Question

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SECTION C: LEARNING OUTCOME 7 International Trade and changes in the Global Economy QUESTION 9 (20 minutes) LO7a) Trade policy- advantages and disadvantages ot moving towards free trade: 8 MARKS a) Outline two reasons why countries trade with each other, 4 marks) b) While generally beneficial international free trade' is opposed by some groups. Outline two reasons why some groups oppose free trade; 4 marks) NZ Government recently agreed to join the CPTPPA. The Government claims that it will be beneficial for the NZ 2 marks) c) economy i.e. it will increase GDP. Give one reason why the CPTPPA might be beneficial for the NZ economy. d) Whether or not trade wars are easy to win they do have a significant impact on domestic consumers, domestic producers and to supply chains. Trump has recently imposed tarifs on a range of products.Other countries e.g. China and Europe; have or may retaliate. NZ has not. New Zealand has been active in removing tarifs. For an industry or product with a competitive disadvantage explain: i. The effect of removing a tariff on that product on consumers (2 marks); and i. The effect of removing a tariff on business involved in the industry (2 marks); and ii The effect on international supply chains (2 marks). A diagram is required as part of the explanation (2 marks- and remember to explain and integrate the diagram into discussion otherwise marks will be deducted). (8 marks)

Answer 1

a) A country involves in trade because of following reasons: 1) The country do not have enough resources to produce certain necessary goods as it isirequired for the people and that goods are in other country. 2) If a country has enough resources to produce certain goods and this production may be higher than its requirement then it can trade with a country where it has demand. So resources of that country will be fully utilised.

b) The free trade is opposed from some grounds and these can be as follows: 1) Free Trade can be harmful for the infant industry in the domestic market. Because these industry can not compete with other efficient and big international industry. So free trade will adversely affect these infant industry. 2) There are some inefficient industry exist in the domestic market and they do not cost efficient and to protect these industry the free trade can adversely affect these country. 3) The country can prefer variety of goods and a developing country can give it's interest on primary products. This argument also goes against the free trade.

c) New Zealand government has joined in the agreement with CPTPPA. In this agreement there is 12 nations who have agreed and signed to reduce tariff and non-tariff barriers to facilitate the trade among member countries. It will benefit to New Zealand economy because New Zealand can engage in more trade among those countries. If a country reduce their the members country can increase their trade volume. Export will be more easier and import also.

d)I. The effect of removing tariff on a product which has competitive disadvantage will adversely affected from there. Because due to removing tariff the international suppliers will sell the product more cheaply. As a result consumer surplus may increase because the goods will be available at lower price but producer surplus may decrease.