IGCSE Development Studies: Specimen Questions with Answers 17 - 18 of 98

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Forms of Free Trade

Question 17 (2 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, 1988. 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 18 (3 of 7 Based on Passage)

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Free trade is good for nations?

Explanation

The Nations Which Can Benefit from Free Trade Are

  • The exporters with competitive advantage
  • The nations having workers who gain jobs in export industries.
  • Nation having net economic welfare gain for society
  • Consumers of nations who get benefits from cheaper prices.
  • Domestic firms who see higher demand from consumers who now have more disposable income due to cheaper imports.
  • The nation whose consumers see lower prices due to the competitive pressure of trade.

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