4.1 International Economics

Question 1

give examples of 2 free trade areas, which countries are involved + any other key facts

Answer 1

1. NAFTA (now ‘USMCA’) -> between USA, Mexico + Canada. Increased trade between members but led to outsourcing of jobs in Mexico
2. ASEAN Free Trade Area (AFTA) -> 10 countries; between Thailand, Indonesia, Singapore, etc.

Question 2

give examples of customs unions

Answer 2

1. EU Customs Union -> 28 countries, including France, Germany; encourages trade but reduces individual trade soverignty (e.g. UK made its own trade deals post-Brexit)
2. Mercosur -> countries including Argentina, Brazil, Paraguay -> common external tariff of 35% to non-members

Question 3

examples of common markets

Answer 3

1. EAC (East African Community) -> includes Kenya, Burundi, Rwanda, Uganda
2. European Single Market (within the EU)

Question 4

example of a monetary union

Answer 4

1. Eurozone (EURO) -> 20 out of 27 Euro countries involved. Those not involved e.g. Hungary, Poland

Question 5

examples of countries that increased protectionism + its effects

Answer 5

1. USA -> Trump reinstated 25% steel + incr aluminium tariffs from 10%-25% to all countries
   - boosted domestic production -> increased output for US producers but decr output for US industries that rely on these materials due to higher costs -> job losses in manufacturing sector
   - high production costs -> consumers face higher prices for goods + services -> disproportionately affects low-income households
   - price hikes extended to related goods
   - other sectors affected due to retaliatory tariffs e.g. China imposed a 25% tariff on soybeans

Question 6

key facts about a developing economy of your choice (GHANA)

Answer 6

• main exports -> gold, cocoa, crude oil (~71% of GDP in 2023)
• appreciating currency (cedi)
• member of AfCFTA (Africa Continental Free Trade Area); aims to be a common market soon

Question 7

key facts about a developed economy of your choice (USA)

Answer 7

• key exports: machinery, vehicles, aircraft = makes up 10% of GDP
• trade bloc: USCMA (Canada + Mexico)
• trade war: 145% on most Chinese goods -> retaliation of 125% on US goods

UPDATE: MAY 2025 - both countries agreed to reduce tariffs: U.S. tariffs decreased to 30%. Chinese tariffs reduced to 10%.