ECO • SHS 1Term 3WAEC / WASSCE SyllabusVIP Lesson
International Trade & Protectionism
Free trade vs. protectionism, commercial trade barriers (tariffs, quotas, subsidies, embargoes), infant industry argument, and the Terms of Trade.
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Real-World Context & Relevance in Ghana
Ghana imposes special tariffs on imported frozen poultry and rice to protect local farmers under the Planting for Food and Jobs initiative.
Key Syllabus Learning Objectives
- 1Compare the economic merits of free trade with protective trade policies
- 2Analyze tools of protectionism: tariffs, quotas, subsidies, and administrative barriers
- 3Evaluate the infant industry argument in the context of Ghanaian industrialization
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Comprehensive Syllabus Study Notes
• Free Trade vs. Protectionism:
- Free Trade: Unrestricted international exchange of goods and services without government tariffs or quotas. Promotes specialization, consumer variety, and efficiency.
- Protectionism: Government policy of erecting trade barriers to shield domestic industries from foreign competition.
• Instruments of Protectionism:
- Tariffs (Customs Duties): Taxes levied on imported goods (Ad-valorem: percentage of value; Specific: fixed amount per physical unit).
- Import Quotas: Physical limits on the quantity of a specific commodity that may be imported during a given period.
- Subsidies: Financial assistance granted to domestic producers to lower costs and compete with cheap imports.
- Embargo: Total legal ban on trade with a specific country or commodity.
- Non-tariff barriers: Strict health, safety, and sanitary standards (e.g. FDA regulations).
• Arguments for Protectionism:
- Infant Industry Argument: Protecting young domestic manufacturing industries until they achieve economies of scale.
- Preventing Dumping (selling below cost to wipe out local competition).
- Correcting Balance of Payments deficits and protecting domestic jobs.
- Free Trade vs. Protectionism:
- Free Trade: Unrestricted international exchange of goods and services without government tariffs or quotas. Promotes specialization, consumer variety, and efficiency.
- Protectionism: Government policy of erecting trade barriers to shield domestic industries from foreign competition.
- Instruments of Protectionism:
- Tariffs (Customs Duties): Taxes levied on imported goods (Ad-valorem: percentage of value; Specific: fixed amount per physical unit).
- Import Quotas: Physical limits on the quantity of a specific commodity that may be imported during a given period.
- Subsidies: Financial assistance granted to domestic producers to lower costs and compete with cheap imports.
- Embargo: Total legal ban on trade with a specific country or commodity.
- Non-tariff barriers: Strict health, safety, and sanitary standards (e.g. FDA regulations).
- Arguments for Protectionism:
- Infant Industry Argument: Protecting young domestic manufacturing industries until they achieve economies of scale.
- Preventing Dumping (selling below cost to wipe out local competition).
- Correcting Balance of Payments deficits and protecting domestic jobs.
Practical Example:
Ghana imposes special tariffs on imported frozen poultry and rice to protect local farmers under the Planting for Food and Jobs initiative.
Core Takeaway:
Dumping is selling goods in a foreign market at prices LOWER than domestic cost of production, designed to destroy foreign competitors.
WAEC / WASSCE Examiner Tips
- Dumping is selling goods in a foreign market at prices LOWER than domestic cost of production, designed to destroy foreign competitors.
Common Candidate Pitfalls & Errors to Avoid
- Claiming absolute advantage explains the gains from trade when comparative advantage does.
- Setting the terms of trade outside the two opportunity cost ranges, which cannot benefit both parties.
- Reading the current account deficit as a complete failure while ignoring a financial account surplus.
- Treating an import tariff as a benefit to consumers because domestic producers expand.
- Confusing devaluation, depreciation and revaluation in exchange-rate discussions.
Topic Mastery Checklist
- Compare the economic merits of free trade with protective trade policies
- Analyze tools of protectionism: tariffs, quotas, subsidies, and administrative barriers
- Evaluate the infant industry argument in the context of Ghanaian industrialization
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