what questions would you like to ask? think – why is free trade good?

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What questions would you like to ask? Think – why is free trade good?

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Page 1: What questions would you like to ask? Think – why is free trade good?

• What questions would you like to ask?• Think – why is free trade good?

Page 2: What questions would you like to ask? Think – why is free trade good?

• Explain how a collapse of trade negotiations may affect the global economy

• A collapse in trade negotiations may lead to trade being less free than it could have been and may lead to a rise in protectionism.

• As a result some of the benefits of free trade may be lost such as the benefits of specialisation

• If protectionism increases this may lead to:• Countries seeing a fall in exports which may reduce economic

growth• Higher prices for imports which may increase inflationary

pressures and reduce living standards

Page 3: What questions would you like to ask? Think – why is free trade good?

• What questions would you like to ask?• Are there any links between the data?

• A Commodity – Is a homogenous product that is usually traded within a competitive market. There may be little opportunity for adding value

Page 4: What questions would you like to ask? Think – why is free trade good?

• Using figure 7 to explain why income levels are higher in countries like the UK than in countries like Benin(4)

• Income levels are higher due to the kind of products the UK specialises in.

• For example, higher value added products ,such as manufactured goods and chemicals earn more export revenue and so lead to higher incomes for firms and workers.

• Cotton and palm oil are lower value, commodity products, and are sold in a competitive market for relatively low prices. This means they generate much less export revenue and result in lower incomes

Page 5: What questions would you like to ask? Think – why is free trade good?

• Benin specialises in primary commodity products such as Cotton and Palm Oil.

• Explain the benefits of specialisation in primary products to Benin• Benin may have an absolute advantage in the production of these

products. This means it can produce them at a lower cost than in other countries. Therefore it can be a good source of export revenue for Benin. This can be used to….

• Explain the potential disadvantages of specialisation in primary products to Benin

• Commodities are quite low value so they do not earn much in the way of export revenue. Therefore…

• Commodity prices are very unstable and vary a lot with supply and demand. If demand falls, prices can fall substantially. If countries increase supply this also may not be good as by producing more a country like Benin may not be any better off as the price will fall.

• There is a danger that if they over specialise and demand falls that economic growth may suffer and poverty may increase markedly.

Page 6: What questions would you like to ask? Think – why is free trade good?

• What questions would you like to ask?

Page 7: What questions would you like to ask? Think – why is free trade good?

• Explain the difference between absolute and relative poverty• Absolute Poverty – is where someone has insufficient income to

live on. They cannot afford the basic essentials such as food, clothing, shelter/housing. According to the world bank absolute poverty is having less than $1.25 to live on

• Relative Poverty - Is poverty defined relative to standards of income in society at a time. In the EU and the UK we define relative poverty as being where you earn less than 60% of median income.

• Using figure 8 describe what has happened to poverty in Nigeria between 1980 and 2010

• Poverty has increased significantly from 17.1million people in 1980 to 112.47 million in 2010. This is an increase of 95 million people. The biggest increase took place between 2004 and 2010 when poverty rose by…

Page 8: What questions would you like to ask? Think – why is free trade good?

• Discuss the barriers which prevent developing countries like Nigeria from achieving the full benefits of increased trade (10 marks)

Page 9: What questions would you like to ask? Think – why is free trade good?

• Level 4 - Candidate evaluates barriers which prevent developing countries like Nigeria from achieving the full benefits of increased trade. Expect a conclusion which evaluates which barriers are likely to be most important

• Level 3 – candidate analyses different barriers which prevent developing countries like Nigeria from achieving the full benefits of increased trade. Analysis must be linked to trade.

• Level 2 – candidate demonstrates an understanding of the barriers

• Level 1 – candidate demonstrates a knowledge of barriers

Page 10: What questions would you like to ask? Think – why is free trade good?

• Poor Infastructure – Infrastructure is the basic facilities, services etc needed for the functioning of a community or society, such as transportation and communications systems, water and power lines. If infrastructure is poor a country will be less attractive to FDI and costs will be higher making it less competitive

• Poor Education and Training – Education and training are vital in a world that depends more and more on advanced technology and knowledge. A poorly educated work force is only going to be able to do poorly paid low skilled jobs. The competitiveness of countries is oftern determined by how educated their workers are (also affects productivity)

• Health and Population Problems – can lead to lower life expectancy and affect growth. Look at the impact of Ebola on a number of African economies

• Debt – High debt levels can mean countries have to use any revenue they gain to service and pay debt back rather than investing in infrastructure and education

• Weak Government – Weak corrupt government can mean the benefits of globalisation go to a small proportion of people in a country rather than being used to benefit the general population

• Low FDI – developing economies can benefit greatly from FDI. This brings jobs, a multiplier effect and also skills and technology transfer. However many of the issues above may make a country less attractive to FDI

• Location – can also have a big impact. Some countries have advantages because of where they are situated. Others struggle because of natural disadvantages such as being landlocked which makes it difficult, costly and slow for firms to get products to the countries of trade partners.