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Economics Notes

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Introduction

Economics Notes 1. Free trade and protection - the basis of free trade - its advantages and disadvantages - reasons for protection - infant industry argument - domestic employment - dumping - defence Advantages & Disadvantages of free trade Free Trade: Situation where there are no artificial barriers to trade imposed by governments which restrict the free exchange of G/S between countries with the aim of shielding domestic producers from foreign competitors. Advantages of Free Trade: 1. Trade allows countries to obtain G/S that they cannot produce themselves or in sufficient quality to satisfy domestic demand e.g country may lack to necessary technology to produce certain manufactured goods 2. Free trade allows countries to specialise in the production of the G/S in which they are most efficient. This leads to a better allocation of resources 3. Resources will be used more efficiently because countries will be producing the G/S in which they have a comparative advantage in 4. Greater specialisation would lead to economies of scale which would lower average costs & increase efficiency 5. Free tarde encourages innovation & the spread of new technology and production processes throughout the world 6. Free trade leads to higher living standards as a result of lower prices, increased quantities & variety Disadvantages of Free Trade 1. Rise in short term unemployment may occur as some domestic businesses may find it hard to compete with imports. 2. New industries may find it difficult to establish themselves if they are not protected from larger foreign competitors. 3. Production surpluses may be sold at unrealistically low prices on the domestic Aust market which may hurt efficient Aust industries. ...read more.

Middle

* Covers newly industrialising economies in South East Asia * Does not include any advanced economies * ASEAN free trade area established in 1992 3. Contemporary trading blocs and agreements - the role, importance and influence in the global economy of blocs and agreements - EU, NAFTA, APEC, ASEAN, CERTA The role, importance and influence in the global economy of trading blocs and agreements Trading alliances and formal agreements have occurred between countries as a result of economic integration, which refers to the liberalisation of trade between 2 or more countries. Economic integration has increased significantly in the last 20 years and has led to the formation of: * Trading blocs o Which often leads to trade diversion, where trade is promoted within a region at the expense of trade development with non-member countries. * Free Trade Agreements o Recent resurgence due to slower WTO negotiations and concern that AUSTRALIA is being excluded from trading blocs The role of trading blocs is to: * Expand the benefits of specialisation of production beyond national boundaries by eliminating barriers of trade. The economic benefits are: o Wider choice of products for consumers o Factors of production used more efficiently o Easy access to export market o Raised cooperation and understanding o Greater interdependence between nation, < war * Factors of production more freely between economic making it possible to: o Access economic growth opportunities o Limit restriction on the best use of resources in the region o Increase in employment as result of trade Concern over the extent to which FTA's assist or hinder progress toward global free trade. Notion that trading blocs are dividing the world into separate trading areas. ...read more.

Conclusion

World Bank (WB) * Primary role of the world bank is helping poorer countries with their economic development * It does this by > Funding investment & investment & infrastructure > Reducing poverty > Helping countries adjust to the demands of globalisation * It is funded from contributors from member countries and from its own borrowings It has a number of organisations that provide specific assistance including the - * International Development Association which provides "soft loans" to developing nations which has little or no interest * International Financer Corporation whose role is to attract private sector investment in the World Bank's projects * Multilateral Insurance Guarantee Agency which provides risk insurance to private investors * WB makes loans to developing nations at rates below commercial rates to fund projects like dams, roads, schools & power plants * In recent yrs WB major aim has been to reduce the proportion of people living on less then $1 a day to half the 1990 level by 2015 * By 2015 it also hopes to achieve universal primary education, reduce child mortality, improve maternal health and treatment of serious health epidemics like HIV/AIDS, improve the natural environment & improve the status of women * 2003 - WB made $US 18.5 billion in mew loans to developing countries * This represents only 7% of all capital flows to developing nations * Because of the growth of FDI flows to the developing nations the role of the WB has been diminished * It's most important action in recent yrs has been its support of the Heavily Indebted Poor Countries Initiative in which it aims to reduce debt by 2/3s in 46 of the world's poorest countries ...read more.

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