QUESTION
BUECO6922 Economics of Globalisation Semester 1 2012
Learning Task 2 (Essay) –Marking Guidelines
Enclosed are the marking guidelines for learning task 2 (essay) When assessing this topic please ensure that students concentrate on discussing the counter-arguments to the protection policies, not the protection policies themselves.
Allocate up to six (6) marks for each counter argument. Mark down answers which concentrate on the discussion of the protection policies.
It is expected that students will correctly acknowledge all source materials. Deduct up to five (5) marks from the overall total if this is not done.
The infant industry argument. Infants may never ‘grow up’: the support may allow them to remain inefficient; not all those industries claiming and receiving infant-industry protection are genuine infants (i.e. those which have a potential comparative advantage); infants may be better promoted through subsidies or other support, rather than by restricting trade – imposing tariffs, by raising prices, cuts down on consumption not only of important substitutes, but also of the goods produced by the infant itself.
Changing comparative advantage and the inflexibility of markets. Factor immobility is better tackled directly, rather than by protecting industries that have growth potential in export markets. Examples of schemes to encourage greater factor mobility are: retraining schemes, investment grants, tax relief for companies’ relocation expenses and government advice on exporting
To prevent dumping and other unfair trade practices. In the short run, consumers will gain from cheap imports. Even if the country loses in the long run from the dumping, the use of protection to stop the dumpng may contribute to growing worldwide protectionism. It would be better to try to negotiate an end to the dumping, perhaps through the auspices of the World Trade Organisation
Please note that there was a typing error in this question. “damaging” should have been ‘dumping” Use discretion when marking this question
To improve a country’s terms of trade by exploiting its market power. Although the export monopoly argument is valid in a static context for certain products, it is likely that export taxes will erode the country’s monopoly power over the longer term. By driving up the price of exports in which the country has monopoly power, other firms in other countries are likely to break into the international market. In practice there are few goods in which individual countries do have significant monopoly power (except for a few raw materials). There are even fewer where countries have significant monopsony power in importing: with a growing process of globalisation, companies have many alternative markets in which to sell
To protect declining industries. There are various ways of helping individuals cope with the adjustment costs of economic change that are not as drastic as cutting down on trade. For example, retraining and special redundancy settlements could help workers who lose their jobs in declining industries
SOLUTION
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