Practise trade theory, protectionism, current-account analysis and exchange rates through calculations, diagrams, data-response questions and policy evaluation.
The EU is expected to strengthen its protection against steel imports, possibly as early as October 2016, as a global trade war in steel intensifies and steel imports keep flooding into the EU.
The EU has strengthened trade defences over the past year, imposing anti-dumping tariffs on a range of steel products. These tariffs range from 18% to 25% for imports of steel from China. It is expected that these duties will be increased in October. EU data shows that 27% of steel imports come from China. The EU now has 37 anti-dumping and anti-subsidy measures in place for steel products, 15 of them against China.
China, which produces half of the world's 1.6 billion tonnes of steel, has struggled to reduce its estimated 300 million tonnes of overcapacity, but the Chinese government denies its firms are dumping by selling steel at below the cost of production. It says global steel overcapacity is due to the collapse of demand after the 2008 financial crisis. Countries from Asia to the Americas disagree with China. The United States (US) claims that the Chinese government is subsidising its steel industry and that this is a form of protectionism that gives Chinese steelmakers an unfair advantage in world markets. It has imposed tariffs of up to 450% on some types of Chinese steel. India has also imposed tariffs on steel imports from a number of countries including China, Japan, Russia, Brazil, Indonesia and South Korea.
Table 1.1: EU exports and imports of goods to and from China 2010-2015 (billions of euros)
Source: Eurostat
Table 1.2: EU exports and imports of services to and from China 2010-2015 (billions of euros)
How does the EU's balance of trade in goods with China in 2015 compare with the balance in 2010?
How does the EU's services balance in trade with China differ from its balance of trade in goods with China over the period 2010 to 2015?
Outline why the US would claim that subsidies to Chinese steel makers give them an 'unfair advantage in world markets'.
With the help of a diagram explain how the imposition of import tariffs on steel will protect domestic producers of steel in India.
Explain who could lose in China as a result of the imposition of tariffs on Chinese steel.
Explain who could lose in the EU as a result of the imposition of tariffs on Chinese steel.
With reference to the principle of comparative advantage, discuss whether the increase in exports of EU services to China could justify free trade in the market for steel.
In which economic context is the term 'protectionism' usually applied?
the protection of consumers against excessive prices
the protection of employees against exploitation by multinational companies
the protection of local producers against foreign competitors
the protection of the foreign exchange rate against currency speculators
The Fiji economy: a positive outlook
Fiji is a small island country in the Pacific with a population of 860000 . In 2014 its economy was reported to be continuing to grow steadily. It remained on course for a fifth consecutive year of expansion, boosted by high tourist arrivals and visible export earnings, particularly from sugar. The factors that were expected to restrict growth in 2015 included ongoing dry weather conditions causing lower output of agricultural goods, with the exception of sugar.
Table 1: Selected economic indicators for Fiji
Consumption remained strong in the first five months of 2014, and imports of consumer goods, mainly vehicles, rose by 15.6%. Personal remittances increased, boosting consumption expenditure.
The tourism sector - Fiji's main source of foreign exchange - continued to perform strongly. Visitor arrivals increased by 4.0% year-on-year, with 4.6% more visitors from Australia and 11.6% more from New Zealand, but there was a significant fall in visitor arrivals from Japan.
Sugar production increased, aided by government investments in new technology that improved efficiency of production and reduced price.
Despite higher growth, inflationary pressures were eased by declining international commodity prices. However, annual average inflation in 2014 was not expected to fall below 3.0%, as economic activity was expected to revive. In addition, continuing dry weather was affecting the food supply.
Despite the positive growth outlook, increased investment is needed to improve productivity and address supply-side capacity constraints.
How and where would revenue from tourist arrivals in Fiji be recorded in Fiji's balance of payments?
Russia's economic problems are getting worse
Russia's currency, the rouble (RUB), has been falling rapidly in value.
Content removed due to copyright restrictions
An index of the real exchange rate fell from a value of 100 in 2010 to 75.8 in 2015 and this should have the effect of eventually helping to encourage exports.
Table 1.1: Selected economic indicators for Russia 2013-2015
Source: Adapted from The World Fact Book
Explain the difference between a nominal exchange rate and a real exchange rate.
Explain, using a demand and supply diagram, how the fall in the price of a barrel of oil contributed to a decline in the value of the rouble.
Analyse the likely impact the depreciation of the rouble could have on the Russian economy.