Please enable JavaScript.
Coggle requires JavaScript to display documents.
4.4 Trade Policies and Negotiations - Coggle Diagram
4.4 Trade Policies and Negotiations
Protectionism
Tariffs
Taxes on imports to a country.
May lead to retaliation so a decreasein exports
Qd Domestic goods should increase whilst Qd Imports decreases
Quotas
Limits the Qty of a ferign produced good that can be sold on the domestic market.
Increases price of good for domestic consumers
Export Subsidies
Tax relief, direct payments used to incentivise the exporting of goods rather than selling it on the domestic market
Embargoes
Complete ban on trade q a country
Red Tape
More red tape makes the cost of trading much higher and discourages imports.
Pros
Trade deficit reduced
Infant industries may need greater gov attention
Can be used to correct market failure
May protect domestic jobs
May improve current account deficit
Cons
Distorts market signals and may lead to loss of allocative efficiency
X-inefficiency + may make monopoly power worse
Extra cost on exporters may lower output
Risk of retaliation
Regressive taxes
Govt failure
Economic Integration
Free Trade Areas
Countriesagree to trade without protectionist barriers
Customs Union
Common trade policy established with the rest of the world - EU
Combined administration of the union
Monetary/Currency Union
Same currency, more economically integrated than a customs union or free trade area
Economic union
E.U- Coomon market with a customs union
Consequences of Economic integration
Trade diversion/creation
Reduced transaction costs
Economies of scale due to larger market available
Migration
Free Trade
Pros
Counries can exploit their comparative advantage-> higher utput w less inputs -> increases world GDP
Competition is more economically efficient
Trade creation due to fewer barriers
Increased exports could engender economic growth
Specialising may lead to economies of scale
Cons
Job losses
Environmental damage
The WTO
The WTO reduce traade barriers and polices agreements and disputes- this promotes free trade
161 members
Imf - america has 17% stake