International Trade Relations Advantages And Disadvantages

EKIP 211: International Trade Relations

Individual Assignment

24819336 N Nhlapo

Question 1
a) Export subsidies
Advantages:
• Enables local producers to export more cheaply and profitable. Thus stimulating the country’s exports.
• Encourages exports thus meaning an inflow of foreign reserves. This means greater income for the country. Disadvantages:
• Export subsidies can cause inflation: since subsidies provided by government are based on costs, an increase in subsidy is directly spent on wage ample hikes demanded by workers. This results in wages in subsidised industries being higher than elsewhere, which makes other workers demand greater wages which are then reflected in prices, causing inflation everywhere in the economy.

It associates competitiveness in countries with good infrastructure, ample education and strong international orientation.

Disadvantages:
• Competition can result in loss of jobs especially in the manufacturing industry because in order to stay competitive move offshore in pursuit of cheaper labour.
• Firms can exploit people, industries and resources in less developed countries in order to fend off competition..

e) Industrialisation
Advantages:
• Industrialisation sees an ample growth of industries which has resulted in larger scales production of goods which are available to consumers at cheaper rates.
• It has raised the standard of living of the people very considerably.
• It has also led to the development of new of transport measures enabling quick export and import.
• Encourages import substitution in developing countries.

Disadvantages:
• Industrialisation results in the gradual depletion of various natural resources, the pollution of water, land and the air.
• It advocates inflation, it sees the value of money going down and the poor working class becomes poorer. It a social impact as conflicts and strike are evident.

Question

Without international competitive pricing, domestic firms are free to raise their prices and operate more profitably.
Arguments for protectionism:
Infancy argument:
• South Africa will be still in Infant Industry; because South Africa will be in its early stages of development it may not be equipped to face foreign competition from established foreign industries hereby requiring protection from competition in its infancy stages of development.
• In the infancy stage South Africa will need full protection from foreign industry because will be in a transition period so operating costs will be high and not enabling them to compete with foreign exporters.
Anti-Dumping Argument:
Protectionism also advocates as an anti-dumping measures. Foreign countries may resort to dumping with the intention of expanding market share in other countries. Thus, to protect local producers against the dumping of foreign goods at lower price and archiving a monopoly a high tariff will be demanded. For instance, China in recent years have been able to dump steel in South Africa and this still continues today to hamper local producers of steel such as ArcelorMittal forcing them to plan on closing down some of their plants.
Arguments against