2018 Nov (WTO) Paper 3 HL

2018 Nov (WTO) Paper 3 HL

(d) State 2 functions of the WTO

 

Promote Trade Liberalization (removal of trade barriers/ lowering of tariffs)

Set Trade Rules

Ensures trade rules are followed

Settles trade disputes

Trade-related technical assistance

Forum for trade negotiations

 

(iii) Explain one possible advantage and one disadvantage for the Sam Marcus economy of the decision to join the WTO and slowly liberalize trade.

 

Advantages

 

• Since tariffs and other trade restrictions will be removed, consumers will enjoy cheaper and a greater variety of imports.
• Since tariffs and other trade restrictions will be removed, production costs for domestic firms using imported inputs will be lower.
• Domestic firms will have easier access to foreign markets increasing their exports
• Domestic firms that grow may face lower average costs

 

Disadvantages

 

• Overspecialization may render the economy vulnerable to changes in the prices of exports and imports.
• Domestic industries unable to compete with foreign producers may suffer job losses.
• Harder to establish new industries due to the competitive advantages of foreign producers.
• Loss of tariff revenues which could be used for public investment.