15) free trade and the wto

Question 1

what is protectionism?

Answer 1

Protectionism represents any attempt to impose restrictions on trade in goods and services.

Question 2

what are the most common protectionist measures?

Answer 2

The most common protectionist measures are imposing tariffs and quota on imports from overseas.

Question 3

what does free trade ivolve linking to the previous statement

Answer 3

free trade normally involves the removal of these 2 and other protectionist policies

Question 4

the benefits of trade: talk about comparative advantage

Answer 4

Free trade allows countries to benefit from comparative advantage, specialising in areas of relative strength and avoiding inefficiencies that come from non-specialisation

Question 5

benefits of free trade: as a result of comparative advantage what does this allow for companies?

Answer 5

This allows companies to grow and benefit from economies of scale

Question 6

benefits of free trade: how does free trade increase AD

Answer 6

It should also increase the volume of a country’s exports, thereby increasing AD

Question 7

benefits of free trade: what happens to competition?

Answer 7

More trade increases competition and more competition reduce prices

Question 8

benefits of free trade: talk about growth

Answer 8

World trade is a major driver of economic growth: freer trade should benefit growth

Question 9

benefits of free trade: talk about resources

Answer 9

Countries with high volumes of natural resources (e.g. Saudi Arabia) can find a market for these resources ensuring they’re not wasted; countries with low levels of natural resources (e.g Japan) can still become very rich by importing the resources they need.

Question 10

what does wto stand for?

Answer 10

the world trade organisation

Question 11

when was the wto established?

Answer 11

1995

Question 12

what has the wto been a major driver for?

Answer 12

it has been a major driver in the trend towards globalisation.

Question 13

what is the wto main function?

Answer 13

Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible.

Question 14

what rules do the wto set?

Answer 14

The WTO sets the global rules concerning trade between nations.

Question 15

wto rules characteristics

Answer 15

It sets different rules for different types of products (e.g. food can only be subject to tariffs, not quotas).

Question 16

is the wto a free trade organisation?

Answer 16

WTO is not a completely free trade body. It allows tariffs and trade restrictions under certain conditions, e.g. protection against ‘dumping’ of cheap surplus goods.

Question 17

what is the wto’s main objective?

Answer 17

The main objective of the WTO is not “free trade” rather “freer trade”. “lowering trade barriers is an obvious way to encourage trade”.

Question 18

does te wto believe free trade is good? why?

Answer 18

The WTO believes that freer trade is good for the economy of the whole world. This is because with free trade: “investment is encouraged, jobs are created and consumers can fully enjoy the benefits of competition - such as increased choice and lower prices”.

Question 19

how many countries are signed up to the wto?

Answer 19

There are currently 164 countries in the world signed up to the WTO, including all the major economies and the vast majority of developing economies from SSA.

Question 20

Evaluation: how has the wto played a major role in promoting trade?

Answer 20

According to a recent UK government report, over 96% of world trade is between WTO members and based on WTO rules. The formation of the WTO has been a major driver in the globalisation of the world economy in the 21st century.

Question 21

how has the wto’s power and influence been challenged?

Answer 21

as with other aspects of globalisation, the WTO’s power and influence has been challenged by the growth of populist movements (e.g MAGA/BREXIT) and the return to fashion of protectionist policies.

Question 22

has the wto benefitted everyone?

Answer 22

the WTO has not benefitted everyone equally. Small open economies (e.g Ireland, Netherlands and Norway) have benefitted most whilst developing countries often get swallowed up by the system. For example, the WTO has allowed MCs to get a foothold in many developing countries, often taking advantage of their resources whilst WTO rules have encouraged the drive for growth in real GDP, often at the expense of environmental considerations.