MJC_H2_ECON_EQ6

MJC Preliminary Examination_2011_H2_Essay Qn 6 6 (a) Account for changes in Singapore’s pattern of trade with the rest of the world. [10] (b) Assess the relevance of protectionism in today’s globalized world. [15] Part (a) 1. Introduction Patterns of trade – direction, volume, and composition of trade between countries Describe Singapore’s patterns of trade 2. Explain the Supply-side factors that account for changes in SG’s patterns of trade Changes in comparative advantages: /barb2right Globalization and uneven technological improvements result in increasing productive efficiency in different economies /barb2right affects both direction and composition of trade /barb2right Changes in trade policies (protectionism) / Signing of Free Trade Agreements /barb2rightChanging factor endowments in economies worldwide 3. Explain the Demand-side factors that account for changes in SG’s patterns of trade /barb2right Strong economic growth in key and regional export /barb2right Changes in intra-industry trade due to outsourcing and decentralized manufacturing supply chains /barb2right changes in composition and volume of trade /barb4right Changes in socio-political climate and consumers’ tastes and preferences 4. Conclusion Changes in the pattern of trade are largely attributed to supply-side factors, most notably the Theory of Comparative Advantage. With increasing globalization, any changes that result in relative changes in opportunity costs of production will shift comparative advantage from Singapore to another country, and vice versa. Demand-side factors play a role in determining the composition and volume of trade. Part (b) 1. Protectionism : Aims to protect domestic employment and production by switching domestic consumers’ expenditure away from imports to domestic substitutes. Comes in the form of tariffs, quotas, subsidies, others. Globalization : Increased volume and speed of trade, capital and financial flows, and mobility of labour worldwide. 2. Thesis: Protectionism is relevant as it alleviates the problems of globalization /barb4right Protection is relevant as it prevents/alleviates unemployment in the economy. Globalization results in increased cyclical and structural unemployment. Protectionism is relevant if it is use in industries that have lost comparative advantage to create allowance for workers in sunset industries to engage in retraining/upgrading to facilitate move into new employment /barb4right Protectionism is relevant if it develops infant industries – protecting industry that could become increasingly efficient over time in line with providing retraining/upgrading of employed factors /barb4right Protectionism is relevant against unfair practices in trade as economies vie to gain comparative advantage unfairly with increasing globalization. With increasing globalization, some economies resort to unfair practices such as the provision of export subsidies and the