IGCSE Development Studies: Specimen Questions with Answers 19 - 20 of 98

Passage

Forms of Free Trade

Question 19 (4 of 7 Based on Passage)

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Which country is an example of free trade?

Explanation

Example of Free Trade is NAFTA. A trilateral agreement was signed by Canada, Mexico, and US known as North American Free Trade. It came into force on 1st January, 1,988. NAFTA trade bloc is one of the largest trade blocs in the world. The purpose of NAFTA is to:

  • To allow free movement of goods and services in the free trade areas.
  • To increase competition in the free trade areas.

  • Protect the property rights of people and business in each country

  • To resolve problems that rise among countries

  • Encourage cooperation among countries.

NAFTA eliminated all non-tariff barriers to agricultural trade between USA and Mexico. Other Tariffs such as tariffs on qualifying goods were eliminated and some were phased out for long periods of time (5 - 15 years) . Because of this orderly adjustment were able to free trade with Mexico. It also improved working conditions in North America.

Benerfits of Free Trade

Question 20 (5 of 7 Based on Passage)

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Differentiate between free trade and protectionism.

Explanation

Differentiate between Free Trade and Protectionism
S. No

Free trade

Protectionism

1.

The idea that countries benefit from trading with other nations

Protectionism is the idea that protecting the home market is necessary because other countries take advantage of a country.

2.

The policy of trading nations without restrictions.

The policy of using tariffs or quotas to restrict trade

3.

The concept that a nation has an “open economy”

The concept of protecting domestic workers and industries in the face of foreign competition.

It fosters efficient market mechanism

It increases international competition and efficiency

5.

It strengthens absolute/comparative advantage

It allows freer movement of resources.