Advantages of Export Promotion
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Questions and Answers

What is the purpose of import substitution?

  • To increase imports
  • To reduce exports
  • To replace imports with locally produced goods and services (correct)
  • To increase trade with other countries

    • What is a tariff?

  • A tax on imports (correct)
  • A quota on exports
  • A subsidy to local producers
  • A type of exchange control

    • What is an advantage of export promotion?

  • No limitation on production (correct)
  • The real cost of production is hidden
  • Increased tariffs and quotas
  • Lack of competition

    • What happens to a country's production when it expands exports?

    <p>It stimulates domestic production</p> Signup and view all the answers

    What is the effect of quotas on imported goods?

    <p>Shift of demand to locally produced products</p> Signup and view all the answers

    Why does the government offer subsidies to local producers?

    <p>To reduce the cost of production and make the industry more competitive</p> Signup and view all the answers

    What is a benefit of export promotion in terms of employment?

    <p>A greater number of jobs are created within the country</p> Signup and view all the answers

    What is the basis of production when applying comparative advantage?

    <p>Cost and efficiency</p> Signup and view all the answers

    What is exchange control?

    <p>A government limitation on the amount of foreign exchange available to importers</p> Signup and view all the answers

    What is an example of physical control?

    <p>Specifying quality control standards for imported goods</p> Signup and view all the answers

    What can happen to competitors due to export promotion incentives and subsidies?

    <p>They can be forced out of the market</p> Signup and view all the answers

    What is diverting trade?

    <p>Making it difficult to import goods</p> Signup and view all the answers

    What can happen to overseas countries when similar goods are sold domestically below their real cost of production?

    <p>They may retaliate with tariffs and quotas</p> Signup and view all the answers

    What is the effect of higher tariffs on exporting firms?

    <p>Reduced exports and market share of exporting firms</p> Signup and view all the answers

    What is a disadvantage of export promotion?

    <p>Lack of competition</p> Signup and view all the answers

    Why might other countries regard exported products as inferior?

    <p>Because they are sold at very low prices</p> Signup and view all the answers

    At what level do countries often use a mixture of import substitution with export promotion?

    <p>Local level</p> Signup and view all the answers

    Which of the following is the aim of the African Union?

    <p>To develop the continent into an economic and monetary union</p> Signup and view all the answers

    What is one of the four most important roles of the WTO?

    <p>To supervise the review of national trade policies</p> Signup and view all the answers

    What is the aim of economic integration?

    <p>To increase trade between countries and thereby increase welfare</p> Signup and view all the answers

    Which country withdrew from the monetary union in 1974 and introduced its own currency?

    <p>Botswana</p> Signup and view all the answers

    What is the status of the South African Development Community (SADC)?

    <p>Free Trade Area</p> Signup and view all the answers

    What type of trade agreement is the Southern African Custom Union an example of?

    <p>Custom Union</p> Signup and view all the answers

    What is the purpose of trade protocols?

    <p>To specify the rules governing the level of trade between parties</p> Signup and view all the answers

    What is the name of the agreement that established free trade between South Africa and the European Union?

    <p>Trade, Development and Cooperation Agreement</p> Signup and view all the answers

    Which of the following is NOT a member of SACU?

    <p>Zimbabwe</p> Signup and view all the answers

    Which of the following is NOT an example of economic integration?

    <p>WTO</p> Signup and view all the answers

    What is the difference between protectionism and free trade?

    <p>Protectionism restricts trade, while free trade promotes trade</p> Signup and view all the answers

    What is the name of the implementation unit of the African Union?

    <p>Nepad</p> Signup and view all the answers

    Which of the following agreements will eventually include all SACU members?

    <p>Mercosur – South Africa agreement</p> Signup and view all the answers

    What is the global approach to trade policies?

    <p>Free Trade</p> Signup and view all the answers

    What percentage of imports from SADC qualifies for duty-free access to South Africa?

    <p>97%</p> Signup and view all the answers

    Which of the following countries is NOT a member of the Mercosur trade bloc?

    <p>South Africa</p> Signup and view all the answers

    What is the main purpose of the African Growth and Opportunity Act (AGOA)?

    <p>To grant duty-free exports to the USA of some goods from some African countries</p> Signup and view all the answers

    What has been the trend of Japanese investment in South Africa since 1994?

    <p>Over Yen 100-billion in investments</p> Signup and view all the answers

    What is the significance of South Africa joining BRICS in 2011?

    <p>It enabled South Africa to join four of the seven biggest economies of the world</p> Signup and view all the answers

    What type of goods does South Africa mainly export to Japan?

    <p>Primary products</p> Signup and view all the answers

    What is the significance of the Japan-South Africa Partnership Forum?

    <p>It represents the expanding bilateral trade between Japan and South Africa</p> Signup and view all the answers

    When was the African Growth and Opportunity Act (AGOA) implemented by the USA?

    <p>2001</p> Signup and view all the answers

    Which of the following is a result of South Africa joining BRICS?

    <p>Trade and investment benefits as well as influence on world forums</p> Signup and view all the answers

    Study Notes

    Advantages of Export Promotion

    • No limitation on production due to the large world market
    • Increased domestic production, leading to export-led economic growth
    • Creation of employment opportunities and increased income and standards of living
    • Cost and efficiency considerations based on comparative advantage

    Disadvantages of Export Promotion

    • Lack of competition due to incentives and subsidies, leading to unsustainable businesses
    • Retaliation from other countries with tariffs and quotas
    • Hiding the real cost of production, making it difficult for firms to compete in an open market
    • Possibility of being seen as dumping, leading to higher tariffs and reduced exports

    Import Substitution

    • A trade policy that encourages the replacement of imports with locally produced goods and services
    • Methods include:
      • Tariffs (custom duties)
      • Quotas (limiting the number of goods and services that can be imported)
      • Subsidies (reducing costs of production for local producers)
      • Exchange control (limiting foreign exchange available to importers)
      • Physical control (banning or specifying quality control standards for imported goods)

    A Desirable Mixture of Trade Policies

    • Countries often use a mixture of trade policies to achieve a balance between imports and exports
    • Examples include:
      • Export promotion vs import substitution
      • Protectionism vs free trade
      • Regional trade blocs, such as Custom Unions, that combine free trade and protectionism

    Globalization and Economic Integration

    • Globalization aims to increase world production through free trade
    • Examples of economic integration include:
      • Free Trade Areas (e.g. Custom Unions, Common markets, and Economic and Monetary Unions)
      • Preferential Trade Agreements (e.g. WTO, AGOA)

    South Africa's Trade Protocols

    • South African Customs Union (SACU)
      • Members include Botswana, Lesotho, Namibia, South Africa, and Swaziland
      • Negotiate jointly on Free Trade Areas (FTA) with the rest of the world
    • Multilateral Monetary Area (MMA)
      • A form of monetary union between South Africa, Botswana, Lesotho, and Swaziland
      • Namibia joined the monetary union, replacing the Common Monetary Area (CMA)
    • South African Development Community (SADC)
      • Aims to develop the region into an economic and monetary union
      • 97% of imports from SADC qualify for duty-free access to SA
    • African Union (AU)
      • Aims to develop the continent into an economic and monetary union
      • Nepad (New Partnership for Africa's Development) is the implementation unit of the AU
      • First phase is to develop 5 regional Free Trade Areas (FTA)
    • European Union (EU)
      • The European-SA Free Trade Area (FTA) entails the freeing of tariffs
      • Trade, Development and Cooperation Agreement was implemented in 2000
    • Mercosur-SA
      • A Framework Agreement was signed in 2000 to expand trade and create a free trade area
      • The agreement will eventually include all SACU members
    • African Growth and Opportunity Act (AGOA)
      • The USA implemented the Act in 2001, granting duty-free exports to the USA from some African countries
      • The Act was reviewed in 2015 and will be further reviewed in 2025
    • Japan-South Africa's Partnership Forum
      • Bilateral trade between Japan and South Africa has been expanding since 1992
      • Japanese investments in South Africa are mostly in the automotive, metals, and chemicals sectors
    • BRICS (Brazil, Russia, India, China, and South Africa)
      • SA joined as a full member in 2011, joining four of the seven biggest economies in the world
      • BRICS comprises countries that will be the pivot of the global economy in the coming decades

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    Description

    Learn about the benefits of promoting exports, including increased domestic production, employment opportunities, and no limitations on production. The quiz covers the reasons for export promotion and its impact on a country's economy.

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