51ºÚÁÏ

Candidates will explore the theory of international trade between countries and its implications for an economy. They will assess the case for free trade, the reasons for protectionism and the advantages and disadvantages of different protectionist measures. This will draw on these key concepts: the margin and decision-making; progress and development. Candidates will consider the current account of the balance of payments as a means of recording a country’s trading performance. They will analyse the roles of a floating exchange rate and the current account of the balance of payments within the economy’s macroeconomic performance. This will draw on these key concepts: equilibrium and disequilibrium; time.

6.1 The reasons for international trade
6.1.1 distinction between absolute and comparative advantage
6.1.2 benefits of specialisation and free trade (trade liberalisation), including the trading possibility curve
6.1.3 exports, imports and the terms of trade:• measurement of the terms of trade• causes of changes in the terms of trade• impact of changes in the terms of trade
6.1.4 limitations of the theories of absolute and comparative advantage6.2 Protectionism
6.2.1 meaning of protectionism in the context of international trade
6.2.2 different tools of protection and their impact:• tariffs• import quotas• export subsidies• embargoes• excessive administrative burdens (‘red tape’)
6.2.3 arguments for and against protectionism