4.C.ECONOMIC INTEGRATION AND THE TERMS OF TRADE

what: Economic integration

  • ​Distinguish between bilateral and multilateral (WTO) trade agreements.
  • Explain how preferential trade agreements give preferential access to certain products from certain countries by reducing or eliminating tariffs, or by other agreements relating to trade. 
  • Distinguish between a free trade area, a customs union and a common market. 
  • Explain how economic integration increases competition among producers within the trading bloc. 
  • Compare and contrast the different types of trading blocs. 
  • Explain the concepts of trade creation and trade diversion in a customs union.
  • Explain how different forms of economic integration allow member countries to gain from economies of scale. 
  • Explain how a monetary union is a common market with a common currency and a common central bank. 
  • Discuss the possible advantages and disadvantages of a monetary union for its members.

how: What is the future for brexit britain?

WHY: LEVELS OF ECONOMIC INTEGRATION HAVE INCREASED IN THE PAST CENTURY AND ARE LIKELY TO CONTINUE INTO THE FUTURE.

Britain edges closer to a hard Brexit

JUST 220 days remain before Britain is scheduled to exit the European Union. Yet as the clock counts down, even the broadest contours of the future of Britain's relationship with its continental neighbours remain uncertain.

A background guide to "Brexit" from the European Union

ON FEBRUARY 20th David Cameron, Britain's prime minister, set June 23rd as the date for a referendum on the country's membership of the European Union. His announcement followed a protracted renegotiation of the current conditions of Britain's membership at a summit in Brussels.

Economic integration and the "four freedoms"

"WHAT'S the model? Have cake and eat it." So read handwritten notes, snapped in the hands of an official of Britain's ruling Conservative Party, as she left a meeting in Downing Street on Brexit strategy in late November.

How Keynes would negotiate Brexit

WOULD John Maynard Keynes be a Brexiteer or a Remoaner? The great 20th-century economist started out as a free-trader. But he argued against "economic entanglement among nations" in an essay titled "National Self-Sufficiency" in 1933. Goods should be "homespun" wherever possible, he wrote, and "above all, let finance be primarily national."

The "WTO option" for Brexit is far from straightforward

THE two sides of the Brexit debate do not agree on much, but they agree on this: if Britain fails to reach a trade deal with the EU it will have to revert to the "WTO option". This involves trading only under rules set by the World Trade Organisation.
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Why Europe's single market is at risk

E VERY FIVE years the appointment of a new team at the European Commission is a chance to steer the European Union ( EU) in a fresh direction. On September 10th Ursula von der Leyen, the incoming boss, set out her priorities: managing the transition from fossil fuels, extra dollops of American big-tech bashing and "upgrading our unique social market economy".

HL - TRADE CREATION AND TRADE DIVERSION

Most economists say Brexit will hurt the economy-but one disagrees

IT IS rare to find economists united, but on Brexit most are: leaving the European Union will reduce GDP, and quitting the single market and customs union (a hard Brexit) will make the loss bigger. Yet a group called Economists for Free Trade, led by Patrick Minford of Cardiff University, disagrees.

Fig. 1 Trade Creation for Britain on its accession/membership of the common market, 1973
Fig. 1 Trade Diversion for Britain on its accession/membership of the common market, 1973

tERMS OF TRADE

  • Explain the meaning of the terms of trade. 
  • Explain how the terms of trade are measured. 
  • Distinguish between an improvement and a deterioration in the terms of trade. 
  • Calculate the terms of trade using the equation: Index of average export prices/index of average import prices × 100. 
  • Explain how the terms of trade may change in the short term.
  • Explain how the terms of trade may change in the long term. 
  • Explain how changes in the terms of trade in the long term may result in a global redistribution of income.
  • Examine the effects of changes in the terms of trade on a country’s current account. 
  • Examine the impacts of short-term fluctuations and long-term deterioration in the terms of trade of economically less-developed countries. 

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TERMS OF TRADE

TERMS OF TRADE . IB ECONOMICS A COURSE COMPANION (2007) P303-313. TERMS OF TRADE. The Terms of Trade is one of the big problems facing many developing countries. This does not simply mean that face obstacles in the international trading system - it has a very specific meaning in context.

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A Marxist theory is (sort of) right

THE Prebisch-Singer hypothesis (PSH) was a staple of leftist economics during the second half of the 20th century. Raúl Prebisch and Hans Singer, working independently, showed that the "terms of trade" between primary products and manufactured goods tended to decline over time.

Making Africa work

"IS ANYONE here actually hoping to make any money, or are you all just trying to minimise your losses?" The question, asked at a dinner in London for investors who specialise in Africa, showed how the mood has changed in the past year.
MAY 2015 PAPER 3  - QUESTION 3 (TERMS OF TRADE)