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Summary - Unit 4 ECON4 - Economics: Protectionism and Trade £5.96   Add to cart

Summary

Summary - Unit 4 ECON4 - Economics: Protectionism and Trade

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Questions, summaries and diagrams on protectionism and the WTO.

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  • August 7, 2024
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International Trade

WTO

Explain the role of the World Trade Organisation (WTO)

Overall objective is universal free trade, making the world into one massive trade bloc

Advocates of comparative advantage

1. Host negotiations
2. Handle disputes
3. Issue sanctions



Explain how the WTO might conflict with trade blocs (15 marker)

Conflict

 Bans existence of trade blocs like the EU because the WTO attempts to create one trade bloc
 WTO against protectionism
 Trade blocs are regional with a common external tariff

Complement

 Negotiations made easier because only need to negotiate with one trade bloc representative
 Trade blocs have same ideology of free trade



How has the reputation of the WTO changed in recent years.

1995-2013

 Globalisation is booming and many countries are advocates of free trade
 Support for WTO but limited WTO action
 WTO is unsuccessful because they support developed countries with high technology
 Anti WTO protests in Seattle, multiple failures
 2013 – Bali package big breakthrough agricultural free trade from the EU

2016-2024

 2016 – bad year for globalisation and free trade – Brexit and Trump’s presidency
 Trump hugely undermined WTO – make America great again
 WTO makes huge efforts for improvements but has less support




Protectionism – For each form of protectionism include the following:

, 1. Definition 2. Relevant diagram 3. Explanation of why a nation would impose the policy
(advantages for the nation) 4. Negative impact of the policy both for the nation and trade partners
(include other evaluation here as well). 5. Relevant examples from the course.

Tariff tax on imports

Highly likely to result in retaliation

Only work if the tariff is small and there is elasticity of supply and demand

US taxing Chinese steel imports 29% started trade war

Low consumer surplus, high producer surplus




Quota – physical restriction in the amount of imports

Less likely to result in a trade war if quota is set high – compared to tariff

Good for domestic firms – increase in supply and bigger increase in domestic demand

Imperfect information – setting quota too high makes it pointless

No tax revenue for government

Limits consumer choice for consumer and higher price – could be shortages created

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