Trade Barriers - Liberalisation Quiz PDF

Reduction of international trade barriers/trade liberalisation Definition: Trade liberalisation Trade liberalisation is the process by which international trade is made easier through relaxation of tariffs and barriers. This is the opposite of protectionism. Trade liberalisation a quick history le...

Reduction of international trade barriers/trade liberalisation Definition: Trade liberalisation Trade liberalisation is the process by which international trade is made easier through relaxation of tariffs and barriers. This is the opposite of protectionism. Trade liberalisation a quick history lesson In 1947 General Agreement on Tariffs and Trade (GATT) was created The world felt the benefits of many rounds of multilateral trade liberalisation China and India experienced rapid growth through GATT It raised living standards around the world as it allowed developing nations to export their goods to more industrialised ones, without having to pay huge tariffs Benefits of GATT GATT meant new jobs for unskilled workers Countries enjoyed trade Garment industry in India was very successful benefits of between $250 and $680 billion dollars income a year * Labour intensive production manufacturers in developing nations, enjoyed comparative advantage because of low labour costs World trade organisation (WTO) WTO was created by GATT in 1994 and exists to reduce barriers to trade and to ensure that countries keep to the agreements they have made The organisation also deals with complaints between members, organising negotiations and, if necessary, making judgements against a country It encourages trade liberalisation by operating a system of trade rules and by providing a forum for the negotiation of trade disputes Trade liberalisation – why tariffs are imposed Governments want to protect their domestic businesses so they use; tariffs, quotas and legal regulations to slow the rate of imports coming into a country They might want to stop imports which will food the market with cheaper foreign versions Tariffs also generate important sources of income for poorer countries Liberalisation is the easing or dropping of tariffs and quotas Benefits of trade liberalisation Trade liberalisation is the India, Vietnam and Uganda have opened process of taking down the their economy in recent years barriers to trade between nations, removing quotas and tariffs Consumers ultimately benefit because liberalised trade can help to lower prices and broaden the range of quality goods and services available – because they are now allowed to buy imported goods Benefits to business of trade liberalisation Companies can benefit because liberalised trade diversifies risks and channels resources to where Since GATT Uganda has been able to returns on investment are the export their coffee all over the world highest Trade openness also means; competition, investment and increases in productivity The main industries in Uganda that have benefitted: Sugar , beverages, tobacco , cotton textiles, cement and steel production Drawbacks of trade liberalisation Competition can intensify between businesses, between nations and profit margins can end up being squeezed Employment that has been created by lower trade barriers, may only be temporary or menial Increased trade can mean pollution or over-cultivation of land to keep up with new demand Developing nations can become economically dependent on industrialised ones