Trade and Specialization Overview

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Questions and Answers

What is a primary benefit of specialization in trade?

It leads to a decrease in global production.

It eliminates the need for trade.

It can improve productivity and efficiency. (correct)

It increases production costs significantly.

Which term describes trade within a country?

Regional trade

International trade

External trade

Domestic trade (correct)

What is one reason for the increase in global trade since around the year 2000?

Higher transportation costs

Isolationist trade policies

Rising trade barriers

Accession of China to the World Trade Organisation (correct)

What is a potential drawback of trading?

Creation of market monopolies or oligopolies Signup and view all the answers

What are re-exports?

Previously imported goods shipped to another country Signup and view all the answers

What effect does a tariff have on imported products?

Increases the price of imported products Signup and view all the answers

Which of the following is a policy reason for trade protection?

Ensuring supply of key materials Signup and view all the answers

What is the primary purpose of quotas in trade protection policies?

Limit the amount of specific imported products Signup and view all the answers

Which trade protection policy makes it difficult for businesses to import goods?

Foreign exchange control Signup and view all the answers

Why might a government impose an embargo?

To retaliate against another country's trade measures Signup and view all the answers

How does a tariff primarily affect consumers?

Consumers are charged higher prices due to the tariff. Signup and view all the answers

What is one way that a country may respond to trade protection policies?

Engaging in high-level dialogue with the imposing country. Signup and view all the answers

What significant role does the World Trade Organisation play?

It acts as a forum for negotiation and dispute resolution among member states. Signup and view all the answers

What percentage of Hong Kong's exports are actually re-exported?

98% Signup and view all the answers

Which factor poses a challenge to Hong Kong's trading competitiveness?

Development of logistical infrastructure in mainland areas. Signup and view all the answers

What is a potential response to challenges faced by trading in Hong Kong?

Develop new markets and industries. Signup and view all the answers

What is one consequence of trade protection policies for local producers?

Reduced competition may slow advancements in quality. Signup and view all the answers

What is a major challenge affecting trade in Hong Kong?

The increase in competition from neighboring ports. Signup and view all the answers

Study Notes

Benefits of Specialization in Trade

Increased efficiency: Specialization allows countries to focus on producing goods and services they are best at, leading to higher output and lower production costs.

Domestic Trade

Intra-national trade: Refers to trade within a single country, encompassing the exchange of goods and services among individuals, businesses, and government entities within its borders.

Increased Global Trade Since 2000

Technological advancements: Improvements in transportation and communication technologies have facilitated easier and cheaper movement of goods and information globally, contributing to the rise in global trade.

Drawbacks of Trading

Potential job losses: Increased international competition due to trade may lead to job losses in domestic industries that struggle to compete.

Re-exports

Re-exports: Products imported from other countries, then exported to others without undergoing substantial processing or manufacturing within the importing country.

Effects of Tariffs

Higher prices: Tariffs are taxes on imported goods, making those products more expensive for consumers.

Policy Reasons for Trade Protection

Protecting domestic industries: Trade protection policies, such as tariffs and quotas, can be implemented to shield domestic industries from foreign competition, allowing them to grow and thrive.

Purpose of Quotas

Limiting imports: Quotas are restrictions imposed by governments on the quantity of specific goods that can be imported from a particular country or region, aimed at reducing imports of those products.

Trade Protection Policies Affecting Imports

Non-tariff barriers: These include regulations, standards, and procedures that make it difficult for businesses to import goods, often used as a form of trade protection.

Reasons for Embargos

Political or economic reasons: Governments may impose embargos, which are complete bans on trade with a particular country, as a means of exerting political or economic pressure.

Consumer Impact of Tariffs

Higher consumer cost: Tariffs raise the cost of imported goods, ultimately leading to higher prices for consumers.

Responses to Trade Protection Policies

Trade retaliation: Countries may respond to trade protection policies by implementing their own protectionist measures, potentially escalating trade tensions between nations.

WTO Role

Promoting free trade: The World Trade Organization (WTO) plays a crucial role in facilitating and regulating international trade by providing a framework for negotiating and enforcing trade agreements, aiming to reduce trade barriers and promote free trade globally.

Hong Kong Re-exports

Significant proportion: A substantial percentage of Hong Kong's exports are re-exports, highlighting its role as a major global trading hub and intermediary.

Hong Kong Trading Competitiveness Challenges

Rising costs: The increasing cost of living and doing business in Hong Kong presents a challenge to its trading competitiveness, potentially making it less attractive as a location for businesses.

Potential Response to Hong Kong Trading Challenges

Diversification: To address challenges, Hong Kong may focus on diversifying its economy and exploring new markets, potentially expanding into areas beyond traditional trading activities.

Trade Protection Policies Impact on Local Producers

Reduced competition: Trade protection policies can shield local producers from intense foreign competition, potentially enabling them to raise prices and operate with less efficiency, as they face less pressure to innovate and improve.

Major Challenge Affecting Trade in Hong Kong

Global economic uncertainty: Economic fluctuations and uncertainties in the global market pose a significant challenge to Hong Kong's trading activities, creating volatility and unpredictability in trade flows.

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Description

This quiz covers the fundamentals of trade and specialization, highlighting how they contribute to productivity both domestically and internationally. It explores key concepts such as domestic and international trade, along with related terminology. Understand the trends shaping global trade and the factors influencing specialization among countries.