Explain why "reduced export competitiveness" might result from trade protection
When domestic producers are protected against foreign competition, there is less incentive to lower costs and to innovate.
If a country suspects another country of engaging in an unfair trade practice, the "internationally accepted" practice is to...
Raise the issue to the WTO and settle this via WTO's dispute settlement mechanism.
Outline FOUR reasons why trade protection could be justified
protecting infant industries, national security, ensuring environmental standards, raising government revenue
What is the main argument of the mercantilism trade theory?
Mercantilists argued that a country must maximize production and reduce their reliance on imports in order to grow richer.
Trade protection always causes a misallocation of resources. Illustrate this through the use of a export subsidy.
Areas c & e with world price above equilibrium price
What steps can the government take to mitigate the consequences of free trade?
Tax the sectors of the economy which have an advantage and then use the money to retrain those in the sectors disadvantaged due to free trade
One of the reasons for trade protection is to raise government revenues. Using any trade protection diagram, highlight the area of government revenues as a result from trade protection.
Tariff diagram only (all other diagrams either don't show gov't revenue or leads to an expense for governments)
Provide one real-world example to showcase how trade protection affects the well-being of consumers.
Brexit tariffs increasing the cost of imports of flour: increased prices, decreased consumer surplus
Draw out a diagram to illustrate why free trade is beneficial to an economy.