
• no customs checks of goods

Question 18

Key information about the EU

Answer 18

• combination of a single market and a customs union trade bloc with 27 countries
• labour, goods and capital allowed to move freely (no custom checks or customer duties)
• sets large amounts on employee and customer rights that give businesses a “level playing field”

Question 19

How to join the EU

Answer 19

• must have a functioning economy that can cope with large pressures from the EU
• be able to guarantee democracy, the rule of law and respect for human rights
• ability to meet needs of what a member must do

Question 20

Key information on the ASEAN trade bloc

Answer 20

• free trade area of 10 countries
• very high economic growth
• access to each countries workforce and consumer base
• very dependent on China, also India and South Korea

Question 21

Key features of the NAFTA

Answer 21

-worlds largest Free trade area with 3 member countries

• tariffs eliminated- therefore lower costs of imports and exports
• increased GDP of all countries
• put lots of Mexican farmers out of business
• bigger markets for businesses to operate in

Question 22

BRICS

Answer 22

Brazil
Russia
India 
China
South Africa

world’s leading emerging economies

Question 23

MINT

Answer 23

Mexico
Indonesia
Nigeria
Turkey

nations that are the net new great emerging markets