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Prelim Revision

Addressing question
requirements
Content Development
Contextualisation
Argument development

International Trade
JC2 T3 Intensive Revision Prog Q14
(AJC Prelim, 2011, Q6)

International Trade
AJC Prelim, 2011, Q6
Prelim Revision

In economics, globalisation broadens the free market to


include many nations to which it had not previously reached.
However, protectionism has recently been rearing its head in
the form of tariff hikes by some countries in response to the
global economic crisis.
a) Using demand and supply analysis, explain the pattern of
trade between countries. (10)
b) Discuss whether you agree that protectionism is the best
approach to deal with the challenges posed by
globalisation. (15)

International Trade
AJC Prelim, 2011, Q6
Prelim Revision

a) Using demand and supply analysis, explain the


pattern of trade between countries. (10)

Part (a) requires you to:


Explain- Detailed description with relevant Economic
Analysis.- Identify and Describe how demand and
supply determinants influences trade patterns.
Do so in context link explanation to examples of
countries in reality.

International Trade
AJC Prelim, 2011, Q6
Prelim Revision
Addressing question
requirements
Did the answer address the
direction and key words?
Identify demand and supply
determinants of trade
patterns.

Describe how the


determinants affects trade
patterns.
Are the explanations in the
context of examples of real
countries?

a) Using demand and supply analysis,


explain the pattern of trade
between countries. (10)

International Trade
Prelim Revision

Addressing question
requirements
Content
Development
Contextualisation

AJC Prelim, 2011, Q6

Essay Structure
Introduction
Definition of key Terms
Overview
Body
How supply side determinants influence pattern of trade
Paragraph 1-Differences in Comparative Advantage
(Opportunity Costs)
Paragraph 2-Government Policies
How demand side determinants influence pattern of trade
Paragraph 3- Rising affluence (income)
Paragraph 4- Changing Taste and Preferences
Paragraph 5- Population Size and/or Demographics
Conclusion
Summarise how demand and supply determinants influence
patterns of trade.

International Trade
Prelim Revision

Addressing question
requirements
Content
Development

Contextualisation

AJC Prelim, 2011, Q6


Introduction
Definition of key terms
A countrys pattern of trade refers to the volume and
composition of trade in a country.
This can be influenced by demand and supply side
determinants.
Supply factors include the differences in Comparative
Advantage (Factor endowment), and government policies.
Demand factors include tastes and preferences, rising affluence
and changes in population sizes and demographics

Overview
In this essay, we will be explain how these factors contribute
towards influencing a countrys pattern of trade.

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

Each Paragraph
should be
written using
the PEEL
method.
Content
Development

AJC Prelim, 2011, Q6


Body
Paragraph 1- Comparative Advantage
P: A countrys comparative advantage based on their
different factor endowments and hence opportunity costs
can help to determine a countrys pattern of trade.

E: The theory of comparative advantage states that


countries should specialise in the production of those goods
they are more efficient in (lower opportunity cost of
production) and import goods that they do not have a
comparative advantage in as opportunity costs of producing
these goods within country are higher.
The different strengths in allocation of resources which
result in lower opportunity cost of the using these factors.
helps play a part in determining their comparative
advantage and hence relative productivity of an economy in
the production of certain goods.

International Trade
Prelim Revision
Addressing question
requirements

AJC Prelim, 2011, Q6


Body
Paragraph 1- Comparative Advantage

E: As Australia has an abundance of land endowments relative


Content Development to Singapore, this allows to produce dairy products at a lower
opportunity cost in relative to Singapore and thus have a
Contextualisation
greater comparative advantage than Singapore in producing
dairy products. Thus Spore imports Australian butter.
Spore has relatively more abundant amounts of highly skilled
labour compared to many other countries. Hence, she is able
to produce these products as a lower opportunity cost
relative to these countries. Hence,
Spores exports
capital/knowledge intensive goods such as wafer chips,
pharmaceutical products.
L: (Link to next paragraph) Hence, due to differences in cost
which affect the supply side, this influences the pattern of
trade in the world.

International Trade
Prelim Revision

AJC Prelim, 2011, Q6


Body

Paragraph 2- Government policies


Addressing question
requirements

P: The government policies of each country can help to


influence a countrys pattern of trade.

Content Development
Contextualisation

E: Government policies of each country is able to help


strengthen or to shift focus onto specific areas (e.g. tourism,
pharmaceutical, bio-medical, petrochemical industries)
through its policies.

Government policies can also help to promote trade between


certain countries through the signing of free trade
agreements that aid in lowering costs.

International Trade
Prelim Revision

AJC Prelim, 2011, Q6


Body

Paragraph 2- Government policies


E: The Singapore Government provides grants to help
Addressing question
pharmaceutical companies to carry out research in order to
requirements
strengthen the industry. Thus, composition of Singapores exports
has also shifted with higher contributions from these industries
Content
Development
as comparative advantage strengthens with government support.
Contextualisation

Also, since 1993, the Singapore government has also signed free
trade agreements with 20 regional and bilateral FTAs with 31
trading partners. This is instrumental in helping Singapore-based
businesses increase cross-border trade by reducing costs through
eliminating or reducing import tariff rates, easing investment
rules and opening government procurement opportunities etc.
All this helps to helps to increase the volume of trade between
trade partners.
L: Besides supply side determinants, demand side determinants
play a part in influencing trade patterns as well.

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body

Paragraph 3- Rising Affluence

P: One of the demand side determinants that influences


pattern of trade is rising affluence. This is especially
seen in emerging economies.
E: A country with rising income levels is able to increase
its demand for goods and services produced overseas
and thus will influence more countries to export to it.
E: Chinas strong rates of Economic growth has resulted

in the increase in exports of tourism-related services to it


by Singapore.

L: (Linkage to next paragraph) Other than rising


affluence, a countrys changing taste and preferences
may also influence its pattern of trade.

International Trade
Prelim Revision

AJC Prelim, 2011, Q6


Body

Paragraph 4-Changing Taste and Preferences


Addressing question P: Global changes in towards a more technology dependent
requirements
lifestyle
E: As technology plays a greater role in our lives, there is also a
Content
greater demand for such products due to their importance. As
Development
a share of global output, trade is now at almost three times the
Contextualisation
level in the early 1950s. This expansion in trade is mostly
accounted for by growth in non-commodity exports, especially
of high-technology products. This also accounts for the changing
composition of trade with more intra-industry trade being
exchanged over the years.
E: As a global trading hub, Singapore sees high-technology
exports amounting to 50% of its manufactured exports, due to
the greater demand for such products. Out of manufactured
goods, we export and import differentiated products (intraindustry)
L: Thus, change in global tastes and preferences contributes
towards the changes in our trade patterns.

International Trade
Prelim Revision

AJC Prelim, 2011, Q6


Body

Paragraph 5-Population Size and Demographics


Addressing question Changes in population size as well as population demographics
requirements
influence global trade demand.
Content
Development
Contextualisation

A general increased in global population have put pressure on


agricultural markets due to the increase in global food demand
and thus increased the composition of food in trade.

International Trade
Prelim Revision

AJC Prelim, 2011, Q6


Body

Paragraph 5-Population Size and Demographics


Addressing question
requirements
Content
Development
Contextualisation

Demographics also play a role in affecting trade composition


An ageing population results in expenditures on some categories
of goods, i.e. trade in consumer durables such as food,
furnishing, clothing and accessories, are noticeably reduced
upon retirement, while expenditures on other categories remain
constant or increase (Hurst, 2008). In particular, trade in
services will increase most in areas such as e.g. health,
financial services, tourism services that target the senior citizen
market.
Singapores total trade in services as a percentage of GDP has
been following an upward trend from the 1990s until now.

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Conclusion
In this essay we have seen how demand and supply
determinants act together to influence the volume
and composition of trade globally.

International Trade
AJC Prelim, 2011, Q6

Prelim Revision

L1: 1-3

L2: 4-6

L3: 7-10

Addressing Question Answer is descriptive


Requirement
and/or regurgitated
statements that are of
Did the answer
little relevance to
address the
question requirement
direction and key
words?

Answer shows a
superficial knowledge
of the different
reasons for a countrys
pattern of trade.

Thorough knowledge
of the demand and
supply determinants
influencing a countrys
pattern of trade with
the ability to support
using examples.

Content
Development

Points are made and


may not always be
supported with
demand and supply
analysis.

There is consistent
linkage of reasons to
demand and supply
determinants and how
changes in demand
and supply therefore
influence pattern of
trade.

Were points
made supported
with economic
theories?

There is merely listing


of definitions and/or
concepts.

International Trade
AJC Prelim, 2011, Q6

Prelim Revision

Contextualisation

L1: 1-3

L2: 4-6

L3: 7-10

No or minimal use of
examples.

Some use of
examples.

Consistent use of
examples.

Examples may be real


world but are weak in
terms of its use to
support points.

Good quality, real


world examples of
countries are used to
support points.

Did answer make


use of examples?
Were examples
used relevant,
real world
examples?

International Trade
AJC Prelim, 2011, Q6
Prelim Revision

In economics, globalisation broadens the free market to


include many nations to which it had not previously reached.
However, protectionism has recently been rearing its head in
the form of tariff hikes by some countries in response to the
global economic crisis.
a) Using demand and supply analysis, explain the pattern of
trade between countries. (10)
b) Discuss whether you agree that protectionism is the best
approach to deal with the challenges posed by
globalisation. (15)

International Trade
Prelim Revision

AJC Prelim, 2011, Q6

Essay Question 6
In economics, globalisation broadens the free market to
include many nations to which it had not previously
reached. However, protectionism has recently been rearing
its head in the form of tariff hikes by some countries in
response to the global economic crisis.
b) Discuss whether you agree that protectionism is the
best approach to deal with the challenges posed by
globalisation. (15)

International Trade
Prelim Revision

AJC Prelim, 2011, Q6

Part (b) requires you to:


1) Explain the challenges posed by globalisation.
2) Discuss whether you agree if protectionism is the best
measure to address these challenges.i. Explain the pros and cons of using protectionism.
ii. Explain 2 other measures (best) that can be better in
helping to address these challenges.
3) Take note of the preamble!
i. One of the protectionist measures brought up needs to be
tariffs.
ii. This question needs to discussed with the global economic
crisis in mind.

International Trade
AJC Prelim, 2011, Q6

Prelim Revision
Addressing question
requirements
Did the answer address the
direction and key words?

Explain the pros and cons of


using protectionism to
address these challenges

Explain the challenges


created by globalisation.

Explain how fiscal policy can


be better at addressing
these challenges in SR

Explain how supply side policy


can be better at address these
challenges in LR

Evaluate: Make a stand and


justify.

Note: Protectionism is generally not regarded as an ideal policy is addressing


globalisations challenges.

International Trade
2011 AJC Qn 6
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

Essay flow
Introduction
Define globalisation and protectionism
Overview
Body
Thesis- Protectionism is the BEST approach to deal with the
challenges posed by globalisation.
-Explain the challenge posed by globalisation.
-Explain how protectionism addresses this challenge.
Anti-thesis 1: Explain why protectionism is not the best
approach

Anti-thesis 2: Explain how other policies ( FP and SSP) can


better addresses these challenges.
Conclusion/ Evaluation
Summarize your overall stand. Provide Insight.

International Trade
Prelim Revision
Addressing
question
requirements
Content
Development

AJC Prelim, 2011, Q6


Introduction
Define globalisation: increasing integration of the international
economy and is characterised by greater global interdependence
through expansion in the volume and variety of cross-border
transactions in goods and services, capital, foreign direct
investments, exchanges in labour and technology.

Contextualisation

Define protectionism: refers to any action that the government


may take to influence market forces to provide an advantage to
domestic industries over foreign producers
Overview:
In this essay, we will explain the challenges globalisation poses
and how protectionism can address these challenge and their
possible limitations.
We will also look at whether other policies could help to address
these challenges and consider which is the best approach.

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body: Thesis

Challenge 1:
Globalisation could result in rapid growth which may
lead to higher levels of structural unemployment in the
sunset industries that have lost CA.

How protectionism addresses this challenge:


With governments intervention, temporary protection
(Short Run) allows workers in these sunset industries
(which may employ significant proportion of the labour
force) to adjust to new conditions
Example: In order to prevent high structural
unemployment, the Obama administration sought to
protect the US Auto industry (General Motors and
Chrysler) by pumping large government subsidies
towards saving the industry.

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body: Thesis

Limitations:
However, once this protection is in place, it may be hard
to remove and if protection is in long term, it may lead to
higher COP, misallocation of scarce resources and a fall
in world output and trade.

International Trade
Prelim Revision

Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body: Thesis
Challenge 2: Increased vulnerability
Greater interdependency and mobility of resources among
countries means problems in one country can be easily
transmitted to other countries. This is especially so during the
global crisis where the national incomes of many countries
were affected.
How protectionism addresses this challenge:
During a worldwide recession, protectionism can be carried
out to maintain home employment.
Restrict imports in order to ensure that income is spent in
domestic country so as to provide some stability in income
and employment

International Trade
Prelim Revision

Addressing question
requirements

AJC Prelim, 2011, Q6


Body: Thesis
Example: Clauses such as the Buy American, Buy
Indonesian were instituted to encourage or even mandate
the purchase of local products and discourage imports.

Content Development
Contextualisation

Limitations:
This may encourages inefficiency in home industries
produce goods with no CA reduced competitiveness in the
future.

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body: Thesis

Challenge 3: deterioration of BOP

-Fall in global demand during crisis and assuming imports


remain constant excessive import expenditure
worsen current account
-Increased global competition for FDI engage in
outward investment long term capital outflow and
less capital inflow
-Increase mobility of capital, esp Short term capital
increased instability in the foreign exchange markets
greater risks of currency crises
How protectionism addresses this challenge:
Tariffs or quotas may be imposed to reduce import
expenditure allow BOP to improve (briefly explain
using diagram)

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body

Example: The EU introduced tariffs on several


agricultural products. And tariffs on steel products were
seen in countries like India and Brazil.
Limitations:
DWL may result (with imposition of tariffs)
Retaliation from trading partners possibly increase
trade barriers increase in general reduction of world
trade

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body: Anti-thesis: Why Protectionism is not Best

1. Begger-thy-neighbour effect
- exports, output and income of its trading partners are
reduced, which then curbs the exports, output and
employment of the country which initiated
protectionism
2. Risk of Retaliatory reactions from trade partners
- trading partners may retaliate and impose their own
import restrictions thus causing the initiating countrys
exports, output and employment to suffer subsequently.
3. Increases market dominance of domestic firms
- protection raises the market power of domestic firms
hence resulting in greater allocative inefficiency. Also,
being flushed with monopoly profits, domestic firms
tend to end up being productively inefficient

International Trade
Prelim Revision

Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body: Anti-thesis 2: Other policies
Fiscal Policy
In the short run, instead in protectionist measures,
Expansionary Fiscal Policy can help improve or at least
maintain employment (Cyclical) and economic growth rates
(Actual growth) during periods of vulnerability by increasing
AD.
Building of IRs and 2009 Resilience package (includes
increase G, Lower corporate taxes and income taxes
increase C and I
This may help improve AD (and may have positive AS
effects) and hence NY and employment, and is better than
protectionist measures as protectionism will only harm our
trading partners and lower their income and hence ability
to buy from us.

International Trade
Prelim Revision

AJC Prelim, 2011, Q6


Body: Anti-thesis 2: Other policies

Addressing question
requirements
Supply Side Policy

Content
Development
Contextualisation

Protectionism may protect the industry in the short run during a


financial crisis, but it does not solve the root of the problem of
unN structural change in country needed and relevant skills
required.
For example Spore needs to move up the value chain towards
more knowledge based and service industries. It does not
protect its domestic industries nature of our exports has to
change as we compete with emerging economies such as China.
Retraining the workers productivity increases as workers are
equipped with appropriate and higher level of skills and
unemployment levels fall e.g. productivity and innovation credit
scheme (PIC)

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Body: Anti-thesis
Policies can be also be put in place to:
-improve labour discipline, improve infrastructure, rules and
regulation attract FDI increase long term capital inflow
-improve non-price competitiveness improve quality &
increase global demand for exports improve BOP
-Strengthen domestic financial sectors before opening up to
global capital flows
This will improve our fundamentals and may be more useful
than short-term protectionist measures.

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Conclusion
Stand
Globalisation poses problems to the economic objectives
of the government.
Therefore, governments should understand the nature of
their economies well and if necessary, may adopt
temporary, short term protectionist measures to
safeguard the interests of their economy.

However, at the end of the day, protectionism may not be


the best approach as it does not solve the root of the
problem and may harm our trading partners and thus
indirectly harm ourselves.

International Trade
Prelim Revision
Addressing question
requirements
Content Development
Contextualisation

AJC Prelim, 2011, Q6


Conclusion
Insight
Instead, more open and well-governed markets should
be the developed through the use of policies that seek to
improve our fundamentals such as supply side policy.
Fiscal policy which can be more easily adjusted and
which may have supply side effects can be used in the
short run.
These combined will allow us to better weather any
storm and will be better than the use of protectionism to
address the challenges posed by globalisation.

International Trade
AJC Prelim, 2011, Q6

Prelim Revision

L1: 1-5
Addressing Question Answer is largely
Requirement
irrelevant. Some points
on globalisation or
Did the answer
protectionism may be
address the
made but these tend
direction and
to be incidentally made
key words?
rather than
purposefully made.

L2: 6-9

L3: 10-13

Answer is able explain


the challenges that
globalisation brings
about and how
protectionism can
address these
challenges and
mentions its limitations.

Answer is able to
provide a good
explanation of the
challenges that
globalisation brings
about and how
protectionism can
address these
challenges and its
limitations.

It touches on other
policies, but does not
address the idea of best It explains how other
approach.
policies may also solve
these challenges and
addresses the idea of
best approach.

International Trade
AJC Prelim, 2011, Q6

Prelim Revision

L1: 1-5
Content Development Points made are
not deliberately
Were points made
supported with
supported with
diagrams and
diagrams and
economic theories:
tables?
Mere stating of the
Were points made challenges of
supported with
globalisation and
economic
types of
theories?
protectionism.

L2: 6-9

L3: 10-13

Points are made and


sometimes
supported with
diagram and
economic theories:

Points are made and well


supported with diagrams
and economic theories.

A thorough economic
analysis of 3 challenges
Incomplete economic of globalisation and the
analysis of 3
ways protectionism may
challenges of
or may not address it.
globalisation and the
Well elaborated
ways protectionism
explanation of how other
can address it. Very
policies can be better
brief
than protectionism are
recommendation of
also seen.
other policies.

International Trade
AJC Prelim, 2011, Q6

Prelim Revision

Contextualisation

L1: 1-3

L2: 4-6

L3: 7-10

No or minimal use of
examples.

Some use of
examples.

Consistent use of
examples.

Examples may be real


world but are weak in
terms of its use to
support points.

Good quality, real


world examples of
countries are used to
support points.

Did answer make


use of examples?
Were examples
used relevant,
real world
examples?

International Trade
AJC Prelim, 2011, Q6

Prelim Revision

Argument
Development

Did answer
provide balanced
discussion that
considers
different
perspectives?
Was the flow of
argument
coherent?

L1: 1-3
There is no breadth of
discussion or coherent
flow of argument.
Essay is mostly onesided or too narrow in
terms of number of
points.

L2: 4-6
There is some breadth
of discussion, but
certain key angles/
perspectives may not
be brought up.

L3: 7-10
There is good breadth
of discussion which
covers multiple
perspectives and
angles.

Flow of argument is
mostly coherent.

Argument is coherent.