International Trade & Globalisation · 4 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 13% of your exam marks.
Comparative advantage, free trade benefits, and protectionist tools (tariff, quota, subsidy) appear regularly in Section B evaluate questions.
Defenders of protectionism point to several specific reasons it can be justified.
A new industry in a developing country may be too small or inexperienced to compete with established foreign rivals. Temporary protection lets it grow until it can stand on its own.
The risk: governments often find it politically hard to remove protection once granted. Industries that were "infants" can stay protected for decades.
Cheap imports may wipe out jobs in domestic industries. Protectionism saves those jobs in the short run.
The risk: the costs are paid by consumers (higher prices) and by other industries (loss of access to cheap inputs). Saved jobs in one sector can mean lost jobs in others.
Reducing imports narrows the trade deficit. A country with a persistent BoP deficit (topic 12) might use tariffs to bring imports down.
The risk: trading partners often retaliate, reducing the country's exports. The BoP improvement may be smaller than hoped.
A country may want to keep the ability to produce essential goods (food, weapons, certain technologies) regardless of cost. The argument: if a war or crisis cuts off trade, the country must be able to feed itself and defend itself.
The risk: "national security" can be stretched to justify protection for almost anything.
If another country imposes tariffs, the home country may retaliate in kind to pressure them to remove the barriers. The argument: standing firm now prevents being exploited later.
The risk: retaliation can escalate into trade wars that hurt both sides.
If foreign firms are dumping (selling below cost to drive out domestic competitors), temporary protection is justified.
The risk: "dumping" is hard to prove, and the accusation is often used as an excuse for protection.
Tariffs raise money for the government. For developing countries with limited tax administration, this can be a significant revenue source.
The risk: tariff revenue distorts the economy; broad-based income or consumption tax is usually more efficient.