2013 CJC H2 Econs P1 Prelim Question Paper with Answers

CATHOLIC JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATIONS In preparation for General Certificate of Education Advanced Level Higher 2 ECONOMICS 9732/01 Paper 1 28 Aug 2013 0800 - 1015 Additional Materials : Writing Paper 2 hours 15 min READ THESE INSTRUCTIONS FIRST Write your name, class and question number on all the work you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use highlighters, glue or correction fluid. Begin each question on a new sheet of paper. Answer ALL questions. At the end of the examination, hand in ALL questions separately. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 7 printed pages and 1 blank page.

2 © Catholic Junior College 9732/01/Preliminary Exams /2013 Answer ALL questions in this section Question 1 Rare Earths Extract 1: China’s dominance of rare earths According to market research reports, there is a growing global dependence upon a multitude of diverse technologies — including computers, smart phones, TVs, lighting systems, hybrid automobiles, life -saving medical technologies, offshore wind turbines and laser -guided missile defense systems – due to the central role telecommunication and high -tech electronic products play in our lives today. China produces more than 95 per cent of the metals that are important for the manufacture of a variety of consumer electronics, such as mobile phones, as well as automotive, advanced medical and defence products. Since 2009, the country has been reducing sales of these metals overseas. Last month, Japan, the US and the European Union lodged a complaint with the World Trade Organisation over China's restrictions on the export of a variety of raw materials including rare earths. For its part, Beijing has cited concerns such as the exposure of miners to cancer -causing chemicals as some of the key reasons for tidying up its rare-earth sector and capping exports. While environmental protection is a valid reason, research analysts questioned if Beijing's reduction of export quota is truly motivated by green concerns. Analyst reports indicate that the production quota has been on a rise while the export quota has been in the downward trend. Adapted from: The Straits Times, 14 April 2012, Extract 2: New trade dispute with China over rare-earth curbs The United States, European Union, (EU) and Japan are accusing Beijing of maintaining export restrictions on them that distort prices and hurt job creation. China vowed to def end itself against the complaint, which was filed with the World Trade Organisation (WTO) in Geneva yesterday. It is arguing that the restrictions were not protectionist but are meant to help prevent environmental damage from excessive mining of the rare metals. The official Xinhua news agency also warned in a commentary that the case could trigger a "backlash", though it gave no indication as to what retaliatory moves Beijing might take. Senior US officials noted that they chose to act to prevent Beijing from introducing more export restrictions. "We can't leave this to chance (as) it could have a crippling effect on our manufacturing and industrial sectors," said one of the officials. "The fact that we are joined by the EU and Japan speaks to the seriousness of (the issue)." President Barack Obama said the economic stakes involved were too important for his administration to do nothing, and urged Beijing to allow market forces to determine the rare- earth trade. "We prefer dialogue, especially with key trading partners like China... but when it is necessary, I will take action if our workers and our businesses are being subjected to unfair trade practices," Mr Obama added. In a statement, US Trade Representative Ron Kirk said China's rare-earth policies hurt American workers and manufacturers by creating "massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace".

3 © Catholic Junior College 9732/01/Preliminary Exams /2013 "The improper export restraints also contribute to creating substantial pressure o n US and other non-Chinese downstream producers to move their operations, jobs and technologies to China," he added. The trade restrictions are not new as the mainland has set export quotas on the valuable minerals since 2000, and introduced export duties from 2007. But the restrictions and duties were dramatically raised in the last two years, prompting serious concerns among global manufacturers. In 2010, it also halted exports of rare earths to Japan amid a heated diplomatic dispute. China has defended its policy on environmental grounds, saying that the production cap and export quotas were necessary to prevent excessive mining. This is despite China urging its enterprises to invest in pollution control and technology upgrading to enhance the environmental protection level of the industry. "China's rare-earth export restriction is not against any specific country, nor is it a kind of trade protectionism. Instead, the policy was drawn up out of concern for the environment and the sustainable us e and development of resources," said Mr Miao Wei, the Chinese Minister for Industry and Information Technology. China's leaders have taken a hard line on trade of late, imposing fresh tariffs on imported poultry and sport-utility vehicles. A Chinese offi cial declared defiantly that “we are fully prepared” to fight any challenge on rare earths. Adapted from Straits Times, 14 March 2012 and China Daily, 21 June 2013 Extract 3: Set to enter the rare earths industry Australia Lynas, an Australian rare earths mining company plans to import ore from Mount Weld in Western Australia, which is said to be the source of the richest rare -earth deposits in the world, for processing in Malaysia. Lynas chose Malaysia to process the materials b ecause labour and other costs are cheaper than they are in Australia. It said its plant would be safe, and is far more advanced than the first rare -earth plant operated by Mitsubishi Chemical in the mid -1980s. The Lynas Malaysian plant will break China's monopoly when it is able to process an initial 11,000 tonnes of rare earths a year – about a third of current world demand – once output begins in June. Japan Japan, which found supplies restricted and even cut off for two months in 2010 over a territorial dispute with China in the East China Sea, is among the countries looking for alternative supplies. It has signed agreements with I ndia, Vietnam and Kazakhstan to d evelop rare earth minerals. Against this backdrop, Chin a yesterday announced it was raising its export quota for this year to 30,996 tonnes, up 2.7 per cent from last year. India India is trying to revive its dormant rare earths industry, seeing an opportunity as top producer China restricts exports of the minerals. Indian Rare Earths (Irel), a state-owned company, is set to start producing rare earth minerals in December and has applied for a mining licence in the state. Irel was producing rare earth minerals until 2004, when it closed because it could not compete with Chinese rivals. China squeezed out big and small players, from India to the US, in the last decade with lower pricing and higher volumes. India's annual production has hovered at 2,700 tonnes. Analysts predicted it could take f ive to eight years for India to set up shop and dip into its rare earth reserves, estimated at 3.1 million tonnes.

4 © Catholic Junior College 9732/01/Preliminary Exams /2013 "India has enough resources and can even meet the Japanese demand... but it will take time to revamp the whole mining sector," said Professor Srikanth Kondapalli