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Discuss the extent to which the use of trade barriers by developing economies is an appropriate policy for such economies.

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Introduction

Discuss the extent to which the use of trade barriers by developing economies is an appropriate policy for such economies. Protectionist measures are those such as tariffs, quotas, subsidies and regulation. Tariffs are taxes on imported goods which create revenue for the government and protect domestic industries from the high pressure of the world trade market. Quotas are limits on the amount of imports allowed in a country. Subsidies are given to the producers in order to reduce costs and encourage production in that sector. A developing economy may decide to enforce tariffs on its importers. The government may d o this to discourage imported goods from being bought and encourage the demand for domestic goods. This would lead to domestic business's increasing output and therefore there would be an increase in employment and the economy would see a growth in its GDP. The tax on imports would generate more revenue and allow the governments to spend in the economy, especially on education, health and infrastructure which is what many developing economies struggle with. ...read more.

Middle

Quotas are a means of physical control unlike tariffs which are a tax on imported goods. This means that the government receives no revenue when quotas are applied. For example in Ghana it imports $250 per capita of foreign rice. This supplies 2/3s of it's rice market. If the country were to produce its own rice and restrict the amount of imports through a quota it would increase employment, decrease imports and therefore improve the balance of payments situation and create growth in the primary sector (domestic). Tariffs and quotas do have similarities; they both reduce the level of imports in an economy, and allow domestic industries to compete at a perfect level. However a dependency may occur on these measures, therefore if barriers were lifted they would be in the same position as they were before the barriers. They therefore have not become more effect of competitive. While this shows an increase in GDP there have not been any improvements to the development of the country as it is not sustainable. ...read more.

Conclusion

Subsidies can also not be allocatively efficient when they are applied to FDI's. This would encourage investment but the subsidy is not benefiting the domestic industry that really needs it. The problem with resources and their allocation may restrict the economy in terms of growth and development. In conclusion it is evident that developing economies do not take in all the factors when considering using protectionist measures. Protectionist measures are only effective in the long run to an economy if the domestic industries do not become reliant. The long term implications involved with these measures seem to out way the short term benefits. However without there measures the economy would experience no growth or development what so ever. The only alternative is to take into account trading blocks where the country would grow in power and the countries can benefit from each other. It is obvious that protectionism is needed in the beginning to kick start the economy however countries at a slightly higher level of development would not need this as they would be able to compete and be more efficient. ...read more.

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Response to the question

This essay engages well, exploring what trade barriers are and then assessing whether they are appropriate for developing countries. The task is a bit cryptic, but if I was doing this essay I would've defined what is appropriate for a ...

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Response to the question

This essay engages well, exploring what trade barriers are and then assessing whether they are appropriate for developing countries. The task is a bit cryptic, but if I was doing this essay I would've defined what is appropriate for a developing county in my introduction. I think looking at the significance of development over growth, an increase in the efficiency of domestic firms and an increased standard of living would've helped this essay focus slightly more. Saying that, there is a breadth of discussion of why trade barriers have certain consequences, showing a strong understanding.

Level of analysis

The analysis in this essay is strong. What I particularly liked about this essay was the discussion of why a government may choose to introduce the trade barrier. This shows a good understanding of why they can be useful, but then the essay goes further to explain why they are not always useful by discussing the disadvantages. Such evaluation will gain credit! Each mechanism is well explained, with each step being linked well. I think this essay would benefit from a few diagrams. For example "This would therefore lead to an increase in aggregate demand" could be displayed with a diagram, when could then be analysed to show the effects. Although the points covered are good, there are some which have been missed out. I would be discussing the ability of trade barriers allowing domestic industries to grow. This is then a point which could be evaluated, saying that without investment or sufficient demand anyway, these domestic firms will struggle to evolve. It is key that you pick points which can be evaluated! I would've also spoken about retaliation, as this is common with trade barriers. Unfortunately, there is no discussion of the extent in this question. Yes, there is some good discussion, but the question isn't truly answered. There needs to be a paragraph saying "the extend to which it is appropriate depends upon" and then elaborating upon investment, demand in the economy, which have been mentioned above. Doing so would ensure this essay gains the top marks.

Quality of writing

This essay has a strong structure, as it has a clear introduction and conclusion. The introduction allows key terms to be defined, making it easy to allocate knowledge and understanding marks. The conclusion attempts to make a justified judgement, which is good, but as mentioned above the extent needs to be addressed. I liked how the long term was considered. The style is strong, making this argument convincing. Spelling, punctuation and grammar are fine.


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Reviewed by groat 11/03/2012

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