Protectionism and business A2

[Maximum number: 20]

Extract F European Union (EU) steps up pressure to remove trade barriers According to a report by the European Commission, 66 countries, including many having trade deals with the EU, have introduced unjustified trade barriers. These barriers include health controls, customs administration fees and limits on the foreign ownership of companies. Most countries have steadily reduced import tariffs but often replaced them with non-tariff barriers that exclude foreign goods and services.

The EU found 462 barriers among 66 countries at the end of 2020. China had the largest number with 40, followed by Indonesia and the US. But there are problems even with longstanding partners. Norway, which is in the EU single market for goods, maintains high tariffs on processed foods.

Extract G United States (US) Has Passed Far More Trade Restrictions Than Its Peers The number of US trade barriers has surged past those of other advanced economies. Since 2008, the US has passed almost 800 protectionist measures, compared to 357 passed in the United Kingdom and 390 passed in Germany. Other advanced economies, like Canada (199) and Australia (174) passed fewer of these restrictions.

Number of protectionist measures passed in selected countries between 2008 and 2019

Figure for Question 4.3.1.4e - Protectionism and business question 1 — Edexcel A-Level Business A2

Extract A adapted from: https://www.just-style.com/news/peru-apparel-industry-welcomes-tariff-barrier-to-block-import- surge/

Extract B adapted from: https://knowledge.wharton.upenn.edu/article/branding-lessons-from-inca-kola-the-peruvian- soda-that-bested-coca-cola/

Extract C adapted from: https://gulfbusiness.com/how-peru-became-one-of-the-biggest-markets-for-fdi-in-south- america/

Extract D adapted from: https://gulfbusiness.com/how-peru-became-one-of-the-biggest-markets-for-fdi-in-south- america/

Extract E adapted from: https://www.bangkokpost.com/business/2321562/inside-thailands-ev-revolution

Extract F adapted from: https://www.ft.com/content/b988cf7d-baf6-49ca-97c2-1ba16c6bdd10

Extract G adapted from: https://www.statista.com/chart/20139/number-of-trade-restrictions-selected-countries/

QS9 Interpret, apply and analyse information in written, graphical and numerical forms.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- Protectionism means the use of trade barriers which are anything that slows or halts free trade. Examples include tariffs, quotas, subsidies and regulation
- Tariffs increase the price of an imported good reducing sales and
making it less competitive against domestic products
- Quotas and other barriers have a similar impact in decreasing supply which pushes the price up and lowers sales
- Protectionism means global businesses find it harder to successfully penetrate overseas markets
- Extract F shows that the European Commission has reported a significant increase in the amount of trade barriers in 2020 even amongst those with EU trade deals
- Extract G shows that this is part of a longer-term trend between 2008 and 2019, with the US passing 790 trade restrictions in this time
- This would suggest that trade barriers are becoming more widespread and damaging to global businesses
- Trade barriers have a disproportionate effect on smaller businesses that
lack the economies of scale or lobbying power of larger ones
- Protectionism can lead to retaliatory measures which have a damaging effect on all businesses, not just those trying to export but on the costs and availability of raw materials and resources that are imported by a global business and used for production
- However, domestic businesses can flourish if protected by trade barriers. Infant industries can grow and established ones can expand
- The impact of trade barriers may not be too great on exporters if PED is
inelastic. BMW and Jaguar cars sell well in the USA despite trade barriers increasing
- Any loss of foreign sales may be compensated by increased domestic sales if they are protected by trade barriers erected in retaliation
- The impact on a business depends on the size and severity of the trade barriers and the length of time they remain in place
- The impact may be reduced if negotiations by the WTO or the EU succeed in reducing or removing the barriers
- A business can benefit from a domestic subsidy enabling it to be more
competitive in global markets
- China is often accused of using excessive subsidies to promote its
industries and agricultural output. Chinese businesses gain at the expense of others
- Protectionism is usually considered to be detrimental. Most economists argue that countries, businesses and consumers would be better off with free trade. However, as shown by Extracts F and G making that happen is not easy

Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-4

Isolated elements of knowledge and understanding.

Weak or no relevant application of business examples.

An argument may be attempted, but will be generic and fail to connect causes and/or consequences.

Level 2

5-8

Elements of knowledge and understanding, which are applied to the business example.

Arguments and chains of reasoning are presented but connections between causes and/or consequences are incomplete. Attempts to address the question.

A comparison or judgement may be attempted but it will not successfully show an awareness of the key features of business behaviour or business situation.

Level 3

9-14

Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.

Uses developed chains of reasoning, so that causes and/or consequences are complete, showing an understanding of the question.

Arguments are well developed.

Quantitative and/or qualitative information is introduced in an attempt to support judgements, a partial awareness of the validity and/or significance of competing arguments and may lead to a conclusion.

Level 4

15-20

Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.

Uses well-developed and logical, coherent chains of reasoning, showing a range of causes and/or effect(s).

Arguments are fully developed.

Quantitative and/or qualitative information is/are used well to support judgements. A full awareness of the validity and significance of competing arguments/factors, leading to balanced comparisons, judgements and an effective conclusion that proposes a solution and/or recommendations.

4.3.1.4e - Protectionism and business question 1