WJEC A Level Economics International Trade Exam Questions

About WJEC A Level Economics International Trade

International trade spans both halves of the WJEC course. At AS the specification covers free trade and protectionism: why countries trade, comparative and absolute advantage, and the effects of tariffs, quotas and other barriers. At A2, under Trade and Development, you go further with the advantages and disadvantages of free trade, protectionism, globalisation and trade and the UK, set in the context of global economics, deeper integration between countries and the role of the World Trade Organization. You should use diagrams for tariffs and quotas and evaluate whether integration benefits the UK. A2 Unit 4 has a dedicated Trade and Development section, making this a key essay area.

What you need to know

• Why countries trade Differences in resources, skills and technology mean countries have different opportunity costs. Absolute advantage is producing more with the same resources; comparative advantage is producing at a lower opportunity cost. Specialising according to comparative advantage raises world output.
• Free trade Free trade brings lower prices, wider choice, economies of scale, more competition and access to larger markets. It can also cause structural unemployment and dependence on imports.
• Protectionism Tariffs raise the domestic price of imports, increase domestic production and government revenue but reduce consumer surplus and create deadweight losses. Quotas limit import quantities. Subsidies and administrative barriers also protect domestic producers.
• The WTO The World Trade Organization sets the rules of international trade, runs negotiations to reduce barriers and settles trade disputes between members.
• Globalisation Deeper integration through increased trade and specialisation, capital transfers, foreign direct investment and international labour mobility. It can boost growth but also increase inequality and vulnerability to global shocks.
• Trade and the UK The UK is a major exporter of services, especially financial and business services, and of goods such as cars, aerospace and pharmaceuticals. Evaluate whether greater integration benefits the UK and its regions, including Wales.

Common mistakes in International Trade

• Using absolute advantage to explain why both countries gain. Gains from trade come from comparative advantage.
• Omitting tariff revenue and deadweight loss from a tariff diagram. Show both clearly.
• Assuming protectionism helps the whole economy. It protects some producers but raises prices for consumers and may provoke retaliation.
• Treating globalisation as only trade in goods. Include capital flows, FDI and labour mobility.

Try three International Trade exam-style questions