IJC_H2_ECONS_Essay_Q6_SuggestedSolution

Discuss the view that signing more FTAs is the best approach to sustain economic performance in an economy [25] Thinking Map: Introduction A Free Trade Agreement (FTA) is a l egally binding agreement between two or more countries to reduce or eliminate barriers to trade, and facilitate the cross border movement of goods and services between the territories of the Parties. Sustained economic perfo rmance could imply sustained achievement of macroeconomic goals over time. It could mean sustained rate of growth which can be maintained without trade-offs with other goals of the government. Thesis Yes, signing more FTAs is the best approach to sustain economic performance in an economy - The pursuit of free tra de policy, such as signi ng of FTAs could be the best approach to sustained economic performance in small and open economies such as Singapore. - These economies are import dependent (relies on imports for survival) as well as export driven (relies on X for growth). Hence STAGE 1: 5Cs to A APPROACH Stage 1: Understanding Question Requirements Question 6: Command Word Discuss which requires thesis and anti thesis on whether signing FTA is the best approach to sustain economic performance in an economy. Content Word Signing FTA Sustained economic performance Context Word Policies must be contextualised to different economies Comparison Best – implies a need to compar e with other policies to suit different economies

expanding trade linkages with re st of the world promotes connection to new markets and firms in these countries investors stand to enjoy a myriad of benefits like tariff concessions, preferential access to certain sect ors and faster entry into these new markets. This promotes sustained economic performance with the achievement of macroeconomic goals such as healthy BOP, economic growth, low cyclical unem ployment etc to be achieved. Especially necessary for s mall economy with a small domestic market like Singapore based firms to invest overseas in order to gain access to a larger foreign market and earn more revenue. - Best approach in sustaining eco nomic performance when existing trading economies such as US and EU are suffering from debt problems and recession. Trad e expands new markets, mitigate exposure of these economies to external economic risks with diversifying of trading partners (decoupling effect)  thereby enjoying sustained demand for X and incoming FDI  macroeconomic goals achieved. - Using free trade diagram and AD/AS analysis, explain how o FTA reduces trade barriers such as tariffs  increases exports of exporting count ry to importing country  increase in X  increases AD  increases actual growth  reduces cyclical unemployment. o FTA expands domestic, regional and international markets enable investment and sharing knowledge, increasing trade opportunities and improvi ng the co