Singapore's Pattern of Trade Explained

HWA CHONG INSTITUTION
Year Two H2 Economics 2013

Tutorials #19-21: Macroeconomics III Balance of Payments, Exchange Rates & International Economics
TUTORIAL #21: INTERNATIONAL TRADE

Section A: Essay Practice
NOTE TO STUDENTS:
You are to come up with a detailed essay plan for every
ESSAY question.
Refer to the Skills Package for Essays and bring it for
tutorials.
PART (I): COMPARATIVE ADVANTAGE, FREE TRADE & PATTERN OF TRADE
On Pattern of Trade
Question 1: TYS N2008 Q6 attempt Part (a)
(a) Explain the determinants of the pattern of trade between Singapore and the rest of
the world.
[10]
(b) Discuss whether the Singapore government should change its policies for managing the
balance of payments.
[15]
[attempted in Tut #19]
Examiners Report:
Surprisingly, given the importance of trade to Singapore, this was the least popular of the questions
within Section B of the paper. In general it was also the worst answered. Answers tended to be
theoretical rather than applied and as such showed a surprising lack of awareness of Singapores
pattern of trade.
(a)
The majority mentioned that Singapore was a small country with few natural resources leading
to a large import of raw materials, but only a few candidates gave itemised examples of the
pattern of trade. In the main, however, the examples given were insufficient to illustrate the
points made later.
Whilst most recognised that comparative advantage was relevant in explaining the pattern of
trade, very few went beyond that simple statement to explain the opportunity cost ratios
for relevant product groups. The examples, where given to illustrate the points made, were
largely theoretical and many of the products in those examples that were claimed to be
produced by Singapore are not of importance to Singapores pattern of trade.
Very few candidates explained how comparative advantage leads to Singapores pattern of
trade and, where tables were used, these all too often demonstrated absolute rather than
comparative advantage.
Hwa Chong Institution. All Rights Reserved. Tutors' Copy

In consequence only a small number of candidates accessed Level 3 marks.

Simple Schematic Plan

Lesson plan and essay prepared by Swee Chu
Review Questions
Command: When you see the command word what do you think the examiner requires you to do?
Content: Which chapter of the lecture notes would provide appropriate content in answering this
essay question?
Context: What is the context in this question?
Questions to assess thinking
Clarity What is Singapores current pattern of trade with the rest of the world?
Accuracy Where can I find these information?
Depth How does the theory of theory of comparative advantage explain Singapores pattern of
trade with the rest of the world
Breadth What are the other determinants of pattern of trade in general?
Relevance Do these other factors apply to Singapore?
Logic Which is the most important determinant in Singapores context
Note:
Theoretical understanding may not be enough to do well.
This question is not recommended if the candidate has little knowledge of applications to Singapores
trade.
Teach the students to use schematic planning to answer this question.
Lead them to come up with a few determinants.
Highlight to students the directive word explain and its requirements.

Introduction
Clarify key words: The pattern of trade refers to the composition of a countrys exports and
imports as well as her trading partners. In other words, in the context of international trade it is
about who sells what to whom
Address the question: Singapore engages in both inter industry trade and intra Industry trade
which are determined by the theory of comparative advantage, tastes & preferences and government
policies.
Determinants of Inter industry Trade (trading
between countries due to differences in
comparative advantage based on factor
endowments)
Determinants of Intra industry Trade

(trading between countries which have similar
comparative advantage)
State: Theory of Comparative advantage
State:
scale
Taste and preferences, Economies of
Explain:
Explain:
Exemplify with itemized examples:
Exemplify with itemized examples:
Other factors affecting pattern of trade e.g government policies i.e FTAs
Conclusion
SUGGESTED ANSWERS
INTRODUCTION
Clarification
Linking to context
and nail down the
concepts
and
provide
an
approach to the
question
The pattern of trade refers to the composition of a countrys exports and

imports as well as her trading partners. In other words, in the context of
international trade it is about who sells what to whom
Typically for Singapore there are 2 distinctive pattern of trade viz. Interindustry and intra-industry trade. These patterns of trade depend on
factors such as a countrys factor endowment, taste and preference and
government policies.

BODY
Inter-Industry Trade (case of DIFFERENCES in CA based on Factor endowment):
Use SEE: State, Explain (with economic analysis), Exemplify (illustration with
examples/diagrams.
State
First and foremost, for inter-industry trade, the POT is best explained by using the
theory of CA.
According to the theory of CA, a country should export products in which it has a CA
and imports those products in which it does not have a CA. CA refers to the ability
to produce a good or product at a lower opportunity cost.
Explain
CA differs amongst countries due to the fact that factor/resource endowment

differs across countries. Some countries have factors/resources that are better
suited to produce agricultural goods (e.g. plentiful land, suitable climate) whilst
others have resources that are better suited for manufacturing.
Thus, a country specializes and produces for export goods that reflect the type of
resources it has in relative abundance. On the other hand, the type of goods
imported by a country reflects the lack of the availability of the necessary resources
or the required technology to produce them efficiently.
Exemplify
Let us use a simple numerical example to illustrate what is meant by CA.
(1)
with
numerical
To illustrate the concept of lower opportunity cost:
e.g.
Country
Rice Microchip
Opportunity Cost of
Opportunity Cost of
(units)
(units)
Producing 1 Unit of R
Producing 1 Unit of M
Spore
120
480
480/120=4 units of M
120/480=0.25unit of R
Thailand
100
100
100/100 = 1 unit of M
100/100 = 1 unit of R
Total
220
580
To produce a unit of microchip, Thailand has to give up 1 unit of rice while
Singapore has to give up 0.25 unit of rice. Likewise to produce rice, Singapore and
Thailand have to give up 4 units and 1 unit of microchip(s) respectively.
As a result, Singapore has comparative advantage in producing microchip as it
incurs a lower opportunity cost than Thailand while Thailand has comparative
advantage in producing rice as it incurs a lower opportunity cost as compared to
Singapore.
Emphasize the need to explain the theory clearly using the table. As
this essay is not solely on CA theory, there is no need to go into details in
the notes.

Exemplify
With reference to our key exports, it can be said that Singapores pattern of trade
(2)
with closely conforms to the principle of CA.
good
examples
SG resource endowment :
Examples of exports
Well-educated
and
trained Electronics: Disk-drives, wafer fabs
labour force suitable for Biomedical: Pharmaceuticals
knowledge-intensive
high-value Chemicals: Petrochemicals
Marine: Oil rigs and ship repair
add manufacturing.
Good
infrastructure
e.g.
industrial
Parks;
R&D; Value-added products:
communication and transport Intermediate products such as electronic
valves and telecommunication equipment
facilities
are imported to Singapore, re-processed
Advanced technology e.g.
and are then re-export out as valueIT; robotics; automation
added products for final assembly in
Such resources are best suited to countries such as Malaysia and China.
produce:
High-end
High-tech
High value-added
Knowledge-based products
What SG does not have

(1) Natural resources:
Shortage of land
No mineral deposits
Favourable
climate
agricultural activities.
High-end services:
Water
management
(iconic
example Hyflux)
Hospital
management
(e.g.
Parkway Healthcare services)
Airport/Seaport
management
(e.g. PSA and Changi International
Airport)
Examples of imports
Agriculture/Fresh Produce
Vegetables; poultry; meat; fruits; eggs.
for Primary Commodities
Oil; metals like copper, aluminium and
steel
(2) Cheap and low-skilled/unskilled

Low-end manufactures
labour
In short, our natural resource Cheap slippers footwear
endowment does not favour nor shoes, bicycles and toys
support such forms of economic
activity.
e.g.
sports
Emphasize the need to illustrate with APPROPRIATE EXAMPLES.
Note: 70% coverage of essay should focus on the key concept CA. Notice the
report is focused almost entirely on CA theory.
examiner

(2)
Intra-trade (Case of SIMILAR CA)
State
Besides, inter-industry trade, Singapore also engages in intra-industry trade with

countries that have similar CA.
Explain &
exemplify
with good
examples
Intra-industry refers to the exports and imports of the same type of products where
there are no differences in CA. Taiwan and other Asian tiger economies like South
Korea and Hong Kong have almost similar CA in the production of high-tech
manufactured products and services like civil aviation; banking and finance and
tourism.
In such cases, despite no CA, international trade in goods and services still take
place because between both countries because of differences in tastes and
preferences. Consumers of both countries benefit from access to a wider choice
or product differentiation. For instance, Singaporean residents get access to
travel by different foreign airlines or use the services of foreign banks like HSBC.
Besides, the 2 integrated resorts (IRs), they can also visit as tourists, the other
casinos in other parts of the world such as Macau or Malaysia.
Moreover, there are gains from economies of scale if a country exports goods or
services abroad. Exporting overseas increases the producers volume of output or
scale of production. Economies of scale enable producers to lower unit costs
through various forms of cost savings such as bulk purchasing and administrative
costs. The advantage is consumers get to enjoy lower prices whilst producers get to
reap better profits. For this reason many Singaporean firms have ventured abroad
to export their services to overseas markets e.g. private hospitals and banks.
Others 10% coverage

FTAs (Preferential trading arrangements)
State
Bil-lateral or regional trade agreements such as FTAs promote trade between

member countries.
Explain &
Singapore has forged many FTAs (about 18) with various trade partners round the
exemplify
world. Thus trade promoted through such FTAS partly explain our POT
with good
examples
Although FTA are theoretically a form of arrangement to promote so-called free
trade amongst members and could be assumed to be based on theory of CA, it is
nevertheless not always the case. This is because such form of trade liberalization
discriminates against non-member countries and thus may result in trade diversion
i.e. trade diverted away from an efficient non-member country to an efficient
member country.
Note: Since the signing of her first FTA under the ASEAN Free Trade Area (AFTA) in 1993,
Singapore's network of FTAs has expanded to cover 18 regional and bilateral FTAs with 24
trading partners. Singapore's FTAs have been instrumental in helping Singapore-based
businesses strengthen cross-border trade by eliminating or reducing import tariff rates,

providing preferential access to services sectors, easing investment rules, improving

intellectual property regulations, and opening government procurement opportunities.
CONCLUSION summarized key points and if possible with some form of judgment.
In conclusion, from the above explanation it can be inferred that the most important determinant of
Singapores pattern of trade is the principle of CA. This is because a large part of Singapores
trade is based on the inter-industry model. Currently, Singapores comparative advantage lies in the
exports of high-end manufactured goods and services. This pattern is clearly aligned with our
resource endowment. Relatively speaking, Singapore is resource poor in terms of cheap land and
labour but resource-rich in terms of capital, technology, knowledge and a well-trained and skilled
labour-force.
Highlight to students the importance of concluding the essay. ANALOGY: A conclusion is

likened to the last 5 minutes of the last episode of a movie/drama series or last few line of
the final chapter of a novel.
It is not just simply a summary of the major points but a FINAL STAND.

Question 2: TYS N2000 Q11

(a) Explain the theory of comparative advantage.
[10]
Answers to (a) can be found in Lecture #21.

Tutors can use Bee Qn1 to go through this part of the question.
Remember to remind students to state the assumptions and to exemplify appropriately and not
just Country X, Country Y with Good A and Good B.
(b)To what extent does this theory explain the pattern of trade between Singapore and
the rest of the world?
[15]
Key Points from the Examiners Report:
Candidates were expected to show knowledge of the pattern of trade between Singapore and the rest of the
world. Candidates were then expected to explain which if any of these identified patterns of trade might be
explained by the theory of comparative advantage, evaluative comments were expected to refer to other
reasons for this trade pattern.
(+)
nil
(-)
Many failed to describe the pattern of trade between Singapore and the rest of the world and relate this
pattern of trade to the theory of comparative advantage and to draw an evaluative comment on the
relevance of this theory.
Most candidates simply described the advantages of free trade to Singapore or something similar and/or
listed some potential sources of comparative advantages, such as a highly skilled and motivated
workforce. There were also a large number of comments on the lack of natural resources. These
observations were NOT, in the main, linked to Singapores pattern of trade. Weak responses
commented on the need for Singapore to adopt a restrictive trade policy to protect the country from
dumping cheap goods from neighbouring countries. These answers were very poorly directed to the
question set.
THESIS
This theory explains
inter-industry
trade
between Singapore and
the rest of the world
subject
to
the
assumptions governing
the theory of CA

INTRODUCTION
BODY
ANTI-THESES
Anti-thesis 1:
It does not explain the pattern of trade of Singapore and the rest of the world due to
limitations of the assumptions:
(a) No trade barriers/protectionism, i.e. Free trade model
(b) No high transport costs.
(c) Perfect factor mobility.
Too idealistic in reality.
Note: Select 2 limitations will do due to time constraint under exam condition.
Anti-thesis 2: The pattern of trade of Singapore and the rest of the world can be explained
by other reasons:
Intra-industry trade
FTAs (preferential trading arrangements)
Strategic reasons
CONCLUSION

INTRODUCTION
Key Words
The pattern of trade refers to the composition of a countrys exports and imports as well as her
trading partners. In other words, in the context of international trade it is about who sells what
to whom
Issue
The theory of CA is often used as a model to explain the pattern of trade. However, in reality
Approach
the CA theory cannot be used as the sole explanation for any countrys pattern of trade including
Singapore. This is because though useful, the CA theory has got its limitations which shall be
elaborated.
Note: Some students may define CA since it is a key concept. However, it is clear for this question defining
CA is best done in part (a). So it is critical to see both part (a) and (b) as a question.
BODY
Thesis: This theory explains the pattern of trade between Singapore and the rest of the world.
Inter-Industry Trade (case of DIFFERENCES in CA based on Factor endowment):
Note: CA theory is already covered in part (a) so do not need to bring in tables/numbers. The focus in part (b)
should be on application to SG POT.
State
Exemplif
y
with
good
examples
With reference to our key exports, it can be said that Singapores pattern of trade closely conform to
the principle of CA (details are explained in part a).
SG resource endowment :
Well-educated and trained labour force

suitable for knowledge-intensive highvalue add manufacturing.
Good infrastructure e.g. industrial

Parks; R&D; communication and transport
facilities
Advanced technology e.g.

IT; robotics; automation
Such resources are best suited to produce:
High-end
High-tech
High value-added
Knowledge-based products
What SG does not have

(1) Natural resources:
Shortage of land
No mineral deposits
Favourable climate for agricultural

activities.
(2) Cheap and low-skilled/unskilled labour
In short, our natural resource endowment
does not favour nor support such forms of
economic activity.
Examples of exports
Electronics: Disk-drives, wafer fabs
Biomedical: Pharmaceuticals
Chemicals: Petrochemicals
Marine: Oil rigs and ship repair
Value-added products:
Intermediate products such as electronic valves and
telecommunication equipment are imported to Singapore, reprocessed and are then re-export out as value-added
products for final assembly in countries such as Malaysia and
China.
High-end services:
Water management (iconic example Hyflux)
Hospital management (e.g. Parkway Healthcare

services)
Airport/Seaport management (e.g. PSA and Changi

International Airport)
Examples of imports
Agriculture/Fresh Produce
Vegetables; poultry; meat; fruits; eggs.
Primary Commodities
Oil; metals like copper, aluminium and steel
Low-end manufactures
Cheap slippers footwear e.g. sports shoes, bicycles and toys
Note: Although similar in content to N2008(a) there is a difference in terms of presentation

(different angle). There is more focus on application than explanation of the technicalities of
CA theory.
10

To what extent is it true?

Anti-thesis 1: It does not wholly explain the pattern of trade of Singapore and the rest of the world due to
limitations of the assumptions.
Anti-thesis 1(a): Trade barriers/Protectionism
State
The theory of CA assumes that countries are able to specialize and trade freely without any form of
trade barriers such as tariffs, quotas or even restrictive rules and regulations. This is clearly
unrealistic in practice because protectionism is a fact of life.
Explain
In reality, every now and then countries may be pressured by their domestic producers or workers to
restrict imports in order to prevent job losses in times of recession. Sometimes, countries may slap
tariffs to correct trade imbalances e.g. trade deficit or even duties to counter perceived dumping by
their trade partners. Countries may also resort to protectionism for political reasons.
Exemplify For example, Malaysia and Indonesia ban sale of sand to Singapore. Also in the recent global
financial crisis, the government in Malaysia started a campaign to encourage the people to buy
Malaysian products instead of imported goods.
For all these reasons, Singapore firms and exporters have experienced from time to time such
protectionist measures imposed by our trade partners.
Anti-thesis 1(b): Prohibitive transport costs
State
Despite the availability of cheap imports due to differences in CA, countries might not trade due to the
prohibitively high transport costs for countries that are separated by vast geographical
distances.
Exemplify Thus, in reality despite the availability of relatively cheap oil from Alaska Singapore imports oil mainly
from countries closer to us such as the Gulf states. Similarly, despite the availability of cheaper
agricultural produce from countries like Vietnam, Singapore trades or import relatively more from
Malaysia. Malaysia is our closest neighbour and hence transport cost is not a big issue.
Note: The explain portion is clearly missing. For less important/obvious/straight-forward points, at times, a
clear statement will do.
Anti-thesis 1(c): Factor immobility.
State
In order for a country to benefit from trade, she must be able to contract the industries in which she
has a comparative disadvantage, whilst expanding those which she has comparative advantage.
However, factors of production may not be able to move quickly or efficiently into another use due to
factor immobility.
Exemplify E.g. Singapores labour force may not be able to move that quickly from manufacturing sectors to
service sectors such as the hotel and airline industries.
Evaluation: Due to globalization and good government planning, factors of production especially labour has
improved greatly over the years.
Anti-thesis 2: The pattern of trade of Singapore and the rest of the world can be explained by other
factors/determinants :
Anti-thesis 2(a): The intra-industry model (vs CA Theory inter-industry trade)
State
Explain &
Exemplify
The intra-industry model could also explain why Singapore exports similar goods that it imports. Intraindustry trade has in recent years made up an increasing share of Singapore's total trade with all the
major regions. Examples: thumb drives and biomedical.
Intra-industry refers to the exports and imports of the same type of products where there are no
differences in CA. Taiwan and other Asian tiger economies like South Korea and Hong Kong have
almost similar CA in the production of high-tech manufactured products and services like civil
aviation; banking and finance and tourism.
11

In such cases, despite no CA, international trade in goods and services still take place because
between both countries because of differences in tastes and preferences. Consumers of both
countries benefit from access to a wider choice or product differentiation. For instance,
Singaporean residents get access to travel by different foreign airlines or use the services of foreign
banks like HSBC. Besides, the 2 integrated resorts (IRs), they can also visit as tourists, the other
casinos in other parts of the world such as Macau or Malaysia.
Moreover, there are gains from economies of scale if a country exports goods or services abroad.
Exporting overseas increases the producers volume of output or scale of production. Economies of
scale enable producers to lower unit costs through various forms of cost savings such as bulk
purchasing and administrative costs. The advantage is consumers get to enjoy lower prices whilst
producers get to reap better profits. For this reason many Singaporean firms have ventured abroad to
export their services to overseas markets e.g. private hospitals and banks.
Anti-thesis 2(b): FTAs (Preferential trading arrangements)
Bi-lateral or regional trade agreements such as FTAs promote trade between member countries. Singapore has forged
many FTAs (about 18) with various trade partners round the world. Thus trade promoted through such FTAS partly
explain our POT Although FTA are theoretically a form of arrangement to promote so-called free trade amongst
members and could be assumed to be based on theory of CA, it is nevertheless not always the case. This is because
such form of trade liberalization discriminates against non-member countries and thus may result in trade diversion
i.e. trade diverted away from an efficient non-member country to an efficient member country.
Anti-thesis 2(c): Strategic Reasons.
Note: This factor explains why instead of importing, Singapore chooses to produce the good ourselves or
alternatively why we should not have produced for exports and yet we did.
State
Singapore chooses to produce certain goods ourselves instead of importing due to strategic
importance.
Explain &
Exemplify
There is the need to be self-reliant in times of war and the desire not to be dependent on insecure
sources. As a result, instead of importing all the water and agricultural produce, Singapore has
invested in high technology plants such as hydro-phonics in agricultural products and water
treatment plants. The outcome has been successful in producing vegetables and water to
supplement domestic consumption but the cost would definitely higher than that produced or
processed in countries such as Malaysia.
Evaluation: Singapore started investing in water treatment and hydro-phonics out of a NEED. But over the
years, we have gained CA in water treatment as Hyflux is exporting the technology to other countries.
CONCLUSION/JUDGMENT
Despite the limitations, the comparative advantage theory can be said to be the most important determinant of
Singapores pattern of trade. This is because the bulk of Singapores trade with the rest of the world is based on the
inter-industry model. Currently, Singapores comparative advantage lies in the exports of high-end manufactured
goods and services. This pattern is clearly aligned with our resource endowment. Relatively speaking, Singapore is
resource poor in terms of cheap land and labour but resource-rich in terms of capital, technology, knowledge and a
well-trained and skilled labour-force.
12

On Benefits of Free Trade

For many years the USA did not conduct normal trading relations with Vietnam. In 2001 a
trade agreement was signed between the two countries which reduced tariffs, encouraged
foreign direct investment and opened up export markets.
(a) How does the theory of comparative advantage explain why a developed country such
as the USA might wish to trade with a developing country such as Vietnam?
[12]
Answers to (a) can be found in Lecture #21.
Remember to remind students to state the assumptions (as a learning point) and to exemplify
appropriately using the correct goods that USA and Vietnam is likely to produce (more critical).
(b) Discuss what effect such a trade agreement might have on the economies of the
participating countries.
[13]
Although most candidates made a reasonable response to this question, part (b) of the question once again
produced a generally disappointing discussion. Part (a) discriminated well, with a number of well-prepared
candidates producing the top (Level 3) marks
(+)
nil
(-)
First, many candidates failed to apply their answers to the specific countries i.e. Vietnam and the USA.
Secondly, points were often stated rather than explained. Weaker answers tended to give one side of
the argument only. The best answers in contrast gave good well-balanced discussion, which, as
required, was clearly applied to the developed, and developing, economy cases. Many answers were
spoilt by too much generalized comment.
INTRODUCTION
BODY
THESIS
Such a trade agreement brings about benefits to the
economies of the participating countries.
ANTI-THESES
Such a trade agreement brings about problems to the
economies of the participating countries.
Effects on economy: One should think of the impact on

4 macro goals (namely impact on growth, employment,
general price and BOP) and 2 micro goals (resource
allocation and income disparity).
1. Trade Creation
2. An extended market and greater output levels
because:
i)
Regional
economic
integration
increases
balance of trade and increasing NI via increase
in AD.
1. Possible trade diversion which means trade is being

diverted from a more efficient non-member producer
to a less efficient but tariff-free member nation of the
free trade area.
2. Externally induced recession and increase in
unemployment:
i)
Cyclical unemployment: Susceptible to External
13

ii)
Regional economic integration increases Foreign

Direct Investment (FDI) and thus increasing NI
via a rise in both AD and LRAS.
3. Possible improvement in Balance of Payments
Evaluation: Can look at the how Vietnam and US would

benefit from FTA differently. Extent of benefits may also
differ. For eg, Vietnam would experience greater
improvement in economic growth as compared to US.
Reason: Higher influx of FDI from US to take advantage
of its cheaper land and labour. In addition, Vietnam
experience greater improvement in its infrastructure as
well as productive capacity via transfer of skills and
knowledge from US.
ii)
Shocks (recession)
Structural Unemployment
3. Possible trade deficit for Vietnam as USAs exports

are mainly manufactured goods which are income
elastic as compared with Vietnams exports of primary
products which are income inelastic.
4. Widening income disparities
Any evaluation/Critical Comments?
CONCLUSION
INTRODUCTION
Key Words
Issue
Approach
A trade agreement or to be exact, a free trade area (FTA) agreement is one whereby member
countries agree to remove tariff and non-tariff barriers among themselves but each can retain
whatever restrictions she wants for non-member countries.
An FTA between USA, a developed economy, together with Vietnam, an emerging economy,
brings about benefits and costs to both participating economies.
BODY
Thesis: Such a trade agreement brings about benefits to the economies of the participating countries.
(1) Trade Creation
State
Trade creation occurs when the production by a member of an FTA is now replaced by low-cost tarifffree imports from another member nation and welfare is increased.
Explain
When no FTA is signed, Vietnam might not be trading with USA due to high tariff imposed on her
goods. With FTA, there will be elimination or lowering of tariffs which will benefit Vietnamese
exporters and also the American consumers will pay a lower price for imports. There is also efficient
allocation of resources.
14

Exemplify
with
Diagram
Show that deadweight loss areas are eliminated with tariff-removed diagram.
Figure 1: Increase in imports due to removal of tariff
Sd
Price
PE
P1
Sw + tariff
A
B
P2
SW
Dd
Q3
Q1QE
Q2
Q4
Quantity of computers
Referring to Figure 1 above,

Dd represents the domestic demand for computers and S d represents the domestic supply of
computers and SW represents the world-supply.
When there is protectionism, the price is at P1 and USA imports Q1Q2.of goods from Vietnam.
After an FTA is signed, the price will fall from P1 to P2. Imports from Vietnam will increase to Q3Q4
The American consumers are better off as they are able to consume more at a lower price
thus increasing their consumer surplus by area A+B+C+D.
The deadweight loss due to the protective and consumption effects will also be eliminated.
(2) An Extended Market and Greater Output Levels both actual and potential growth
As an LDC, Vietnam could leverage on trade/investment with USA as a source of GROWTH &
DEVELOPMENT e.g. US market is an engine of growth for Vietnam.
In the short-run: X+I rises AD rises k effect: generate higher income, output, employment
In the long-run: FDI LRAS rises potential growth
USA - as an advanced developed country could leverage on Vietnams cheap labour /resources for
offshoring.
15

(i) Regional economic integration increases balance of trade and thus increasing NI via increase in AD
The establishment of free trade between USA and Vietnam means that producers in each country now face
a much larger market. Both countries open up their markets to each others goods and services. This results
in larger markets for both producers and consumers, resulting in higher expenditures and revenues. The
higher incomes and expenditures will stimulate economic growth and increase the living standards for both
countries.
Thus the reduction of trade barriers leads to an increase in (X-M). AD increases and NI increases via k,
leading to actual economic growth. With more real output, more factors of production are hired,
leading to higher employment levels.
At the same time, there is greater efficiency as the firms grow and reap economies of scale. Also, with
the removal of trade barriers, producers are exposed to greater competition and hence come under
pressure to be as efficient as possible.
With FTA, USA which will export hi-tech manufactures e.g. cars; electronics chips and high value-added
services e.g. financial services; shipping and aviation to Vietnam. On the other hand, Vietnam will export
low-cost labour- intensive manufactures e.g. footwear; clothings and agricultural products e.g. rice, Heritage
tourism to USA.
(ii) Regional economic integration increases Foreign Direct Investment (FDI), and thus increasing NI via a
rise in both AD and LRAS
With FTA, new ideas, technology & skills can be expected to flourish upon closer contact. Transfers will
come about when the American producers relocate their operations in Vietnam.
An increase in FDI increases AD and NI via k leading to actual economic growth, higher employment
levels. It also increases the LRAS leading to an increase in potential growth. Investment and Transfer of
technology
With potential growth, price stability is achieved as general price levels are brought down when LRAS
shifts right. The economy is less at risk of facing demand-pull inflation when LRAS shifts in tandem with
increase in AD.
GPL
LRAS0
P2
Figure 2:
P1
Non-inflationary Growth P0
LRAS1
E1
E2
E0
P1
P0
AD0
Y0 Yfe
AD1
Y1 Yfe
Real NI
From Figure 2, we can see that national income increases from Y 0 to Yfe when aggregate demand increase from AD 0
to AD1 and general price level increases to P 2. But when the economy productive capacity also increases from LRAS 0
to LRAS1, national income further increase to Y1 and price drops to P1 achieving non-inflationary growth.
Evaluation: Can look at the how Vietnam and US would benefit from FTA differently. Extent of benefits may also
differ. For eg, Vietnam would experience greater improvement in economic growth as compared to US. Reason:
Higher influx of FDI from US to take advantage of its cheaper land and labour. In addition, Vietnam experience
greater improvement in its infrastructure as well as productive capacity via transfer of skills and knowledge from US.
16

17

(3) Improvement in Balance of Payment (BOP)

Trade of goods & services:
For both USA and Vietnam, the increase in balance of trade improves the current account.
FDI:
When US firms relocate the factories (offshore not outsource) to Vietnam, there is an outflow in the financial
account from US to Vietnams (inflow).
When profits are ultimately remitted back to US, not only the property income from abroad increases and
improves the GNP, the current account will also improve.
Assuming inflows outweigh outflows, the BOP will improve.

Anti-thesis: Such a trade agreement brings about problems to the economies of the participating countries.
(1) Possible Trade Diversion
Trade is being diverted from a more efficient non-member producer to a less efficient but tariff-free member nation of
the free trade area e.g. USA could be buying rice from Vietnam because of the FTA when rice is produced more
efficiently in Thailand.
Evaluation: This FTA affected Thailand more than Vietnam and US.
(2) Susceptible to Externally-induced Recession and increase in Cyclical Unemployment
(i)
Increase in Cyclical Unemployment
Countries that are open to free trade will be more prone to other countries economic crisis. These shocks
can be transmitted from one country to another through various channels - trade, financial and mechanical
spillovers.
In the most recent subprime mortgage crisis started in the USA, Vietnams economy was badly affected.
With recession in USA, income of the Americans fell which led to a fall in demand for goods and services
which included that of Vietnams exports. With net exports falling, Vietnams AD fell and thus leading to a fall
in NI and resulted in cyclical unemployment in the country.
Evaluation: To avoid being over-reliant on another economy, it is important for the government to diversify
the exports and trading partners so as to spread the risk.
(ii) Structural Unemployment
As a result of some firm USA firms relocating their plants to Vietnam, some US citizens will experience
structural unemployment.
Also, as Vietnam economy develops and moves up the value chain, workers without the appropriate skills
will not be able to find jobs.
Evaluation: As a result, it is crucial for the government to provide necessary education and training to the
people so as to prepare them for the new industries.
(3) Trade Deficit
American's exports to Vietnam are mainly high tech K/manufactured goods and are more income elastic. Vietnam's,
on the other hand, exports mainly primary products which are income inelastic
BOT for Vietnam is likely to worsen with USA.
Evaluation: This may not be true as an FTA creates a new market with USA which allows the demand for
her exports to rise significantly.
18

(4) Widening income disparities

Workers that are employed in growing sectors will earn higher incomes than those in declining sectors.
Evaluation: This problem is unavoidable as the economy grows. HOWEVER, the government can come up
with policies to have to minimize the gap such as subsidies for training for the poor.
CONCLUSION/JUDGMENT
In conclusion, such a trade agreement brings about more benefits than costs as the costs can be mitigated through
appropriate government policies. HOWEVER, countries should not pursue free trade agreements at the expense of
global trade talks advocated by WTO as there is always the possibility of trade diversion occurring in the case of free
trade agreements.
19

PART (II): GLOBALISATION & PART (III): PROTECTIONISM

On Globalisation
Discuss whether Singapore is among the economies that have most to gain from
globalisation.
[25]
(+)
The good answers (L3) were the ones that
considered in detail the potential gains and
losses of globalisation to Singapore. There
was a well-balanced discussion and
arguments were well presented and
backed by analytical depth.
(-)
Biggest weakness would be the lack of focus on other economies that might
have a great deal to gain from globalisation. Few candidates offered a
comparison with other countries and consequently the overall evaluation as
to whether Singapore may be among the economies with most to gain was
not fully considered
The best was clearly applied to the

developed, and developing, economy
cases.
INTRODUCTION
BODY
THESIS: Singapore is among the economies that have most to
gain from globalization in view of her unique characteristics
Benefits of globalization measured in terms of macro goals
(Make comparison between Singapore and other economies among
the economies that have MOST to gain)
Actual growth
Open up/provide access to markets for our exports

External demand or Export-led growth strategy
Open up to inflow of FDI

Changes in supply (Linked to potential economic growth)
Open up/provide access for importing resources for domestic

production as well as for exports
Increase in productive capacity
ANTI-THESES: However, there are

costs of Globalisation to SG
Vulnerability to external shocks
Domestic problems related to
globalisation
Widening income inequality
Worsening Gini coefficient
Congestion/pollution (Harms
non material SOL, efficiency)
Other economies
Compare with other countries DCs
(China/India), Emerging Economies
in SEA
Increase in SOL
Open up/access markets for importing consumer goods for Evaluate where possible
domestic consumption
Evaluate where possible
CONCLUSION/SYNTHESIS: Does Singapore have most to gain from globalization compared to other
countries?
20

INTRODUCTION
Globalization refers to the integration or inter-connectedness of national economies through trade of goods
and services, foreign direct investment, capital flows, spread of technology and labour migration. Singapore
is one of the most highly globalised countries in the world today. In fact, according to the World Globalisation
Index 2010 compiled by Ernst and Young, Singapore ranked third just behind Hong Kong and Ireland. This
essay aims to discuss whether Singapore is among the economies that have most to gain from globalization.
BODY
Thesis
Singapore is one of the economies that has most to gain from globalization in view
of its unique characteristics.
Sub-Thesis (1)
Economic growth (AG & PG)

Export as an engine of growth
Access to foreign resources for potential growth
State
First and foremost, globalisation helps to drive economic growth thus benefiting the
Singapore economy.
Elaborate/
Exemplify using
Diagram(s)
where
appropriate
Characteristics of Singapore economy need to depend on external economy for

economic growth
Countries with small domestic markets like Singapore face severe growth
constraints.Singapore currently has population of about 5million whereas large countries
such as US has 313.9million people. Once the domestic demand is saturated there is not
much room for output to grow. In fact, domestic consumption only takes up about 40% of
GDP vs US which has 70% of GDP. However, globalisation overcomes this constraint by
providing domestic producers access to large/huge global export markets. For this reason
growth can be driven by exports (i.e. external demand).
Singapore is a good example of a country that has adopted an export-led or export-driven
growth strategy. In fact, external demand for X constitutes 150% of Singapores GDP.
Together with imports, total trade to GDP ratio is around 3.5 to 4. This ratio clearly indicates
the high degree of openness and dependence of the SG economy on external trade.
The intersection of the AD0 and AS0 curves represents the current equilibrium output or
GDP. Let us assume initially the economy is in equilibrium at point E 0, producing an output
Y0.
GPL
LRAS0
LRAS1
The actual level of output can be expanded in the short run by increasing AD and being a
small and open economy,
P2 the major component of AD comes from external demand.
Whenever
export
increases
upturn, ceteris paribus, the AD 0
Figure 3:
P1 due to say a global economic
E1
function
shifts rightwards
Non-inflationary
Growth P0to AD1 causing real GDP to expand to Y1.
E2
E0
P1
P0
AD0
AD1
Hwa Chong Institution. All Rights Reserved. Y0

Tutors'
Yfe Copy
Y1 Yfe
21
Real NI

Exemplify
For instance whenever the global economy booms especially the economies of our major
trade partners such as EU and USA and so did Singapore too. This is called the coupling
effect as these major economies served as global locomotive or engines of growth.
Access to foreign resources for potential growth
Globalisation enables countries with resource constraints to tap on foreign resources.
Singapore has been relying on imported inputs (raw materials) to produce goods for
exports. In fact, the import-content of our exports is relatively high by international
standards. For every $1 of exports about $0.60cents is made of imported inputs.
Globalisation allows Singapore to benefit by increasing the ease of obtaining imported raw
materials to increase our productive capacity.
In a globalised world, countries can also tap on foreign capital to drive growth through the
influx of FDI. Any inflow of FDI resulting from globalization will stimulate AD via an
increase in total Investment expenditure (I). With reference to figure 3, the AD function shift
rightwards in the same manner as an increase in X expenditure. Hence, in the short run, it
will stimulate greater output and employment level until the economy reaches its full
potential output. In the long run, more FDI inflows enhance the nations productive
capacity, thus shifting the potential output level rightwards. Such an expansion in
productive capacity provides even more room for the economy to grow without
overheating.
Other developing countries are able to gain from globalisation. With the speed of the
transfer of technology and information, it is easier for emerging economies to catch up with
the developed economies. Poorer developing economies can now learn lessons and use
technologies from the developed countries to catch up and narrow the digital divide
between the rich and poor countries. For example, the spread of the internet and mobile
telephony has enable people in poor countries to improve their daily lives in terms of
access to information; education and business opportunities, which enables them to
improve their productive capacity
From Figure 3, we can see that real national income increases from Y 0 to Yfe when
aggregate demand increase from AD0 to AD1 and general price level increases to P1. But
when the economy productive capacity also increases from LRAS 0 to LRAS1, real national
income further increase to Y1 and price goes back to P0 achieving non-inflationary
growth.
22

For labour short economies like Singapore, globalisation has enabled us to tap on imported
or foreign labour to drive our economic growth. In fact today about a third of our labour
force is made up of foreign workers. At the same time, the influx of young migrants could
help to rejuvenate our population and mitigate problems associated with an ageing
population. The influx of foreign talent represents a brain gain to our economy, contributing
to the development of a knowledge-based and innovation-driven economy. They also
contribute significantly to our productive capacity.
23

Sub-Thesis (2)
Increase in SOL
State
Trade and FDI inflows are both drivers of growth and employment. The increase in growth
& employment raises current living standards in the country.
Elaborate/
Exemplify using
Diagram(s)
where
appropriate
The earnings of foreign currency from exports enable Singapore to buy imports to meet our
consumption demand. As Singapore hardly produces any good for local consumption e.g.
food, energy. The ability to import to sustain consumption and welfare is crucial for
maintaining current living standards.
Globalisation would mean local consumers can reap the following benefits: (focus on 2
points)
Ability to consume beyond their production possibility frontier. Higher consumption level
means the residents or people can get access to more material goods and services
and hence enjoy a better standard of living.
Access to a wide variety of goods for consumption.
Economies of scale: Access to global markets means exporters can produce goods on
a big scale and hence enjoy cost savings via economies of scale. The end result is
consumers benefit from lower prices.
Greater Competition: Globalisation involves the opening of home or domestic markets
to foreign competition. More competition spurs efficiency and prevents exploitation of
consumers by monopoly firms with substantial market power. At the end of the day
consumers get to enjoy cheaper and better products made possible by increased
competition.
EVALUATION
Anti-Thesis
Sub-anti-thesis
(1)
However, greater competition may edge out smaller domestic firms which do not have the
financial ability to compete with large foreign firms. Hence, while consumers may enjoy
high material standard of living through lower prices of goods and service, some producers
and workers may lose out.
In addition, the extent of improvement in SOL might be more significant than some
developing countries as the latter may face the possibility of exploitation of labour in view of
low wages and poor working conditions.
Despite being among the countries that have the most to gain from globalization,
there are still costs of globalization for Singapore. Retreating from globalization is
not an option for us, hence policies need to be implemented to counter these
problems.
Externally induced cyclical unemployment
State
Globalisation increases the threat of the contagion effect. As a result economies that are
open to globalisation such as Singapore are vulnerable to external shocks. Such external
shocks could destabilise the economy and/or derail growth.
Elaborate/
Exemplify using
Diagram(s)
where
In reality, the tide of globalization can recede or can be reversed anytime. For example,
trade flows can be subject to various forms of protectionist measures (e.g. anti-dumping
duties; quotas; anti-trade regulations). Capital movements can also be restricted by capital
controls (e.g. tax may be imposed on funds taken out or coming into the country or subject
24

appropriate
to exchange controls). Countries can also restrict inflow or outflow of labour (e.g.
Indonesia banning maids bound for Malaysia).
Thus countries such as Singapore that are overly dependent on external trade, capital or
labour inflows may be subject to economic instability due to uncertainty; price volatility and
sudden disruptions to growth.
In a globalised world, any national economic crisis e.g. USA sub-prime mortgage crisis
2007-2009, can easily spread to other parts of the world. This contagion effect resulted
in a sudden collapse in external demand for Singapores exports to USA and other major
trade partners like the EU. As US home consumers cut back their spending, invariably it
will affect also the demand for our exports to their country. Thus, workers employed in
manufacturing goods for these markets lost their jobs. Moreover, the banking crisis due to
the sale of toxic assets also affected some local banks e.g. DBS sale of Lehman Brothers
Minibonds. Many investors lost their hard earning savings.
In such situations, small and externally driven economies like Singapore tend to experience
a more drastic decline in economic growth as compared to large economies like China.
The latters large domestic market helps to cushion the collapse in external demand.
Sub-anti-thesis
(2)
Structural unemployment
State
Besides the contagion effect, there is also the constant threat of competition from new
rivals for a share of global export markets, hence putting workers at risk of becoming
structurally unemployed. This may happen if the workers skills become obsolete e.g. lowskilled workers in advanced economies lose their jobs to cheaper workers in emerging
economies via offshoring/relocation or outsourcing.
In a globalised world, structural changes occur more frequently due to rapid changes in
comparative advantage. As a result certain sectors of the economy which have lost their
comparative advantage declined and become sunset industries. Unlike they are
occupationally and geographically mobile, workers in these declining sectors face the
threat of structural unemployment. This is not unique to Singapore. Both developing and
developed countries face this problem. The extent of the problem would be negated by the
government intervention such as retraining of workers to rising industries. Singapore
implements workfare training scheme. China, as a developing country, on the other hand
implements college training problems for lower skilled workers so that they can learn
relevant skills and knowledge to gain employment.
Elaborate/
Exemplify using
Diagram(s)
where
appropriate
Sub-anti-thesis
(3)
Worsening income disparities
State
Elaborate/
Exemplify using
Diagram(s)
where
appropriate
Globalization may also lead to a worsening of the income disparities in the economy.
Low-skilled, uneducated or lowly-educated workers across the developed world are losers
for their real wages tend to stagnate or even fall. This is because in a globalised world
employers have access to a vast pool of cheap unskilled labour coming mainly from poor
developing countries. The abundance of an international pool of cheap labour makes it
difficult for the real wages of such workers to rise in tandem with the rest of society.
25

On the other hand, the global demand for highly-skilled talented workers e.g. CEOs far
exceed the available supply. Thus such talented skilled workers command very high
wages. Thus, over time the income gap between the low-wage earners and the rest of
society tends to widen.
This phenomenon has in recent years become an issue in Singapore. The Gini-coefficient
is used by economist to measure income inequality. The lowest value is 0 (representing
perfect equality) and the highest value is 1 (representing perfect inequality). In Singapore
the Gini-Coefficient has risen to 0.48 in 2009, placing the country at the bottom 29 th in the
world in terms of income inequality.
If the trend continues unabated the worsening income-disparity may reach the point where
social harmony is threatened. Those at the bottom of the income ladder may feel
disaffected, marginalised and unfairly treated and hence may resort to crime, violence
and other anti-social acts to hit back at society. Such social conflicts and discontent in turn
may scare away foreign investors thus crippling economic growth.
26

Sub anti-thesis
(4)
State/
elaborate/
exemplify
Singapore may not be among the economies with most to gain from globalisation
With the increasing globalised world, more economies are becoming integrated with other
countries. Benefits to these economies such as China & India are significant in the areas
of economic growth. By opening up their economies to the rest of the world, they have
seen an increase in exports which encourages growth. They have also benefitted from an
increase in imports which allows their consumers a wider choice of goods and services,
increasing the standard of living in the countries.
However, given their big population (consumer base) and vast resources (potential for
growth) they can weather external shocks better than Singapore. For example, in the light
of the financial crisis and trade disputes with her trade partner USA, it is easier for China to
reduce her dependence on export-led strategy and shift towards more reliance on domestic
demand to power her economic growth.
CONCLUSION
Despite the downsides, Singapore economy is among the economies like China and India which have much
to gain from globalisation. As a trade and resource-dependent economy retreating from globalisation is simply
not an option. The Singapore government has been introducing policies to build resiliency into the economy to
better withstand external shocks. As a result, Singapore has been able to leverage on globalisation to
increase the free flow of trade, capital and labour to spur and sustained economic growth as well as improve
the living standards of its residents as evident by the robust economic growth and relatively high standard of
living enjoyed by Singapore and other globalised economies in recent times.
27


An economist stated The trend towards globalization leaves no room for protectionism.
(a) Account for the trend towards globalization.
[10]
Answers to (a) can be found in Lecture #21 (Pg 21.38)
(b) Discuss whether you agree with the economists view.
[15]

Candidates were expected to show knowledge of the pattern of trade between Singapore and the rest of the
world. Candidates were then expected to explain which if any of these identified patterns of trade might be
explained by the theory of comparative advantage, evaluative comments were expected to refer to other
reasons for this trade pattern.
(+)
Well
discussed
reasons
for
protectionism as candidates put forward
a long-term argument for totally free
flow of products and productive factors
whilst recognising that, in practice and
over the short term, protective
measures
might
be
considered
necessary to produce a level playing
field. A good structure plus strong
evaluation therefore produced some
good marks for this question.
(-)
Mid-range answers, although showing knowledge of reasons for
protection in general, lacked clarity of structure. These therefore
tended to describe the reasons for protection and came to broad and
largely unsubstantiated evaluative comments that free trade was
best.
There were regrettably few attempts at introducing analysis through,
for example, the standard tariff diagram, which can be used to show
both the loss and potential welfare gains from protectionism.
Weak responses simply listed some reasons for protectionism.
INTRODUCTION
BODY
THESIS
Trend towards globalization leaves no
room for protectionism
Explain how globalization brings about
benefits to an economy and stress that
protectionism would attenuate the
benefits.
Export as an engine of actual

growth
Access to foreign resources for
potential growth
Higher employment and SOL
ANTI-THESES
Protectionism is still necessary despite globalization , i.e.
Protectionism will mitigate the possible threats & negative effects of
globalization in the short-run
Protection of infant industry

Protection against dumping
Protection of declining or "sunset industries
Protection of strategic industries
Note: Under exam conditions, candidates may be able to cover only

2 points. Remember: Dont sacrifice depth/analysis for breath.
Any evaluation/Critical Comments?
CONCLUSION
Note: A pitfall to this essay is candidates failed to link the reasons for protectionism IN VIEW OF
GLOBALISATION.
28

INTRODUCTION
Address the issue: Establish the link between globalization and protectionism.
Key Words
The freer trade in goods and services and the international movement of capital and labour
due to globalization has been achieved through the breakdown of protectionist barriers to
trade and capital movement.
Issue
Approach
In this regard, protectionism, which is the restriction of the international movement of goods
and resources across countries, apparently appears to be at odds with the trend towards
globalization.
This essay aims to discuss whether in a globalised world there is no room for protectionism.
BODY
Thesis: Trend towards globalization leaves no room for protectionism [Cover 2 points for depth in
analysis]
Argument for totally free flow of products (free trade) and productive factors (capital & labour)
Explain how globalization brings about benefits to an economy and stress that protectionism would
attenuate the benefits.
(1) Promotes economic growth
Boost AD via X - access to foreign markets i.e. enlarged/ bigger markets
Actual growth
Globalization trade liberalization through signing of FTAs lower barriers to trade access to bigger
markets for X rise in X
Freer capital flows facilitates FDI Increase I
Both rise in NX and I rise in AD rise in NI by magnified effect
Boost AS - access to foreign resources i.e. Increased resources
Potential growth
Access to raw materials and inputs; more foreign capital and technological transfer rise in I rise in LRAS
i.e. capacity to produce rises
Increased labour mobility inflow of foreign talents rise in LRAS
(2) Higher employment
Rise in X markets and freer capital flows rise in NX and I rise in AD firms hire more workers rise in
employment by magnified effect.
Rise in I Rise in LRAS i.e. capacity to produce rises produce more jobs for Singaporeans in the future
Trade and FDI inflows are both drivers of growth and employment. For many developing countries like China,
India and Vietnam, the presence of many foreign MNCs have provided jobs for the local population. Many
international MNCs such as American and Japanese auto-makers have relocated or off-shored their
manufacturing plants to these low-cost countries to take advantage of the availability of cheap labour. These
countries can benefit from the rise in I and employment.
(3) To sum up:
(a) Greater economic efficiency which enhances Consumers welfare
With globalization, production chain has been broken up and shifted to different low-cost producing countries
(international vertical specialization). This is made possible by the openness to trade and capital and labour
flows. Such movements provide greater scope for countries to specialize according to their comparative
29

advantage (e.g. Singapores comparative advantage is in production of high value added products) and hence
an efficient allocation of world resources can be achieved.
(b) Economies of scale

Expansion of market size allows firms to reap economies of scale (the fall in long run average costs as the
firm expands its scale of production). Countries can also import their raw materials from the cheapest markets
in the world/ import cheaper business services from abroad (outsourcing). All these enable firms to lower
their unit cost of production and possible lower prices of final products.
(c) Greater Competition
Greater competition spurs efficiency and prevents exploitation of consumers by monopoly firms with
substantial market power. Hence, consumers enjoy lower prices, better quality and a wider variety of
goods, standard of living improves.
Anti-thesis: Protectionism is still necessary despite globalization in some situations
Arguments for protectionism
Justification for protectionism + Evaluation (costs of protectionism)
Protectionism will mitigate the possible threats & negative effects of globalization in the short-run
Protection of Infant Industries
Protectionist measures for an infant industry which has potential comparative advantage, especially with the
trend towards globalization, in the face of more established foreign competitors, are necessary.
Infant industries face high start-up cost at their initial stage of production
With the trend towards globalization, these industries are exposed to competition from
established or low cost foreign firms.
Subsidies can be given to these producers to become more competitive against the more efficient
foreign producers until it matures and is able to expand its output sufficiently to reap economies of
scale and establish market share that it is able to compete with the foreign firms
Hence, protectionism is necessary in the short-run to produce a level playing field
Evaluation:
Protectionism is not justifiable in the long run:
Local industry may become complacent and produce low-quality goods at high prices with
limited variety if protectionism is implemented as a long-term measure. Under protection the
industry lacks the incentive to mature into strong and efficient producers that can compete
internationally.
(I.e. Industrys growth may be stunted or firms in industry end up as permanent infants)
Protection Against Dumping

Dumping takes place when goods are sold in a foreign market at a price below cost or below
that sold at the home market.
In view of globalization, dumping may be undertaken by a foreign government to drive
out local producers of another country. Hence, some countries may be unfairly victimized by
competing foreign imports that are dumped in their markets.
E.g. USA has been blaming China for dumping their goods in their country by undervalued
the Yuan.
Protectionism such as tariffs is thus often used to reduce imports and increase domestic
production.
30

Use a tariff diagram to illustrate the potential welfare gains and loss to the society
31

Explanation with reference to Figure 4:

Figure 4: Decrease in imports due to tariff
Sd
Price
PE
P1
Sw + tariff
A
B
PWW
SW
Dd
Q1
Q3QE
Q4
Q2
Quantity
Sd and Dd represent the domestic supply and demand curve respectively. S W is the world supply which is
perfectly elastic.
Without protectionism and under free trade, the goods will be sold at P W and Q1 will be produced by the
domestic producers and Q2 will be demanded by the consumers and thus Q1Q2 will be imported.
To protect the home industry against dumping, the government levies a specific tariff on the imported
good, thus raising the world supply curve from SW to (SW + tariff). The price now increases from PW to P1.
At P1, domestic production increases from 0Q1 to 0Q3, hence domestic unemployment is reduced;
domestic buyers are buying less at Q 4. The tariff has caused a fall in the amount of imports from Q 1Q2 to
Q3Q4.
Evaluation:
In such instances, the ultimate cost of protection is borne by domestic consumers, e.g. American car
consumers suffer welfare losses if their car-manufacturers end up paying higher costs for using
domestically produced steel.
With reference to Figure 1, since the price is higher after the tariff, consumers are worse off compared
to having free trade as consumer surplus is reduced. The loss in consumer surplus is equal to the
Areas (A + B + C + D).
Though producers gain in producer in terms of increased domestic production and higher price of the
good (Area A) and government can expect to collect an amount of tax revenue equivalent to Area C,
the loss of consumer surplus of Areas B and D are not transferred to other sectors of the economy, they
are deadweight loss to the society.
Also, in practice, countries may find it convenient to use this argument also as a pretext to keep out imported
goods for other reasons. In actual fact, foreign producers may be indeed more efficient than local producers.
For instance, in the face of mounting trade deficits with China in recent years, this argument has been used
by the USA to pressure China to cut back its steel exports to USA.
32

Protection of declining or "sunset industries

Prevent sudden massive structural unemployment in those industries which employ a substantial
proportion of the workforce
With the trend towards globalization, structural unemployment arise due to the following:
i. faster rate of economic transformation and technology transfer results in new
machines and methods that make old skills obsolete
ii. greater flow of cheaper imports which compete directly with domestic producers
decline in demand for domestic goods retrenchment of workers as importsubstitutes domestic firms lose their comparative advantage and shut down
workers face difficulty seeking employment in other industries
Protectionism such as tariffs to reduce imports and increase domestic production provides a buffer for
workers in these sunset industries with the opportunity to retrain and seek employment in other
expanding sectors of economy
Declining industries can also make use of the term of protectionism to reorganize and restructure
themselves to compete effectively with the foreign rivals again.
Note: If point 2 is not included in the essay, you need to use a tariff diagram to illustrate the potential
welfare gains and loss to the society here for point 3.
Evaluation:
Protectionism is not justifiable in the long run; It delays or slows down the restructuring
process and prolong the inefficient use of the economy's resources
While tariffs help to reduce unemployment, it brings about loss of consumer welfare in terms
of higher prices and fewer goods consumed and loss of societal welfare
CONCLUSION/JUDGMENT
From the above discussion it is clear that whilst globalization promotes growth and bring other economic
benefits to countries which have embraced it, nevertheless there are also drawbacks and problems that
arises from time to time. If unresolved these problems might threaten the very process of globalization
itself and made it unsustainable. For example, countries might withdraw from free trade if there perceived
themselves as losers or victims of unfair trade.
Hence, it is too sweeping to say the trend towards globalization leaves no room for protectionism.
Protectionism if used under the right circumstances e.g. discourage dumping, correct persistent trade
imbalances, etc and actually helps in the long run to sustain globalization for all countries. For ultimately
countries will embrace globalization only if they perceived free trade and free movement of capital and labour
to be fair and beneficial (i.e. win-win) for everyone.
Nonetheless, one also has to note that protectionism at best should be practised in the short-run so as to reap
the benefits of globalization in the long run.
Note: For anti-thesis, under exam conditions, candidates may be able to cover only 2 points.
Remember: Dont sacrifice depth/analysis for breath.
33

Section B: Case Study Practice

NOTE WHILE ATTEMPTING A CASE STUDY:
Take note of the headings of the extracts as they may drop some hints to the coverage.
As you read through the passages, HIGHLIGHT key points including statistics as you most likely
need to quote some of them in the answers and link the passages to economics concepts.
You have to scrutinize (Note the year(s), units, axes and etc) the charts, figures and tables (if
any).
Read through all the questions before start attempting.
You
have
to
make
some
form
of
reference
to
ALL
THE
TABLES/CHARTS/FIGURES/EXTRACTS in the data. In other words, if you did not use info from a
particular table/chart/figure/extract in the case study at all, it will mean you have left out some
important information and that will lead to losing of some marks. (Refer to Case Study Skills
package)
REMEMBER: Highlight the passages and link important points to economic concepts.
TYS November 2008 Case Study Q2

Issues in Trade and Globalisation
Extract 1: European Union imposes shoe penalties
The European Union (EU) has begun imposing duties on imports of shoes from China and Vietnam.
Tariffs are to be phased in starting at 4% and rising to nearly 20% for China and 16.8% for Vietnam.
The EU contends that these measures are a justifiable response to unfair competition from Asian
producers who, it is alleged, enjoy state support in the form of tax exemptions, cheap finance or
subsidized rents. China denies the accusation, saying the EU does not want to open up its markets to
competition. The move is supported by EU nations with large shoe industries such as Italy and
Portugal, but others such as the UK fear it will have a negative impact on consumers and retailers.
China has urged the EU to re-consider its action, saying the planned measures are unfair. Chinese
officials say there is no evidence of dumping and question whether the measures conform with World
Trade Organization (WTO) rules.
China exported 1.2 billion pairs of shoes to the EU last year, while Vietnam exported 265 million pairs.
Source: BBC News, 7 April 2006
Extract 2: New threats to global trade and investment
34

In its latest report on the global economy, the International Monetary Fund (IMF) highlighted the need
to resist protectionist pressures. In the US there are complaints in some quarters that Chinese
manufacturers enjoy an unfair competitive advantage arising from the alleged undervaluation of the
Chinese currency, the Yuan (Renminbi). Some politicians are calling for the US Treasury to declare
China a currency manipulator, while others have called for heavy tariffs on Chinas exports to the
US.
In April the EU took legal action against several of its own member states considered to have
breached EU free- market rules. This action was welcome in ensuring free trade within the EUs
internal market. However, the EUs record on global trade issues is less inspiring. Last year, a bra
war dispute arose between the EU and China. The Chinese were accused of dumping bras in the EU
market. This resulted in quotas being applied to textile imports from China. The footwear trade now
faces similar difficulties following the EUs decision in April to impose tariffs on shoes from China and
Vietnam. In the US there is now growing doubt about globalization, and influential voices are calling
for US trade policy to be focused on bilateral or regional trade deals.
Source: Meredydd Davies, HSBC Economic Review, July 2006
Extract 3: EU threatens India in whisky feud
The EU will carry out its threat to refer India to the WTO if the Indian government does not agree to
remove unfair tariffs on imports of drinks by the end of next month. India is an open economy which
generally favours free trade, but it is risking a trade war by effectively excluding whisky from its
market. A recent EU investigation found that Indias duty system unfairly distorts competition and
includes clear violations of WTO rules.
The threat to take action will be welcomed by the Scottish Whisky association (SWA), a strong critic of
the Indian tariff policy. India has long been considered a potentially profitable market for international
whisky producers, but a range of duties imposed by national and state governments means that a
bottle of Scottish whisky faces a tax burden up to five times greater than its Indian-made substitutes.
In contrast, the Indian-made product is not taxed when imported into Europe, although it is subject to
stringent labeling requirements. Compared with Scottish whisky Indian whisky is made from different
ingredients and is not allowed to be labeled as whisky in the EU. It is marketed in the EU as Indian
Spirit which Indian producers claim gives it a disadvantage when compared to scotch.
A spokesman from the SWA in support of the EUs threat of action stated that Scottish whisky
producers have campaigned for years for fair market access to India. A non-discriminatory duty policy
would offer Indian consumers more choice at a reasonable price, boost Indian government revenue
and introduce a fair system for international producers. However, representatives of Indias domestic
drinks industry claim that it will be destroyed if tariffs are removed.
Source: Conal Walsh, Observer, 13 August 2006
35

Table 3: Trade in Goods

Total Value
Of Trade
US$bn
2005
World
USA
Total EU:
UK
Italy
China
India
4 Asian
Tigers*
10121
904
3988
378
367
762
90
731
Exports
Imports
Annual Percentage Change

20002003
2004
2005
2005
10
17
21
13
3
5
13
10
10
19
19
7
Annual Percentage Change

20002003
2004
2005
2005
10
17
21
13
7
9
17
14
10
20
20
8
6
9
25
16
9
9
18
35
16
19
14
18
35
33
25
9
4
28
19
12
8
10
24
21
8
13
20
40
26
15
20
19
36
37
27
6
7
18
35
14
* Hong Kong, Singapore, South Korea, Taiwan
Source: World Trade Organization (WTO) World Trade Report 2006
36

Questions
(a)
(i)
How does the value of the Yuan in September 2006 compare to its value in 2000?
[1]
(ii)
Describe what happened to the US balance on current account over the period 1998 to[2]
2006.
(b)
Identify and explain any evidence contained in the data that suggests that the Chinese[5]
government is a currency manipulator.
(c)
Explain how you would decide whether the low price of Chinese shoes in EU markets[4]
occurred as a result of dumping.
(d)
Discuss whether the Indian governments treatment of Scotch whisky and the EU[8]
governments treatment of imported bras from China can be justified in terms of economic
theory.
(e)
Assess whether the growing doubt about globalization is well founded, using both the[10]
case study and your own relevant knowledge.
37

38

TYS 2008 Case Study 2

General comments from the examiner
There was a large rise in the number of candidates entered for H2 Economics this year. Generally, the
performance of candidates was very encouraging. There are signs that there is now a strong
emphasis on the development of those skills that are essential for success at this level. Nevertheless,
there are still large numbers of students who lose marks because they insist upon writing a great deal
of material which is unnecessary to answer the question set. They fail to show the necessary
analytical and evaluative skills for a good mark. Careful reading of the question set and careful
consideration of the directive words is essential if the highest mark is to be achieved.
[In other words, the examiner is pointing to the importance of mastering the art of dissecting Questions
using 3 Cs techniques]
(a)
Questions
(i) How does the value of the Yuan in September 2006 compare to its value in 2000?
The Yuan has appreciated against the USD. [1m]
[1]
Evidence
8.28 yuan (2000) per USD to 7.93 yuan (Sept 2006) per USD
[% appreciation = 8.28-7.93 divided by 8.28 x100=4.2 %]
Examiners comments:
Many candidates stated incorrectly that the Yuan had depreciated in 2006. With more
careful consideration of the data candidates would have come to the correct conclusion that it
had in fact risen or appreciated.
(ii) Describe what happened to the US balance on current account over the period 1998 to 2006.[2]
The US balance on current account was in deficit (1m) and the deficit was getting larger [1m].
OR
The US had an increasing (1m) deficit (1m) in its current account.
Watch Out!!!
Wrong to say balance was negative. Expected to use the correct economic term.
Wrong to say it decrease
Examiners comments:
This question was generally done well by most candidates. To score both marks available it
was simply necessary to state that the United States had a deficit on the current account of the
balance of payments and that this deficit was becoming larger. Most candidates scored both
marks, but disappointingly a significant number of candidates failed to use the appropriate
economic terms and failed to score. For example, answers that stated that the balance was
negative or that it was falling, failed to score because they failed to use the appropriate
economic terms in the given context.
39

(b)
Identify and explain any evidence contained in the data that suggests that the Chinese[5]
government is a currency manipulator.
The foreign exchange rate of the Yuan is simply the price of the Yuan in terms of another
currency e.g. US$. Like any price it is determined in a market by the forces of demand and
supply. Whether the claim that China acted as a currency manipulator would depend upon
whether the Chinese authorities were fixing the price of the Yuan below equilibrium price in
the market for foreign exchange in order to give Chinese exports an unfair advantage.
This is done through intervention selling of the Yuan in exchange for USD.
Evidence to show that China manipulated in the foreign exchange market to keep Yuan below its
market rate:
From Table 4: The stable value of the Yuan (US$1 = 8.28 Yuan) from 2000 to June 2005
would be unlikely to occur in a free market, hinting at government intervention.
In addition, from Fig 2, there is a considerable rise in Chinas foreign exchange reserves
from 2000 and from Table 3, Chinas trade balance is likely to have improved (note that
we cannot infer that Chinas trade balance is in surplus from table 3) and yet Table 4
shows a stable value of Yuan with no changes.
This suggest that the Chinese authorities are selling Yuan and purchasing foreign
exchange over the years to increase the supply of Yuan to exert downward pressure on
the value of the Yuan [which would likely have appreciated otherwise]
Examiners comments:
This question proved difficult for many candidates. In order to score well here it was not
necessary to understand the detail of fixed exchange rate systems. This question required the
simple application of demand and supply principles in the context of the foreign exchange
market. The foreign exchange rate of the Yuan is simply the price of the Yuan and like any price it
is determined in a market by the forces of demand and supply. Whether the claim that China
acted as a currency manipulator would depend upon whether the Chinese authorities were
fixing the price of the Yuan below equilibrium price in the market for foreign exchange.
There was considerable evidence in the data to suggest this. The stable value of the Yuan from
2000 to June 2005 would be unlikely to occur in a free market. This suggests that market
intervention was taking place. This is linked to the changes shown in the value of Chinas
foreign exchange reserves which show a considerable rise from the year 2000. This suggests
that the Chinese authorities are selling Yuan and purchasing foreign exchange over the
years to exert downward pressure on the value of the Yuan. Such a reasoned approach was
rewarded with a good mark.
40

(c)
Explain how you would decide whether the low price of Chinese shoes in EU markets[4]
occurred as a result of dumping.
Definition of dumping
Dumping occurs when goods are sold in overseas markets at a price below cost, more precisely
marginal cost. The motive is often to drive domestic competitors out of the market with the aim
of establishing monopoly power in the future.
In practice, often times domestic producers may accuse foreign competitors of dumping
goods simply because they cannot match the low prices offered by them.
To assess whether the low prices of imported goods could be considered as dumping
Consider
Whether low prices were a result of low input costs in the exporting economy, which
might simply reflect comparative advantage which China is likely to have since it has
abundance of cheaper labour for the production of shoes which is more labour intensive
in nature.
Whether was it a deliberate policy to sell below marginal cost.? This might be with the
help of the Chinese government to lower cost for domestic producers through, for
example, subsidised rents and tax exemption. Under such circumstances, dumping was
certainly taking place. {Extract 1 line 5}
Watch Out!!!
Dumping is not just selling at low prices. But the stress must be on artificially low with a
predatory motive.
Note it is often related to subsidies (either outright grants or hidden subsidies) provided by
the state
Examiners comments:
Many candidates lost marks here because they had an inaccurate understanding of the term
dumping. Dumping occurs when goods are sold in overseas markets at a price below cost, more
precisely marginal cost. The motive is often to drive domestic competitors out of the market
with the aim of establishing monopoly power in the future. Many candidates seemed to think
that dumping was simply selling at low prices in foreign markets. The better answers to this
question provided an accurate definition of dumping. They then went on to explain how they
would assess whether the low prices of imported goods could be considered as dumping. They
explained that it was necessary to consider whether low prices were a result of low input costs in
the exporting economy, which might simply reflect comparative advantage, or whether it was a
deliberate policy to sell below marginal cost. This might be with the help of the Chinese
government through, for example, subsidised rents and tax exemption. Under such
circumstances, dumping was certainly taking place. As stated, without a firm grasp of the central
concept, it was unlikely that a candidate would score well.
41

42

(d)
Discuss whether the Indian governments treatment of Scotch whisky and the EU[8]
governments treatment of imported bras from China can be justified in terms of economic
theory.
Introduction:
Identify the respective measures
EU government imposed quotas on imported bras from China
India slapped hefty tariffs on imported Scotch Whisky
Protectionism is often argued to be justified under certain circumstances such as
(1) protection of infant industry
(2) protection of domestic industry from predatory dumping by foreign exporters.
(3) To correct persistent trade deficits or BOP disequilibrium
(4) To protect workers in declining sunset industries from structural unemployment.
(5) To reverse a worsening TOT
Trade is only beneficial if it is FREE and FAIR.
Thus, from the economic standpoint the above reasons are justified or valid because they
are not in any fundamental misalignment with the concept of the gains from trade based
on the principle of CA.
Examine each of the measures usedFrom Extract 2: Protectionistic quotas imposed by EU
The EU governments justification for the treatment (ie EU imposed quotas) of imported bras is
that China is dumping. (Extract 2).
Evaluation:
However, in practice it is often not easy to ascertain or prove a country is dumping goods simply
because it is selling the good at very low prices which domestic producers cannot match and there
is no evidence in the case study. If China is indeed able to price bras at a lower price due to its CA
(Note: explained in previous part!) then EU response is NOT JUSTIFIED based on economic
theory.
From Extract 3: Protectionistic tariff taken by India Reason or argument for protection: Based on protecting jobs + retaliating against discrimination
of Indian whisky imported into Europe (labeled as Indian spirits downgrade its status hence
affecting its sales)
If indeed Indias action to slap hefty tariffs on imported Scotch Whisky is motivated by retaliation
then clearly its action cannot be justified by economic theory.
This is because retaliation will only breed more retaliation leading to trade wars. Indeed,
the extract seems to hint at the possibility of trade war erupting between India and EU. The end
result is a no win situation for every country. Every country ends up the loser because trade is
severely hindered depriving countries from reaping potential welfare gains and growth.
43

Evaluation:
Unless data can be provided to justify that the whisky industry in India has for example a potential
CA in this area as an infant industry (and that the Indian government is using it as a temporal
measure) would the tariff be justified in terms of CA theory.
Conclusion:
In reality trade may bring about complex issues as illustrated by the above cases. Unless empirical
evidence can be found to justify for an infant industry with the potential to acquire
comparative advantage, the use of protectionist measures will run contrary to the gains that free
trade entails.
However, in principle, it appears best or ideal to practice free trade as much as possible without
resorting to protectionist measures.
[NB: In practice, the WTO can act as arbiter in the spirit of promoting free trade to mediate and
help resolve trade disputes]
Examiners comments:
In response to this question candidates were asked to consider the two examples of protectionism
provided in the data and assess whether they could be justified in terms of economic theory. It was
expected that judgement would be made with reference to the principle of comparative
advantage. This suggests that economic welfare is maximised if countries >specialised in the
production of those goods and services in which they have the lowest opportunity cost. This
is the basis of the argument in favour of free trade. Arguments often used to justify
protectionism include the so- called infant industry argument. Such industries are those
that have the potential to develop comparative advantage in the future. The question was
generally done well, but a disappointingly large number of candidates simply listed and explained
a large number of arguments in favour of protectionism with no reference to theory at all.
Inevitably, they scored poorly, usually in Level 1, and such approaches usually gained few
marks for evaluation. Careful consideration of the requirements of the question would ensure a
more focused answer and a better mark would result.
44

(e)
Assess whether the growing doubt about globalization is well founded, using both the case
study and your own relevant knowledge.
[10]
45
Define Globalization:
Globalization refers to the integration of national economies into the international economy
through trade, foreign direct investment, capital flows, migration, and the spread of technology.
Year
Two H2
Economics
[ NB: There may be slightly different versions
of the
definition2013
of globalization but at the end of
Tutorials
#19-21:
Macroeconomics
III
Balance
of
Payments,
Rates & International Economics
the day the concept/idea boils down to the free flow of Trade,Exchange
Capital, labour]
As a result of globalization the world is said to be more inter-connected and inter-dependent.
Such inter-connectedness may bring both advantages and disadvantages to countries that are
engage in international trade and investment. In other words there are winners and losers.
Thesis
Disadvantages ( Growing doubts about globalization)
Explain using information provided.
In the context of the case, the USA seems to be disappointed with the outcome of globalization.
The information provided in extract 2 suggests that the situation has reached a point where its
trade policy is moving away from free trade towards protectionism.
This is because the US perceived itself as a loser or victim of unfair trade practiced by its
trading partners. In particular its trade with China had resulted in various problems such as:
(a) persistent and growing trade deficits
(b) currency manipulation by China.
(c) Dumping by China
(d) Job losses in USA due to outsourcing/relocation of businesses to places like China/India
Instead of embracing multilateral free trade whole-heartedly, the US is moving towards greater
bilateral and regional trade arrangements/deals. Such preferential trade deals are by their
nature exclusive and may be harmful to free trade based on the principle of CA. For example it
may result in trade diversion instead of trade creation.
Similarly, the EU also experienced disputes in its trade with China and India.
They too perceived themselves as losers or victims of unfair trade practices adopted by these
2 newly emerging giant Asian economies.
Therefore, based on contextual evidence, there appear to be grounds for scepticism and
growing doubt over the benefits of globalization for countries experiencing problems related to
trade.
ANTI-THESIS
[The advantages /upsides of globalization]
State
However, despite the disappointing experiences of USA and EU as described in the data,
globalisation has benefited many other economies in the world today.
Explain
Indeed many countries have benefited from the positive impact of globalisation. This is because
globalisation has in general fuel economic growth world wide .
Exemplify using China/India as examples
Iconic examples would be Singapore as well as the 2 emerging giant Asian economies of China
and India. Since opening up their economies to the free flow of trade and capital such as inflow
of FDI, both China and India has been experiencing phenomenal growth rates in recent times.
Hwa
Chong
Institution.
Rights
Reserved.
This has also raised their
per
capita
incomeAlland
standard
of Tutors'
living.Copy
Today, China is now
46
considered as an Asian economic powerhouse and the second largest economy in the world
with a GDP of US$5.8 trillion. Indeed, the data suggest China has taken the opportunity offered

Examiners comments:
This question required candidates to assess whether the growing doubts about globalization were well
founded. Candidates were asked to use both the case study and their own relevant knowledge to
make this assessment. The case study contained considerable material that could be drawn upon to
develop an answer alongside the candidates own knowledge. It was expected that good answers
would give a balanced assessment of both the advantages and disadvantages of globalization and
then provide some overall evaluative judgement. There were some excellent answers, but others simply
repeated the material that had been learned in class. Candidates are reminded that the questions that
carry a high mark allocation are designed to test the higher-order skills. Repeating class notes with
little exercise of judgement will result in a poor mark. To score well, candidates need to develop
answers that use the material provided as a stimulus to answer the question in the context provided
by the case study. They need to reach a considered judgement after a thoughtful consideration of all
the issues that are relevant.
47

Singapore's Pattern of Trade Explained

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Singapore's Pattern of Trade Explained

Uploaded by

Copyright:

Available Formats

HWA CHONG INSTITUTION

Year Two H2 Economics 2013

TUTORIAL #21: INTERNATIONAL TRADE

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

In consequence only a small number of candidates accessed Level 3 marks.

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

Simple Schematic Plan

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

Determinants of Intra industry Trade

State: Theory of Comparative advantage

Taste and preferences, Economies of

The pattern of trade refers to the composition of a countrys exports and

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

CA differs amongst countries due to the fact that factor/resource endowment

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

What SG does not have

(2) Cheap and low-skilled/unskilled

Emphasize the need to illustrate with APPROPRIATE EXAMPLES.

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

Intra-trade (Case of SIMILAR CA)

Besides, inter-industry trade, Singapore also engages in intra-industry trade with

Others 10% coverage

Bil-lateral or regional trade agreements such as FTAs promote trade between

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

providing preferential access to services sectors, easing investment rules, improving

Highlight to students the importance of concluding the essay. ANALOGY: A conclusion is

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

Question 2: TYS N2000 Q11

Answers to (a) can be found in Lecture #21.

Simple Schematic Plan

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

Well-educated and trained labour force

Good infrastructure e.g. industrial

Advanced technology e.g.

What SG does not have

Favourable climate for agricultural

Water management (iconic example Hyflux)

Hospital management (e.g. Parkway Healthcare

Airport/Seaport management (e.g. PSA and Changi

Note: Although similar in content to N2008(a) there is a difference in terms of presentation

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

To what extent is it true?

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

On Benefits of Free Trade

Effects on economy: One should think of the impact on

1. Possible trade diversion which means trade is being

Hwa Chong Institution. All Rights Reserved. Tutors' Copy

HWA CHONG INSTITUTION

Regional economic integration increases Foreign

3. Possible improvement in Balance of Payments