Pearson Edexcel · A-Level · Economics B
Course version: 9EB0 · Version from Sept 2015
Trade and growth: a) Increasing trade liberalisation
Trade liberalisation involves the removal or reduction of barriers to international trade, such as tariffs and quotas, allowing goods and services to flow more freely between countries.
Checked against the Pearson Edexcel 9EB0 specification (opens in a new tab) on .
- Point 1 of 4
- 4 key terms
Study notes
From the checked teaching notes for this specification point.
The idea
Trade liberalisation involves the removal or reduction of barriers to international trade, such as tariffs and quotas, allowing goods and services to flow more freely between countries. This process is often facilitated by the WTO and free trade agreements. By lowering import taxes, trade liberalisation reduces costs for domestic consumers and businesses importing raw materials. It also opens foreign markets for domestic exporters, promoting economic growth. For example, removing a tariff on imported steel lowers production costs for domestic car manufacturers. However, it exposes domestic industries to intense global competition, which can lead to structural unemployment if local firms are unable to compete with cheaper foreign imports.
What earns the marks
- Defines trade liberalisation as the reduction of trade barriers like tariffs and quotas.
- Explains how liberalisation lowers prices and increases choice for consumers.
- Analyses the benefits to domestic firms, such as cheaper imported raw materials and access to new export markets.
- Evaluates the drawbacks, including the risk of structural unemployment in uncompetitive domestic industries.
Common mistakes and how to put them right
Confusing trade liberalisation with deregulation of domestic markets.
Put it right: Trade liberalisation specifically refers to reducing barriers to international trade, not domestic rules.
Assuming trade liberalisation benefits all domestic firms equally.
Put it right: Recognise that while exporters and importers of raw materials benefit, domestic firms competing directly with cheap imports may suffer.
Stating that trade liberalisation eliminates all trade barriers.
Put it right: Liberalisation is the process of reducing barriers; it does not necessarily mean all protectionist measures are completely removed.
Exam tips
- Use specific examples of trade barriers, such as tariffs or quotas, when explaining how liberalisation works.
- Link trade liberalisation to macroeconomic objectives, particularly economic growth and employment.
- When evaluating trade liberalisation, contrast the benefits to consumers with the potential negative impacts on domestic producers.
Try the lesson
The start of the Trade and growth: a) Increasing trade liberalisation lesson, made from checked teaching notes for this specification point.
Have a go first
Which of the following policies represents an increase in trade liberalisation?
Listen
Trade liberalisation involves the removal or reduction of barriers to international trade, such as tariffs and quotas, allowing goods and services to flow more freely between countries. This process is often facilitated by the WTO and free trade agreements. By lowering import taxes, trade liberalisation reduces costs for domestic consumers and businesses importing raw materials. It also opens foreign markets for domestic exporters, promoting economic growth. For example, removing a tariff on imported steel lowers production costs for domestic car manufacturers. However, it exposes domestic industries to intense global competition, which can lead to structural unemployment if local firms are unable to compete with cheaper foreign imports. A strong answer earns marks for these points. Defines trade liberalisation as the reduction of trade barriers like tariffs and quotas. Explains how liberalisation lowers prices and increases choice for consumers. Analyses the benefits to domestic firms, such as cheaper imported raw materials and access to new export markets. Evaluates the drawbacks, including the risk of structural unemployment in uncompetitive domestic industries. A common slip: Confusing trade liberalisation with deregulation of domestic markets. Instead, Trade liberalisation specifically refers to reducing barriers to international trade, not domestic rules. Exam tip: Use specific examples of trade barriers, such as tariffs or quotas, when explaining how liberalisation works.
Key words
Say what each word means before you turn the card.
Trade liberalisation
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Tariffs
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Quotas
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Structural unemployment
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See every definition
- Trade liberalisation
- The removal or reduction of barriers to international trade, such as tariffs and quotas, allowing goods and services to flow more freely between countries.
- Tariffs
- Import taxes that, when lowered through trade liberalisation, reduce costs for domestic consumers and businesses importing raw materials.
- Quotas
- Barriers to international trade that trade liberalisation removes or reduces, alongside tariffs.
- Structural unemployment
- Arises when domestic industries exposed to intense global competition are unable to compete with cheaper foreign imports.
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