economics international trade essay

Economic Essays Grade 12

Grade 12 Economic Essays for the Next Three-Year Cycle (2021-2023)

Discuss in detail the markets within the FOUR-SECTOR model (Circular Flow)

Discuss in detail 'The new economic paradigm'/Explain the 'smoothing of cycles (Business Cycles)

Discuss in detail the features underpinning forecasting (Business Cycles)

Discuss in detail the main objectives of the public sector in the economy (Public Sector)

Discuss in detail the reason(s) for public sector failure (link them to typical problems experienced through public sector provisioning) (Public Sector)

Discuss in detail the reasons for international trade (Foreign Exchange Markets)

Discuss in detail export promotion (Protectionism and FreeTrade)

Discuss in detail the arguments in favour of protectionism (Protectionism and Free Trade)

Discuss in detail the demand-side approach in promoting growth and development in South Africa (Growth and development)

Discuss in detail the following South African growth and development policies and strategic initiatives (Growth and development)

Discuss in detail South Africa's initiaties (endeavours) in regional development (Industrial Development Policies)

Discuss in detail the following economic indicators (Economic and Social Performance Indicators

Discuss in detail the following social indicators (Economic and Social Performance Indicators)

Discuss in detail the various equilibrium positions with the aid of graphs-PERFECT MARKET (Perfect Market)

Discuss the monopoly in detail (with/without the aid of graphs) (Imperfect Market)

Examine the oligopoly in detail (Imperfect Market)

Compare and contrast any TWO types of market structures

Discuss in detail how the following factors lead to the misallocation of resources in the market (Market Failures)

Discuss in detail state intervention as a consequence of market failures, with the aid of relevant graphs (Market Failures)

Discuss in detail the consequences of inflation (Inflation)

Discuss in detail the measures to combat demand-pull and/or cost-push inflation (Inflation)

Examine in detail the effects of tourism (Tourism)

Examine in detail the benefits of tourism (Tourism)

Discuss in detail how the government can ensure sustainable development (Environmental Sustainability)

Discuss in detail the following problems and the international measures taken to ensure sustainable development (Environmental Sustainability)

ESSAYS FOR THE NEXT THREE-YEAR CYCLE (2021-2023)

Macroeconomics- paper1.

Discuss in detail the markets within the FOUR-SECTOR model (Circular Flow) INTRODUCTION The economy of a country is regarded as an open economy because of the presence of households, producers, government, foreign sector and financial sector as active participants in the economy. Markets link the participants in the economy 🗸🗸 [Max 2]

BODY: MAIN PART PRODUCT / GOODS/ OUTPUT MARKET🗸

These are the markets for consumer goods and services🗸🗸
Goods are defined as tangible items, like food, clothes, cars, etc. that satisfies some human wants or needs🗸🗸
Buying and selling of goods that are produced in markets e.g. 🗸🗸
Capital Goods market for trading of buildings and machinery🗸🗸
Consumer goods market for trading of durable consumer goods, semi-durable consumer goods and non-durable consumer goods. 🗸🗸
Services are defined as non-tangible actions and include wholesale and retail, transport and financial markets. 🗸🗸

FACTOR / RESOURCE/ INPUT MARKETS🗸

Households sell factors of production on the markets: rent for natural resources, wages for labour interest for capital and profit for entrepreneurship🗸🗸
The factor market includes the labour, property and financial markets. 🗸🗸
The market where services of factors of production are traded e.g. labour is hired and capital is borrowed – these services earn wages, interest, rent and profits🗸🗸

FINANCIAL MARKETS🗸

They are not directly involved in the production of good and services, but act as a link between households , the business sector and other participants with surplus finds🗸🗸
E.g. banks, insurance companies and pension funds🗸

MONEY MARKETS🗸

In the money markets short term loans, and very short term funds are saved and borrowed by consumers and business enterprises 🗸🗸
Products sold in the market are bank debentures, treasury bills and government bonds 🗸🗸
The simplest form exists when parties make demand and short-term deposits and borrow on short term 🗸🗸
The SARB is the key institution in the money market🗸🗸

CAPITAL MARKETS🗸

In the capital markets long term funds are borrowed and saved by consumers and the business sector🗸🗸
The Johannesburg Security Exchange (JSE) is a key institution in the capital 🗸🗸
Products sold in this market are mortgage bonds and shares🗸🗸

FOREIGN EXCHANGE MARKETS🗸

On the foreign exchange markets businesses buy/ sell foreign currency to pay for imported goods and services🗸🗸
These transactions occur in banks and consists of electronic money transfers from one account to another🗸🗸
The leading centres/ most important foreign exchange markets are in London, New York and Tokyo 🗸🗸
e.g. traveller’s cheques to travel abroad🗸
Flows of private and public goods and services are real flows and they are accompanied by counter flows of expenditure and taxes on the product market🗸🗸
Factor services are real flows and they are accompanied by counter flows of income on the factor market🗸🗸
Imports and exports are real flows and are accompanied by counter flows of expenditure and revenue on the foreign exchange market🗸🗸[Max 26]
A change in investment of R 10m will result in a change in income of R 20m🗸🗸
An increase in investment causes the expenditure function to shift upwards from C1 to C2 so that C1 is parallel to C2🗸🗸
The effect of the increase in investment is that the total expenditure will increase from R 20m to R 30m🗸🗸
The increase in the value of output (Y) is greater than the increase in the expenditure (E) 🗸🗸 (Explanation must comply with the figures supplied in the graphical presentation) [Max 4] [Max 10]

CONCLUSION The circular flow ensures continued interdependence and coordination of the economic activities in the economy / markets are critically important institutions in our economic system, because they regulate the supply and demand and safeguard price stability and general business confidence. 🗸🗸 [Any other relevant conclusion] [Max 2]

INTRODUCTION The new economic paradigm in terms of the smoothing of business cycles discourages monetary policy makers from using monetary and fiscal policies to fine tune the economy but rather encourages achieving stability through sound long term decisions relating to demand and supply in the economy/smoothing out the painful part of economic down-fall that is part of the market economy🗸🗸 (Accept other relevant definition/description of smoothing/new economic paradigm). [Max 2]

BODY: MAIN PART The new economic paradigm is embedded in the demand and supply side policies. 🗸🗸

Demand-side policies

It focuses on aggregate demand in the economy🗸🗸
When households, firms and the government spend more, demand in the economy increases. 🗸🗸
This makes the economy grow but lead to inflation.🗸🗸
Aggregate demand increases more quickly than aggregate supply and this causes price increases. 🗸🗸
If the supply does not react to the increase in demand, prices will increase. 🗸🗸
This will lead to inflation (a sustained and considerable in the general price level) 🗸🗸

Unemployment:

Demand-side policies are effective in stimulating economic growth. 🗸🗸
Economic growth can lead to an increase in demand for labour. 🗸🗸
As a result more people will be employed and unemployment will increase. 🗸🗸
As unemployment decreases inflation is likely to increase. 🗸🗸
This relationship between unemployment and inflation is illustrated in the Phillips curve. 🗸🗸
The PC curve shows the initial situation. A is the point of intersection of the PC curve with the x- axis. It shows the natural rate of unemployment, for instance 14%🗸🗸
At point A inflation rate is zero. 🗸🗸
If unemployment falls to C for instance, 8%, inflation caused by wage increases is at 6%.🗸🗸
If unemployment increases from C to B to A, inflation falls from 6% to 2% to 0%.🗸🗸

Supply-side policies Reduction of costs 🗸

Infrastructural services: reasonable charge and efficient transport, communication, water
services and energy supply. 🗸🗸
Administrative costs: these costs include inspection, reports on applications
of various laws, regulations and by-laws, tax returns and returns providing statistical
information.
It adds to costs and businesses carry a heavy burden 🗸🗸
Cash incentives: it includes subsidies for businesses to locate in neglected areas where unemployment is high and compensation to exporters for certain costs they
incurred in development of export markets. 🗸🗸

Improving the efficiency of inputs 🗸

Tax rates: low tax rates can serve as an incentive to workers. It will improve the productivity and output. 🗸🗸
Capital consumption: replacing capital goods regularly creates opportunities for businesses to keep up with technological development and better outputs🗸🗸
Human resource development: to improve the quality of manpower by improving health care, education and training. 🗸🗸
Free advisory service: these promote opportunities to export. 🗸🗸

Improving the efficiency of markets 🗸

Deregulation: removal of laws, regulations and by-laws and other forms of government controls makes the market free. 🗸🗸
Competition: encourages the establishment of new businesses 🗸🗸
Levelling the play field: private businesses cannot compete with public enterprises 🗸🗸 Answers must be in full sentences and well described with examples to be able to obtain 2 marks per fact. Learners should be awarded 1 mark per heading or sub-heading to a maximum of 8 marks. (8 x 1) (8) [Max 26]

Explanation: The above graph shows:

Aggregate demand (AD) and aggregate supply (AS) are in equilibrium at point C. 🗸🗸
If aggregate demand is stimulated so that it moves to AD1 and aggregate supply responds promptly and relocates at AS1; a larger real output becomes available without any price increases. 🗸🗸
Supply is often sticky and fixed in the short term. 🗸🗸
Therefore, if aggregate demand increases to AD1 and aggregate supply does not respond, intersection is at point F. Real production increases but so does the price, in other words, with more inflation. 🗸🗸
The aggregate demand locates at any position to the left of AS1 inflation prevails. 🗸🗸
The solution is to create conditions that ensure supply is more flexible. 🗸🗸
If the cost of increasing production is completely flexible, a great real output can be supplied at any given price level. 🗸🗸 [Max 10]

CONCLUSION It is clear from the discussion above that it is critically important to manage the aggregate supply and demand to ensure stability in the economy. 🗸🗸 [Accept any relevant higher order conclusion] [Max 2]

INTRODUCTION Accurate prediction is not possible in Economics. The best the economists can do is to try and forecast what might happen. There are a number of techniques available to help economists to forecast business cycles, e.g. economic indicators 🗸🗸 OR Successive periods of contraction and expansion of economic activities 🗸🗸 [Accept any other relevant introduction] [Max 2]

BODY: MAIN PART Business cycle indicators Leading economic indicators 🗸

These are indicators that change before the economy changes / coincide with the reference turning point 🗸🗸
They give consumers, business leaders and policy makers a glimpse (advance warnings) of where the economy might be heading. 🗸🗸
Peak before a peak in aggregate economic activity is reached.
Most important type of indicator in helping economists to predict what the economy will be like in the future 🗸🗸
When these indicators rise, the level of economic activities will also rise in a few months' time/an upswing 🗸🗸
E.g. job advertising space/inventory/sales ratio🗸

Coincident economic indicators🗸

They move at the same time as the economy / if the turning point of a specific time series variable coincides with the reference turning point🗸🗸
It indicates the actual state of the economy🗸🗸
E.g. value of retail sales. 🗸
If the business cycle reaches a peak and then begins to decline, the value of retail sales will reach a peak and then begin to decline at same time🗸🗸

Lagging economic indicators🗸

They do not change direction until after the business cycle has changed its direction🗸🗸
They serve to confirm the behaviour of co-incident indicators🗸🗸
E.g. the value of wholesalers' sales of machinery🗸
If the business cycle reaches a peak and begins to decline, we are able to predict the value of new machinery sold🗸🗸

Composite indicator🗸

It is a summary of the various indicators of the same type into a single value🗸🗸
Their values are consolidated into a single value , if this is done we find a value of a composite leading , coincident and lagging indicator🗸🗸 Accept ONE example from the table below:

This is the time that it takes for a business cycle to move through one complete cycle (measured from peak to peak) 🗸🗸
It is useful to know the length because the length tends to remain relatively constant over time.🗸🗸
If a business cycle has the length of 10 years it can be predicted that 10 years will pass between successive peaks or troughs in the economy. 🗸🗸
Longer cycles show strength. 🗸🗸
Cycles can overshoot. 🗸🗸

Ways to measure lengths:

Crisis to crisis 🗸🗸
Historical records 🗸🗸
Consensus on businesses experience 🗸🗸

Amplitude 🗸

It is the difference between the total output between a peak and a trough. 🗸🗸
It measures the distance of the oscillation of a variable from the trend line / It is the intensity (height) of the upswing and downswing (contraction and expansion) in economic activity 🗸🗸
A large amplitude during an upswing indicates strong underlying forces – which result in longer cycles 🗸🗸
The larger the amplitude the more extreme the changes that may occur / extent of change 🗸🗸
E.g. During the upswing inflation may increase from 5% to 10%. (100% increase) 🗸🗸
A trend is the movement of the economy in a general direction. 🗸🗸
It usually has a positive slope because the production capacity of the economy increases over time 🗸🗸
Also known as the long term growth potential of the economy. 🗸🗸
The diagram above illustrates an economy which is growing – thus an upward trend (positive slope) 🗸🗸
Trends are useful because they indicate the general direction in which the economy is moving – it indicates the rate of increase or decrease in the level of output🗸🗸

Extrapolation 🗸

Forecasters use past data e.g. trends and by assuming that this trend will continue, they make predictions about the future🗸🗸
Means to estimate something unknown from facts or information that are known 🗸🗸
if it becomes clear that the business cycle has passed through a trough and has entered a boom phase, forecasters might predict that the economy will grow in the months that follow 🗸🗸
It is also used to make economic predictions in other settings e.g. prediction of future share prices🗸🗸

Moving average 🗸

It is a statistical analytical tool that is used to analyse the changes that occur in a series of data over a certain period of time / repeatedly calculating a series of different average values along a time series to produce a smooth curve 🗸🗸
The moving average could be calculated for the past three months in order to smooth out any minor fluctuations 🗸🗸
It is calculated to iron out (minimize) small fluctuations and reveal long-term trends in the business cycle🗸🗸 Answers must be in full sentences and well described with examples to be able to obtain 2 marks per fact. Learners should be awarded 1 mark per 8 headings and examples. [8 x 1=8] [Max 26]

BODY: ADDITIONAL PART

An expansionary monetary policy is implemented when the economy is in recession in order to stimulate economic activities. 🗸🗸
Interest rates can be reduced to encourage spending. 🗸🗸
Households and firms can borrow more and spend more. 🗸🗸
The increased spending increases the level of economic activity. 🗸🗸
Investment will increase and more factors of production will be employed. 🗸🗸
Higher levels of production, income and expenditure will be achieved. 🗸🗸
If the supply of goods and services does not increase in line with an increase in demand, inflation will increase. 🗸🗸
Inflation can be curbed by reducing money supply and availability of credit. 🗸🗸
To dampen demand at the peak the government will be able to reduce the money supply by increasing interest rates. 🗸🗸
Selling government bonds and securities (open market transactions) and reduce the supply of money in circulation. 🗸🗸
Increase the cash reserve requirements to manipulate money creation activities of banks. 🗸🗸
Persuade banks to decrease lending (moral suasion) 🗸🗸
To devaluate the exchange rate (exchange rate policy) 🗸🗸 [Max 10]

CONCLUSION It remain clear that business cycles must be clearly monitored through the indicators available, policy makers must act quickly by using monetary and fiscal instruments in order to prevent instability in the economy. 🗸🗸 [Accept any other relevant conclusion] [Max 2]

INTRODUCTION: The government provides goods and services that are under supplied by the market and therefore plays a major role in regulating economic activity and guiding and shaping the economy. 🗸🗸 [Max 2]

BODY: MAIN PART Objectives:

Economic growth 🗸

Refer to an increase in the production of goods and services 🗸🗸
Measured in terms of Real GDP 🗸🗸
For economic growth to occur, the economic growth rate must be higher than Population growth 🗸🗸
Growth and development in a country benefit its citizens because it often leads to a higher standard of living 🗸🗸

Full employment 🗸

It is when all the people who want to work, who are looking for a job must be able to get a job 🗸🗸
High levels of employment is the most important economic objective of the government 🗸🗸
The unemployment rate increased over the past few years 🗸🗸
Informal sector activities must be promoted because it is an area where employment increase 🗸🗸

Exchange rate stability 🗸

The economy must be manage effectively and effective Fiscal and monetary policy must be used to keep the exchange rate relatively stable 🗸🗸
Depreciation and Appreciation of the currency create uncertainties for producers and traders and should be limited. These uncertainties must be limited 🗸🗸
The SARB changed the Exchange rate from a Managed floating to a free floating exchange rate 🗸🗸

Price stability 🗸

Stable price causes better results in terms of job creation and economic growth 🗸🗸
The SARB inflation target is 3% - 6% and they are successful in keeping inflation within this target 🗸🗸
Interest Rates, based on the Repo Rate are the main instruments used in the stabilisation policy 🗸🗸
The stable budget deficit also has a stabilizing effect on the inflation rate 🗸🗸

Economic equity 🗸

Redistribution of income and wealth is essential 🗸🗸
South Africa uses a progressive income tax system – taxation on profits, taxation on wealth, capital gains tax and taxation on spending, are used to finance free services 🗸🗸
Free social services are basic education; primary health and to finance basic economic services 🗸🗸
E.g. Cash Grant to the poor, e.g. child grants and cash grants to vulnerable people, e.g. disability grants 🗸
Progressive taxation means that the higher income earners pay higher/more taxation 🗸🗸 [Max 26]
Learner responses can be positive or negative.
Follow the argument and see if the learner can produce enough evidence to support his/her answer.

Economic Growth:

SA targets 4–5% economic growth. Previously SA had a 5% growth rate 🗸🗸
In recent years the growth rate decreased steadily (presently below 3%) 🗸🗸

Full Employment:

Compared to foreign countries unemployment is very high. (Expanded – over 30%) 🗸🗸
Efforts by SA government to reduce these figures includes the GEAR strategy, focus on small business enterprises, Public Works Programme 🗸🗸

Exchange rate stability:

SA now operates on a free floating exchange rate system in line with international benchmarks 🗸🗸
Unfortunately our currency has lost its value, with a general trend of depreciation over the last few years 🗸🗸

Price stability:

For the past few years South Africa has managed to remain within the 3–6% target 🗸🗸
The current increase in the repo rate has put constraints on the inflation rate 🗸🗸

Economic equity:

Economic equity has improved (BEE, affirmative action, gender equity) and led to an improvement in economic equity 🗸🗸 [Any 5 x 2] [Max 10]

CONCLUSION: While some successes have been achieved by government, the fulfilling of some of the objectives are compromised by factors like lack of accountability, corruption, budgeting, nepotism and incompetence. 🗸🗸 [Any relevant conclusion] [Max 2]

INTRODUCTION The government responds to market failures by establishing and maintaining state owned enterprises to provide public goods and services 🗸🗸 [Any other relevant introduction] [Max 2]

BODY: MAIN PART

It is required to give an explanation of one's decisions, actions and expenditures over a period of time 🗸🗸
There are mechanisms for evaluating government's economic and financial performance 🗸🗸
That the desired quantities and quality of goods and services for which taxes are raised are delivered 🗸🗸
That monopolies, corruption, nepotism, incompetence and apathy does not occur 🗸🗸
Two important elements of accountability is participation and transparency🗸🗸
Ministerial responsibilities, i.e. the ministers of government departments are responsible for decisions and actions and expenditures 🗸🗸
Parliamentary questioning arises and members of the government departments have to respond 🗸🗸
The national treasury is responsible for treasury control 🗸🗸
The auditor-general reports annually in writing on each government department🗸🗸
Public goods are efficiently provided if Pareto efficiency is achieved 🗸🗸
That is if resources are allocated in such a way that no one can be made better off without making someone else worse off 🗸🗸
Bureaucracy the official rules and procedures. 🗸🗸/insensitivity to the needs of their clients 🗸🗸
Incompetence- the lack of skill or ability to do a task successfully🗸🗸/May have improper qualifications/or an attitude of apathy 🗸🗸
Corruption- the exploitation of a person's position for private gain /taking bribes, committing fraud, nepotism 🗸🗸
State-owned enterprises do not operate according to the forces of supply and demand 🗸🗸
It becomes thus very difficult for state-owned enterprises to assess needs and they are thus prone to under- or over-supplying public goods and services 🗸🗸
The census and other household surveys as well as local government structures provide this type of information 🗸🗸
Since resources are scarce, government must then decide which needs and whose needs are to be satisfied 🗸🗸
In the private sector houses are built according to the price that people are able and willing to pay 🗸🗸
In the public sector housing is regarded as a social responsibility and authorities supply them according to the needs of people 🗸🗸
In a market economy prices are determined by supply and demand 🗸🗸
The objectives of firms are to maximise their profits and they usually set prices to achieve this objective 🗸🗸
Government does not pursue the profit maximisation objective 🗸🗸
Government takes into account certain social, economic, political and environmental conditions as well as public opinion 🗸🗸
Free-of-charge services- this is met from taxes 🗸🗸 and applies to most community goods and collective goods 🗸🗸 (e.g.) defence, police whereby charges and toll fees are levied 🗸
User-charges 🗸 option to charge depends on technical reasons 🗸🗸 (e.g.) cost of providing a double lane road could be recovered by toll charges 🗸 Economic reasons 🗸 such as services like water and electricity 🗸 that have a zero price 🗸 political reasons 🗸 where income distribution is significantly unequal, administrative rationing according to need takes place 🗸🗸 (e.g.) public health and education 🗸
Direct and indirect subsidies direct subsidies are used to cover part of the costs 🗸🗸 (e.g.) urban bus service 🗸 and an indirect subsidy is used to write off accumulated losses or deficits 🗸🗸
Standing charges -called availability charges 🗸🗸 (e.g.) water and electricity 🗸 standing charges goes to meet fixed costs and the price per unit consumed covers variable costs 🗸🗸
Price discrimination - different users have different elastic ties of demand for a good 🗸🗸 (e.g.) commercial and manufacturing businesses pay higher rates than households and they pay on a sliding scale🗸🗸
State-owned enterprises that either render a service or when an existing enterprise is nationalised 🗸🗸
They focus on making a profit and maximizing cost at the expense of the needs of some groups 🗸🗸 (e.g.) Iscor 🗸 SABC, 🗸SAA, Spoornet 🗸
refers to the process whereby state-owned enterprises and state-owned assets are handed over or sold to private individuals 🗸🗸
cost of maintaining and managing state-owned enterprises are high which can lead to higher taxes and larger public debt 🗸🗸
State-owned enterprises are not run as efficiently as private enterprises 🗸🗸
Nationalisation is the process whereby the state takes control and ownership of privately owned assets and private enterprises 🗸🗸
It includes contracting of services, public-private partnerships, increasing competitiveness🗸🗸 [Max 26]

ADDITIONAL PART Possible problems in your community or elsewhere

Lack of drinking water due to burst pipes 🗸🗸
Lack of electricity due to lack of infrastructure (load shedding) 🗸🗸
Lack of schooling – no buildings available – lack of maintenance 🗸🗸
Lack of health services due to lack of staff, infrastructure, strikes 🗸🗸
Lack of adequate housing (RDP) 🗸🗸 [Max 10 marks - List of examples max 5 marks] [Accept any other relevant answer]

CONCLUSION If the above problems are not dealt with timeously by government, government will continue to fail its people in terms of service delivery, seeing many protests occurring regularly 🗸🗸 [Any other relevant higher order conclusion] [Max 2]

INTRODUCTION International trade can be defined as the exchange of goods and services between countries globally. 🗸🗸 These trade agreements are negotiated by protocols and agreement due to the uneven distribution of natural resources globally. 🗸🗸

BODY-MAIN PART The main reasons for international trade.

Demand reasons The size of the population impacts demand.

If there is an increase in population growth, it causes an increase in demand, as more people’s needs must be satisfied. 🗸🗸
Local suppliers may not be able to satisfy this demand. 🗸🗸

The population’s income levels effect demand.

Changes in income cause a change in the demand for goods and services. 🗸🗸 • An increase in the per capita income of people in more disposable income that can be spent on local goods and services, some of which may then have to be imported. 🗸🗸

An increase in the wealth of the population leads to greater demand for goods.

People have access to loans and can spend more on luxury goods, many of which are produced in other countries. 🗸🗸

Preferences and tastes can play a part in the determining of prices,

E.g. customers in Australia have a preference for a specific product which they do not produce and need to import and it will have a higher value than in other countries. 🗸🗸

The difference in consumption patterns is determined

By the level of economic development in the country, e.g. a poorly developed country will have a high demand for basic goods and services but a lower demand for luxury goods. 🗸🗸

Supply reasons Natural resources are not evenly distributed

Across all countries of the world. 🗸🗸
They vary from country to country and can only be exploited in places where these resources exist. 🗸🗸

Climatic conditions

Make it possible for some countries to produce certain goods at a lower price than other countries, e.g. Brazil is the biggest producer of coffee. 🗸🗸

Labour resources

Differ in quantity, quality and cost between countries. 🗸🗸
Some countries have highly skilled, well-paid workers with high productivity levels, e.g. Switzerland. 🗸🗸

Technological resources

Are available in some countries that enable them to produce certain goods and services at a low unit cost, e.g. Japan. 🗸🗸

Specialisation in the production

Certain goods and services allows some countries to produce them at a lower cost than others, e.g. Japan produces electronic goods and sells these at a lower price. 🗸🗸

Capital allows developed countries

Enjoy an advantage over underdeveloped countries. 🗸🗸
Due to a lack of capital, some countries cannot produce all the goods they require themselves. 🗸🗸

ADDITIONAL PART

Buying and selling goods and services from other countries: 🗸🗸
The purchase of goods and services from abroad that leads to an outflow of currency from SA- Imports (M). 🗸🗸
The of goods and services to buyers from other countries leading to an inflow of currency to SA – Exports (X) 🗸🗸
Different factor endowments mean some countries can produce goods and services more efficiently than others- specialisation is therefore possible: 🗸🗸

Absolute Advantage:

Where one country can produce goods with fewer resources than other. 🗸🗸

Comparative Advantage:

Where one country can produce goods at a lower opportunity cost it sacrifices less resources in production. 🗸🗸

CONCLUSION International trade is important of countries to survive economically, as barriers to trade would disadvantage all countries, due to their interdependency globally. 🗸🗸 [Any other relevant higher order conclusion] [Max 2]

ECONOMIC PURSUITS-PAPER 1

Discuss in detail export promotion (Protectionism and Free Trade)

INTRODUCTION Export promotion refers to measures taken by governments increase production of goods and services that can be exported. The government provides incentives to encourage production 🗸🗸 [Max 2]

BODY: MAIN PART REASONS:

Export promotion measures lower cost of production which makes it easier to compete on the international market 🗸🗸
Achieve significant export-led economic growth🗸🗸
Export enlarges production capacity of country because more and larger manufacturing industries are established. 🗸🗸
The first step to export-led economic growth is to implement policies that encourage the establishment of industries to produce goods and services for export markets🗸🗸

METHODS: Exports are promoted through: Incentives🗸

Export incentives include information on export markets, research with regard to new markets, concessions on transport charges, export credit and export credit guarantees and publicity commending successful exporters🗸🗸
This will encourage manufacturers to export an increased volume of their production🗸🗸
Trade missions help to market SA products abroad🗸🗸and supply SA companies with information about potential markets 🗸🗸

Direct Subsidies🗸

Described as direct because it involves government expenditure. 🗸🗸
Include cash payments to exporters, refunds on import tariffs and employment subsidies.
The aim is to increase the competitiveness of exporting company🗸🗸 reduce cost of production🗸🗸and explore and establish overseas markets🗸🗸

Indirect subsidies

Regarded as indirect because it results in the government receiving less revenue🗸🗸 e.g. general tax rebates,
Tax concessions on profits earned from exports or on capital invested to produce export goods, refunding
Of certain taxes e.g. custom duties on imported goods used in the manufacturing process🗸🗸
Allows companies to lower their prices and enables them to compete in international markets🗸🗸
Challenge for governments to design incentives and subsidies in such a way that prices of export goods can't be viewed as dumping prices🗸🗸

Trade neutrality 🗸

Can be achieved if incentives in favour of export production are introduced
Up to point that neutralises the impact of protectionist measures in place🗸🗸
E.g. subsidies equal to magnitude of import duties can be paid🗸

Export processing zones (EPZs) 🗸

Is free-trade enclave within a protected area –
Is fenced and controlled industrial park that falls outside
Domestic customs area, and usually located near harbour or airport 🗸🗸 NOTE : For the response with regard to the effectiveness of export promotion methods, a maximum of 5 marks can be allocated.
No limitations on size and scale since world market is very large🗸🗸
Cost and efficiency of production based on this and organised along lines of comparative advantage🗸🗸
Increased domestic production will expand exports to permit more imports and may result in backward linkage effects that stimulate domestic production in related industries🗸🗸
Exchange rates are realistic and there is no need for exchange control and quantitative restrictions🗸🗸
Value can be added to natural resources of the country 🗸🗸
Creates employment opportunities 🗸🗸
Increase in exports has positive effect on balance of payments 🗸🗸
Increase in production leads to lower domestic prices, which benefit local consumers🗸🗸

DISADVANTAGES

Real cost of production 🗸 subsidies and incentives reduce total cost of production which must be met from sales🗸🗸 real cost is thus concealed by subsidies🗸🗸products cannot compete in open market 🗸🗸
Lack of competition 🗸 businesses charge prices that are so low that they force competitors out of the market 🗸🗸
Increased tariffs and quotas 🗸can be against spirit of provisions of WTO🗸🗸overseas competitors retaliate with tariffs and quotas🗸🗸 goods are sold domestically below their real cost of production (export subsidies and dumping) 🗸🗸
Protection of labour-intensive industries 🗸 developed countries maintain high levels of effective protection for their industries that produce labour-intensive goods in which developing countries already have or can achieve comparative advantage 🗸🗸
Withdrawal of incentives often leads to closure of effected companies. 🗸🗸
Incentives often lead to inefficiencies in the production process, since companies don't have to do their best to compete🗸🗸
Can be seen as dumping 🗸🗸 [Max 26]

BODY: ADDITIONAL PART How successful is South Africa in protecting the local textile industry against foreign competition?

Not successful: 🗸 Many domestic textile manufacturers closed down due to unfair international competition 🗸🗸 Many wholesalers make use of suppliers from abroad 🗸🗸 e.g. Woolworths/Walmart🗸
Dumping still occurs – European manufacturers still dump clothing in Africa out of season at prices below cost 🗸🗸 Job losses due to a lack of protection in this industry 🗸🗸 [Accept any motivation relating to success indicators] [Max 10]

CONCLUSION South Africa's international trade policy facilitates globalisation thereby impacting positively on the balance of payment. 🗸🗸 [Accept any other relevant conclusion] [Max 2]

INTRODUCTION Protectionism refers to a deliberate policy on the part of the government to erect trade barriers, such as tariffs and quotas, in order to protect domestic industries against international competition. 🗸🗸 [Accept any other relevant definition] [Max 2]

BODY-MAIN PART Raising revenue for the government

Import tariffs raise revenue for the government. 🗸🗸
In smaller countries the tax base is often small due to low incomes of individuals and businesses. 🗸🗸
Low incomes do not provide much in the form of income taxes and therefore custom duties on imports is a significant source of income or revenue. 🗸🗸

Protecting the whole industrial base

Maintaining domestic employment. 🗸🗸
Countries with high unemployment are continuously pressured to stimulate employment creation and therefore resort to protectionism in order to stimulate industrialisation. 🗸🗸
It is thought that using protectionism the country’s citizens would purchase more domestic products and raise domestic employment. 🗸🗸
These measures on domestic employment creation at the expense of other countries, led to such measures as “beggar-my-neighbour” policies. 🗸🗸
Applying import policies is likely to reduce other countries ability to buy country’s exports and may provoke retaliation. 🗸🗸

Protecting workers

It is argued that imports from other countries with relatively low wages represent unfair competition and threaten the standard of living of the more highly paid workers of the local industries. 🗸🗸
Local industries would therefore be unable to compete because of higher wages pushing up the price levels of goods. 🗸🗸
Protection is thus necessary to prevent local wage levels from falling or even to prevent local businesses from closing down due to becoming unprofitable. 🗸🗸
Competition from low-wage countries may also reflect the fact that those countries have a comparative advantage in low-skilled labour-intensive industries. 🗸🗸

Diversifying the industrial base

Overtime countries need to develop diversified industries to prevent overspecialisation. 🗸🗸
A country relying too heavily on the export of one or a few products is very vulnerable. 🗸🗸
If a developing country’s employment and income is dependent on only one or two industries, there is the risk that world fluctuations in prices and demand and supply-side problems could results in significant fluctuations in domestic economic activity. 🗸🗸
Import restrictions may be imposed on a range of products in order to ensure that a number of domestic industries develop. 🗸🗸

Develop strategic industries

Some industries such as the iron-ore and steel, agriculture, (basic foodstuffs, such as maize), energy (fuels) and electronics (communication) among others, are regarded as strategic industries. 🗸🗸
Developing countries may feel that they need to develop these industries in order to become self-sufficient . 🗸🗸

Protecting specific industries Dumping

Foreign industries may engage in dumping because government subsidies permit them to sell at very low prices or because they are seeking to raise profits through price discrimination. 🗸🗸
The reason for selling products at lower prices may be to dispose of accumulate stocks Of the goods and as a result consumers in the importing country stand to benefit however,
Their long term objective may be to drive out domestic producers and gain control of the market and consumers
Are likely to lose out in the reduction in choice and higher prices that the exporters will be able to charge. 🗸🗸

Infant industries

Usually newly established and find it difficult to survive due to their average costs being higher than that of their well-established foreign competitors. 🗸🗸
However, if they are given protection in their early years they may be able to grow and Thereby take advantage lower their average costs and become competitive and at this point protection can be removed. 🗸🗸

Declining industries/sunset industries

Structural changes in the demand and supply of a good may severely hit an industry such industries should be permitted to go out of business gradually declining industries
Are likely to be industries that no longer have a comparative advantage and however, if they go out of business quickly there may be a sudden and large increase in unemployment. 🗸🗸
Protection may enable an industry to decline gradually thereby allowing time for resources including labour to move to other industries. 🗸🗸
Protecting domestic standards domestic regulations of food safety human rights and environmental standards have been increasingly acting as trade restrictions. 🗸🗸 [Accept any other relevant fact] [Max 26]

ADDITIONAL PART South Africa promotes exports through subsidies

Direct Subsidies

Strict screening measures should be put in place when companies apply for financial assistance. Government expenditure can provide direct financial support to domestic producers for their exports e.g. 🗸🗸
Cash grants offered to South African exhibitors to exhibit their products at exhibitions overseas. To explore new markets. 🗸🗸
Foreign trade missions to explore new markets imposition of tariffs on imports. 🗸🗸
Funds for the formation of formal export councils. 🗸🗸
Subsidies for training or employing personnel. 🗸🗸
Funds for the export market research. 🗸🗸
Product registration and foreign patent registrations. 🗸🗸
Government can refund companies certain taxes to promote exports.
These types of indirect subsidies are:
General tax rebates (Part of the cost of production can be subtracted from the tax that has been paid) 🗸🗸
Tax concessions on profits earned from exports or on capital invested to produce export goods. 🗸🗸
Refunds on import tariffs in the manufacturing process of exported goods companies often use custom duties are paid on these goods and the government refunds them. 🗸🗸 [Max 10]

CONCLUSION Most countries agree that protectionism is harmful to the economy if not well managed. Protectionism is needed especially where industries are young and need expansion or development. 🗸🗸 [Any other relevant higher order conclusion] [Max 2]

INTRODUCTION Economic growth is responsible for the overall growth of the economy, in order to enhance the well being of the economy as a whole. Whereas economic development would focus on the individual well being of the citizens of a country. [Any other relevant higher order conclusion] [Max 2]

BODY-MAIN PART Growth and Development A demand-side approach includes discretionary changes in monetary and fiscal policies with the aim of changing the level of aggregate demand. 🗸🗸

Monetary policy

Is driven by the South African Reserve Bank (SARB). 🗸🗸
It aims to stabilise prices by managing inflation. 🗸🗸

Fiscal policy

Is driven by the Department of Finance. 🗸🗸
It aims to facilitate government, political and economic objectives. 🗸🗸
A demand-side approach to economic growth and development does not only depend on fiscal and monetary policy. 🗸🗸
It is dependent on all components of aggregate demand, that is, C, I, X and G. 🗸🗸

South African approach

The South African approach uses both monetary and fiscal measures to influence aggregate demand in the economy. 🗸🗸
The South African Reserve Bank (SARB) as the central bank in South Africa formulates the monetary policy. 🗸🗸
They use the following instruments:

Interest rate changes

It is used to influence credit creation by making credit more expensive or cheaper. 🗸🗸
The exchange rate is stabilised by encouraging inflow or outflows. 🗸🗸

Open market transactions

To restrict credit the SARB sells securities. When banks buy these securities money flows from banks to the SARB. 🗸🗸
The banks have less money to lend and cannot extend as much credit as before. 🗸🗸
To encourage credit creation the SARB buys securities. Money flows into the banking system.🗸🗸

Moral suasion

The SARB consults with banks to act in a responsible manner based on the prevailing economic conditions. 🗸🗸

Cash Reserve Requirements

Banks are required to hold a certain minimum cash reserve in the central bank. 🗸🗸
Banks have a limited amount to give out as credit. 🗸🗸
South Africa’s fiscal policy is put into practice through the budgetary process. 🗸🗸
The main purpose of fiscal policy is to stimulate macroeconomic growth and employment, and ensure redistribution of wealth. 🗸🗸
The following instruments are used:

Progressive personal income tax

Higher income earners are taxed at higher tax rates. 🗸🗸
These taxes are used to finance social development. 🗸🗸
The poor benefit more than those with higher incomes. 🗸🗸

Wealth taxes

Properties are levied (taxed) according to their market values. 🗸🗸
Transfer duties are paid when properties are bought. 🗸🗸
Securities (shares and bonds) are taxed when traded. 🗸🗸
Capital gains tax is levied on gains on the sale of capital goods (e.g. properties, shares). 🗸🗸
Estate duties are paid on the estates of the deceased. 🗸🗸
These taxes are used to finance development expenditures which benefit the poor more often. 🗸🗸

Cash benefits

Old age pensions, disability grants, child support and unemployment insurance are cash grants. These are also known as social security payments. 🗸🗸
Benefits in kind (natura benefits) 🗸🗸
These include the provision of healthcare, education, school meals, protection etc. 🗸🗸
When user fees are charged, poor or low income earners pay less or nothing. 🗸🗸
Limited quantities of free electricity and water are provided. 🗸🗸

Other redistribution

Public works programmes, e.g. the Strategic Integrated Projects (SIP) provides employment subsidies and other cash and financial benefits such as training, financing and export incentives.🗸🗸

Land restitution and land redistribution

Land restitution is the return of land to those that have lost it due to discriminatory laws in the past. 🗸🗸
Land redistribution focuses on land for residential (town) and production (farm) for previously disadvantaged groups. 🗸🗸
The money for these programmes is provided in the main budget. 🗸🗸

Subsidies on properties

It helps people to acquire ownership of fixed residential properties. 🗸🗸
E.g. government’s housing subsidy scheme provides funding to all people earning less than R3 500 per month🗸🗸

CONCLUSION The demand-side approach focuses on the expansion of the demand for goods and services produced in the economy. 🗸🗸 OR To ensure economic growth, there should be an adequate and growing demand for goods and services produced in the economy. 🗸🗸

[Any other relevant higher order conclusion] [Max 2]

INTRODUCTION Different growth and development strategies have been implemented in South Africa since 1994, each aimed at addressing particular needs at the time of introduction. 🗸🗸 [Any other relevant introduction] [Max 2]

BODY-MAIN PART The Reconstruction and Development Programme (RDP)

The RDP was an integrated, coherent socio-economic policy framework that was implemented directly after our first democratic elections in 1994. 🗸🗸
It seeked to mobilise all our people and our country’s resources toward the final eradication of apartheid and the building of a democratic, non-racial and non-sexist future. 🗸🗸

The RDP was based on six principles.

an integrated and sustainable programme. 🗸🗸
a people-driven process focusing on the needs of the population. 🗸🗸
peace and security for all, aimed at a non-violent society that respects all human rights. 🗸🗸
nation-building, focusing on the needs of all members of society. 🗸🗸
linking reconstruction and development. 🗸🗸
The RDP consisted of many proposals, strategies and policy programmes.
All of these could, however be grouped into five major policy programmes that were linked to each other.

The five key programmes were:

meeting basic needs. 🗸🗸
developing our human resources. 🗸🗸
building the economy. 🗸🗸
democratising the state and society. 🗸🗸
implementing the RDP. 🗸🗸

The Growth, Employment and Redistribution Programme (GEAR)

The GEAR built upon the strategic vision set out in the RDP, i.e. 🗸🗸
The importance of all the objectives of the RDP was reaffirmed but it recognized the implementation and macroeconomic problems that the government had been experiencing in implementing the RDP. 🗸🗸
The RDP placed much more emphasis on disciplined economic policy. 🗸🗸
While still recognizing that there were very serious needs that had to be addressed. 🗸🗸

The Accelerated and Shared Growth Initiative for South Africa Programme (AsgiSA).

AsgiSA resulted from government’s commitment to halve unemployment and poverty by 2014. 🗸🗸
The Joint Initiative on Priority Skills Acquisition (Jipsa) was established to address the scarce and critical skills needed to meet AsgiSA’s objectives. 🗸🗸

AsgiSA identified six important factors that prevented growth:

the relative volatility of the currency. 🗸🗸
the cost, efficiency and capacity of the national logistics system. 🗸🗸
shortages of suitably skilled labour, and the spatial distortions of apartheid affecting low-skilled labour costs. 🗸🗸
barriers to entry, limits to competition and limited new investment opportunities. 🗸🗸
the regulatory environment and the burden on small and medium enterprises (SME’s). 🗸🗸
AsgiSA was not intended to be a government programme. 🗸🗸
But rather a national initiative supported by all the key groups in the economy. 🗸🗸
Namely business, labour, entrepreneurs and government and semi-government departments and institutions. 🗸🗸

Joint Initiative on Priority Skills Acquisitions (JIPSA)

It is the skills development arm of ASGISA. Focus is on skills development, especially through the SETAS. 🗸🗸

Expanded Public Works Programme (EPWP)

It is a nationwide government intervention to create employment using labour-intensive methods, and to give people skills they can use to find jobs when their work in the EPWP is done. 🗸🗸

The New Growth Path (NGP)

The New Growth Path (NGP) was released in November 2011. 🗸🗸
This plan is designed to serve as a framework for economic policy, and to be the driver of the country’s job strategy. 🗸🗸

The New Growth Path therefore proposes certain strategies to ensure adequate demand:

Deepening the domestic and regional market by growing employment. 🗸🗸
Increasing incomes and undertaking other measures to equity and income distribution. 🗸🗸
Widening the market for South African goods and services through a stronger focus on exports to the region and other rapidly growing economies. 🗸🗸
On a macroeconomic level the NGP entails accommodating or looser monetary policy combined with stricter fiscal policy to limit inflationary pressures and enhance competitiveness. 🗸🗸
Government spending will be prioritised with the objective of long-term sustainable employment opportunities. 🗸🗸

The microeconomic measures to control inflationary pressures include the following:

A competition policy to supervise monopoly pricing on products and services. 🗸🗸
A review of administered prices to ensure that they do not increase above inflation without compelling reasons. 🗸🗸
Interventions in the case of rapidly rising prices of essential products and services such as private🗸🗸
Healthcare and basic food items. 🗸🗸
Active industrial policy. 🗸🗸
Rural development policy. 🗸🗸
Competition policy. 🗸🗸
Stepping up education and skills development. 🗸🗸
Enterprise development: promoting small business and entrepreneurship; eliminating unnecessary red tape. 🗸🗸
Broad-based Black Economic Empowerment (BBBEE). 🗸🗸
Labour practices. 🗸🗸
Technology policy. 🗸🗸
Developmental trade policies. 🗸🗸
Policies for African development. 🗸🗸
The different growth and development strategies that have been implemented in South Africa since 1994. 🗸🗸
Have all contributed to making our country more prosperous and to address problems created by inequalities of the past. 🗸🗸
However, problems such as a low level of education, unemployment and unequal distribution of income persist. 🗸🗸
The current NGP is a comprehensive policy that is focused on addressing all of these problems. [Any other relevant higher order conclusion] [Max 2]

INTRODUCTION South Africa’s overall objective of Industrial Development Policy is to ensure international competitiveness in its nine provinces. OR Regional development is aimed at increasing the economic livelihood of specific areas or regions. OR Regional development attempts to limit the negative effects of economic activities in only a few areas. OR It attempts to promote the advantages of a more even regional development by using labour and other natural resources and infrastructure in neglected areas. [Accept any relevant introduction] [Max 2]

BODY-MAIN PART SPATIAL DEVELOPMENT INITIATIVES

SDI Programme attracts infrastructure and business investments to underdeveloped areas to create employment. 🗸🗸
Department of Trade and Industry is driving force behind industrial and spatial development. 🗸🗸
DTI plans together with central, provincial and local government, IDC, parastatals and research institutions. 🗸🗸
Industrial Development Policy Programme (Spatial Development) has 2 focus points spatial development initiative (SDI) and financial incentives. 🗸🗸
SDI refers to government’s initiative and economic development potential of certain specific spatial locations in SA. 🗸🗸

Key Objectives:

Stimulate economic activity in selected strategic locations. 🗸🗸
Generate economic growth and foster sustainable industrial development. 🗸🗸
Develop projects of infrastructure in certain areas and finance them through lending and private sector investment. 🗸🗸
Establish private-public partnerships (PPP’s). 🗸🗸

In areas with high poverty and unemployment, SDI focuses on:

High level support in areas where socio-economic conditions require concentrated government assistance. 🗸🗸
Where inherent economic potential exists. 🗸🗸
The approach is towards international competitiveness, regional cooperation and a more diversified ownership base. 🗸🗸

Some of the main focus points of the SDI Programme are:

Lubombo Corridor (agro-tourism, education, craft, commercial and agricultural sectors); 🗸🗸
KwaZulu-Natal (Ports of Durban and Richards Bay); 🗸🗸
West Coast SDI (fishing and industrial ports); 🗸🗸
Coast-2-Coast Corridor with agro-tourism. 🗸🗸
It also makes it possible for private sector businesses to take advantage of the economic potential of underdeveloped areas in private-public partnerships (PPP’s) 🗸🗸
In PPP a private business may provide the capital to build the factory and to buy raw materials and employ labour, while the government provides the capital for the infrastructure such as roads and water and electricity. 🗸🗸
The business benefits from profits and the government benefits from taxes, levies and employment opportunities. 🗸🗸

There are TWO types of PPP’s which are compensated differently: Unitary payments:

Private sector builds and runs a project (it performs the function on behalf of the public sector); the payment provides an acceptable return on the total investment (building cost, maintenance, operational expenses). 🗸🗸
Private sector constructs the project and then is given the right to change a toll fee (e.g. public road); 🗸🗸
The toll covers costs of construction, maintenance, operation. 🗸🗸
The above options can be combined: E.g. hospital (cost of building is an annual payment and a user fee is also charged). 🗸🗸
A track of land that forms a passageway allowing access from one area to another and particular advantages to mining, manufacturing and other businesses. 🗸🗸
Domestic Corridor: e.g. Lubombo, West Coast, Fish River. 🗸🗸
Corridors beyond the South African Borders (SADC) e.g. Maputo Development Corridor Mozambique. 🗸🗸
Reasons in support of South Africa’s regional integration in Southern Africa: have political and stable neighbours have important export markets and a future source of water and energy supplies integration may be a precondition for support from foreign investors, donors and multilateral institutions. 🗸🗸
A robust regional transport system and a solid infrastructure base hold the key to attracting investment into the SADC region – improving competitiveness and promoting trade. 🗸🗸

Advantages from Corridor development:

Greater levels of economic efficiency and productivity compact urban form corridor urban form. 🗸🗸
Corridor developments will often occur due to private investment. 🗸🗸
Intergration of land use and transport planning will lead to generally efficient integration. 🗸🗸
Efficient urbanisation leads to efficient use of land and promotion of an efficient transport system. 🗸🗸

INDUSTRIAL DEVELOPMENT ZONES (IDZ’s)

Geographically designed, purpose-built industrial sites providing services tailored for export- orientated industries. 🗸🗸
Physically enclosed and linked to an international port or airport. 🗸🗸
Specifically designed to attract new investment in export-driven industries. 🗸🗸
Falls outside domestic customs zones and able to import items free of customs and trade restrictions, add value and then export their goods. 🗸🗸
Development and management done by private sector. 🗸🗸
Government IDZ policy designed to boost exports and jobs. 🗸🗸
IDZ’s aim to encourage economic growth –attract foreign investment in industrial development – facilitate international competitiveness regarding manufacturing. 🗸🗸 [Max 26]

ADDITIONAL PART FINANCIAL INCENTIVES Small and Medium Enterprise Development Programme (SMEDP) • This incentive has provided a tax-free cash grant for investment in industries in

South Africa. 🗸🗸
E.g. manufacturing, agricultural, processing, aquaculture and tourism. 🗸🗸

Critical Infrastructure Fund Programme (CIF)

A tax-free cash grant incentive for projects has improved critical infrastructure in South Africa. 🗸🗸
E.g. for installation, construction of infrastructure, payment of employees, materials directly consumed during installation. 🗸🗸

Duty Free Incentives (for businesses operating in the IDZ’s)

This has encouraged export-orientated manufacturing to increase their competitiveness 🗸🗸
And helped to promote foreign and local direct investment. 🗸🗸

Foreign Investment Grant (FIG)

This has assisted foreign investors to invest in new manufacturing businesses in SA. 🗸🗸
Benefited in terms of the cost of relocating new machinery and equipment from abroad. 🗸🗸

Strategic Investment Projects (SIP)

This has attracted investment from local and foreign entrepreneurs in manufacturing, computer, research and engineering sectors. 🗸🗸

Skills Support Programme (SIP)

This cash grant for skills development has encouraged greater investment 🗸🗸
In training in general and stimulated the development of new advanced skills. 🗸🗸

Black Businesses Supplier Development Programme (BBSDP)

This 80 % cash grant has provided black-owned enterprises with access to 🗸🗸
Training which has improved management of their enterprises. 🗸🗸

Special Economic Zones (SEZ)

It is an extention to the current financial incetives to further promoted regional development. 🗸🗸
The major incentive is a tax reduction of 15 % for businesses settling in this area. 🗸🗸
This does not mean that existing businesses in the IDZ can relocate to take advantage of this incentive. 🗸🗸
If a current business in the IDZ wants to expand they are allowed. 🗸🗸 [Max 10]

CONCLUSION From the above discussion it is clear that different initiatives form part of South Africa’s Regional Industrial Development Programme. [Max 2]

INTRODUCTION Economic indicators are used to evaluate the economic performance of an economic unit. This unit can be a company, an industry, a country or a region. Macro-economic indicators, measures the economic performance of a country as a whole. 🗸🗸

BODY-MAIN PART Such indicators can provide an indication of:

Changes taking place in a country. 🗸🗸
How a country compares to other countries. 🗸🗸

Inflation Rate

This is the general increase in the price level of goods and services in the economy over a certain period in time. E.g. one year. 🗸🗸
This is therefore an indicator of the health of the economy and it is monitored in two ways that is at the production wholesale level producer price level (PPI) and at the retail or consumer level consumer price index (CPI) 🗸🗸

The Consumer Price Index (CPI)

Shows the price increases of a representative (weighted) basket of goods and services that consumers buy. 🗸🗸
It is abbreviated as CPI this cover all the urban areas. 🗸🗸
It is an overall index and weights are obtained from expenditures of different income categories of households. 🗸🗸
It is the most comprehensive indicator measuring consumer inflation in the country. 🗸🗸
It shows changes in the general purchasing power of the rand and it is used for inflation targeting 🗸🗸
Is compiled by Stats SA and measures the change in the price level of a basket of consumer goods and services. 🗸🗸
The goods and services included in the basket are chosen to represent the goods and services purchased by an average household. 🗸🗸
This basket is adjusted from time to time as consumption patterns change. 🗸🗸
The inflation rate is the percentage change in the CPI from the previous year and can be calculated as follows:
Change in CPI x 100 🗸🗸 CPI

The Production Price Index (PPI)

Used to measure the price of goods that are produced domestically when they leave the factory year. 🗸🗸
The goods that are imported when they enter the country (at a port) and both of these are before consumers become involved. 🗸🗸
PPI consists of three baskets that are domestically manufactured outputs, e.g. changes in the PPI can be made monthly or quarterly or yearly. 🗸🗸
While changes in the imported products and exported commodities are given separately in the same report. 🗸🗸
PPI includes capital and intermediate goods but not services. 🗸🗸
It is based on a completely different type of a basket of items in the CPI. 🗸🗸
It measures the cost of production rather than the cost of living. 🗸🗸
It is used to predict consumer goods inflation (CPI) 🗸🗸
Which is also estimated and published on a monthly basis by Stats SA, is similar to the CPI, 🗸🗸
Except that it also includes the prices of raw materials and intermediary goods 🗸🗸 (i.e. goods that will be finished in the production process), excludes VAT and excludes services. 🗸🗸
Manufactured goods included in the PPI are priced when they leave the factory, not when they are sold to consumers. 🗸🗸
Unlike the CPI, the PPI therefore cannot be related directly to consumers’ living standards. 🗸🗸
The PPI is nevertheless very useful in the analysis of inflation because it measures the cost of production. 🗸🗸
A significant change in the rate of increase in the PPI is usually an indication that the rate of increase in the CPI will also change a few months later. 🗸🗸

The GDP Deflator Is a ratio that indicates the relationship of the GDP at nominal prices to the GDP at real prices. GDP deflator = Normal GDP x 100 🗸🗸 Real GDP

Nominal GDP

Is the value of total gross domestic product measured at current prices. 🗸🗸
While the real GDP is the value of total gross domestic product measured at constant prices.🗸🗸
So, the GDP deflator includes changes in the prices of exports but not of imports. 🗸🗸
In a small open economy, like that of South Africa where both, imports and exports are significant in relation to the total size of the economy. 🗸🗸
The exclusion of import prices is an important shortcoming. 🗸🗸

Unemployment rate

In terms of economic development, employment is a very important indicator. 🗸🗸
Employment is, however, not very easy to measure as so many people are employed in the informal sector which is not recorded. 🗸🗸
The concept of underemployment is also important. 🗸🗸
This is when someone is employed in a position that requires less skill than their ability. 🗸🗸
For example when a qualified accountant works as a delivery person because he or she cannot find employment as an accountant. 🗸🗸
Someone may also be employed on a part-time basis but would prefer to work full time. 🗸🗸
A labour force survey is published quarterly by Stats SA. 🗸🗸
This publication contains information and statistics concerning a variety of issues related to the labour market, including the official unemployment rate. 🗸🗸
It is a comprehensive survey and provides information on changes in employment in different provinces and industries. 🗸🗸
Employment in the informal sector, and even reasons for changes in employment figures. 🗸🗸
The unemployment rate is a percentage of the total labour force. 🗸🗸
The total labour force includes all employed people and unemployed people who are looking for work. 🗸🗸
The unemployment rate is a lagging indicator, which means that it will only change a few periods after the trend in the economy has changed. 🗸🗸
For example if the economy starts growing at a faster pace. 🗸🗸
The unemployment rate will only react to the growth after two or three quarters. 🗸🗸

Interest rates

Interest rates are important indicators of future economic activity, as the interest rate level is usually an important determinant when economic decisions are being taken. 🗸🗸
Both the general interest rate level and the structure of interest rates are important indicators.🗸🗸
There are many interest rates in the economy. 🗸🗸
Some are short term rates, such as the repo rate, which is the interest rates at which South Africa banks borrow from the Reserve Bank to finance their liquidity deficit. 🗸🗸
The difference between the short term interest rates and long term interest rates: 🗸🗸
Is called the interest rate spread and the term structure of interest rates provides an indication of the interest rates levels on loans or investments of different maturities. 🗸🗸
Usually we can expect the interest rates level in a developing country to be higher than the interest rate in a developed economy. 🗸🗸
This is due to the higher risk attached to the developing economy. 🗸🗸
Factors such as political and economic uncertainty cause this higher risk. 🗸🗸
Developing economies also need to attract foreign investment to their country to finance growth. 🗸🗸
Investors’ funds will move towards the highest yield and thereof. 🗸🗸
Developing countries cannot allow interest rates in their countries to become too low. 🗸🗸

Money Supply

The increase in the M3 money supply is an important economic indicator. 🗸🗸
If M, the money supply increases, this means that either (P) prices or Y (output) has to respond to the increase in M. 🗸🗸
Therefore, an increase in the money supply is an important indicator showing that output will increase. 🗸🗸
Whether this will translate to an increase in real production or the price level will depend on factors like production within the economy. 🗸🗸
In addition to economic growth the employment of people of working age (15 -64 years) is a majot economic objective. 🗸🗸
We need to know more than this; we need to know who the people are that need to be employed. 🗸🗸
The numbers are determined, not only by age, but also by people’s willingness to work. 🗸🗸

The Economically Active Population (EAP)

The EAP is also known as the labour force. 🗸🗸
It consists of people between the age of 15 and 64 who are willing to work for income in cash or in kind and includes: 🗸🗸
Workers in the formal sector- workers in the informal sector. 🗸🗸
Employers any one 🗸🗸
Self employed persons. 🗸🗸

Related Items

BBR or BSR - Economics Grade 12 Study Guides and Notes
SOUTH AFRICA'S ECONOMIC AND SOCIAL INDICATORS QUESTIONS AND ANSWERS
ENVIRONMENTAL SUSTAINABILITY QUESTIONS AND ANSWERS GRADE 12
TOURISM INFLATION QUESTIONS AND ANSWERS GRADE 12
INFLATION QUESTIONS AND ANSWERS GRADE 12
SOUTH AFRICA'S INDUSTRIAL POLICIES AND THEIR SUITABILITY IN TERMS OF INTERNATIONAL BEST PRACTICE QUESTIONS AND ANSWERS GRADE 12
ECONOMIC GROWTH AND DEVELOPMENT QUESTIONS AND ANSWERS GRADE 12
THE REASONS AND CONSEQUENCES OF MARKET FAILURES QUESTIONS AND ANSWERS GRADE 12
THE DYNAMICS OF IMPERFECT MARKETS QUESTIONS AND ANSWERS GRADE 12

Unemployed Persons

The 2021 estimate of the South African population was million people. 🗸🗸
The EAP numbered million ( % of the population). 🗸🗸

The Employment Rate

The number of employed persons expressed as a percentage of the EAP gives the employment rate. 🗸🗸
The employment rate can also be converted into an index. 🗸🗸
The SA employment rate was % in 2011. 🗸🗸
This is low, compared to rates in developed and even some developing countries such as Argentina and Pakistan. 🗸🗸
In SA the growth in the economy is not accompanied by the similar growth in employment numbers. 🗸🗸

Employment indicators are used for:

To calculate trends in employment in different sectors or industries. 🗸🗸
This indicates structural changes in the economy. 🗸🗸
To calculate productivity. 🗸🗸
To show the success of the economy in utilizing its full potential. 🗸🗸

Unemployment Rate

Statistics SA (SSA) obtains its labour data each year from Quarterly Labour Surveys (QLFS). 🗸🗸
It uses the standard definition of the International Labour Office (ILO) to calculate unemployment. 🗸🗸
The strict definition of unemployment is used to calculate the unemployment rate. 🗸🗸
Did not work during the seven days prior to the interview. 🗸🗸
Want to work and are available to start work within a week of the week of the interview. 🗸🗸
Have taken active steps to look for work or to start some form of self-employment in four week prior to the interview. 🗸🗸
In SA the official unemployment rate was % in 2021. 🗸🗸
In developed countries, change in the unemployment rate trigger responses. 🗸🗸
From governments to fine-tune the economy. 🗸🗸
Increases require more funds for unemployment insurance (UIF) drawings. 🗸🗸
In developing countries, unemployment is the most important cause of poverty. 🗸🗸 [Accept current statistical data] [Max 16]
To give a policy direction in the country. 🗸🗸
To develop mechanism to caution the most affected sectors of the economy promptly
e.g.during the 2019-2020 recession/pandemic some companies required a bail out from the government. 🗸🗸
Develop some economic stabilisers to defuse the huge impact that may result from the unexpected economic downturn. 🗸🗸
Open some other alternative markets for their goods and services. 🗸🗸
To do research and advice the business community before the actual moment hits. 🗸🗸
It can be used to stimulate thinking and growth in a number of sectors in the Economy. 🗸🗸 [Accept any relevant consideration] [Max 10]

CONCLUSION Countries cannot survive and grow their economies if they do not pay attention to economic indicators for their planning processes. [Accept any relevant consideration] [Max 2]

INTRODUCTION Social indicators also called human development indicators as they promote improvement in the standard of living. 🗸🗸 [Any other relevant definition] [Max 2]

BODY-MAIN PART Demographics

This is the description of the physical population and its composition.
To get this a census is done regularly to obtain this information. 🗸🗸

Human development Index (HDI)

This is a measure of people’s ability to live long and healthy lives, to communicate, 🗸🗸
To participate in the community and to have sufficient income to experience a decent lifestyle. 🗸🗸

Human poverty index (HPI)

It measures life expectancy is measured by the percentage of newborns not expected to survive to age 40. 🗸🗸
Lack of education is measured by the percentage of adults who are ill- educated. 🗸🗸

Health and nutrition

Life expectancy birth. 🗸🗸
Infant mortality rate. 🗸🗸

Nutrition indicators

Daily calorie intake per person. 🗸🗸
The number of children who go hungry. 🗸🗸
These measures are important to government as they are supplying healthcare and sometime have to include legislation such as adding vitamin A to basic foodstuffs such as bread. 🗸🗸
The standard of living of people is directly connected to their education. 🗸🗸
Educated people are employable and can earn an income and provide for their own wants and needs. 🗸🗸

Two important measures are:

Secondary enrolment percemtage-how many children that start Grade 1 get to Grade 8 and finish Grade 12. 🗸🗸
Adult literacy- People over the age of 15 that can read and write. 🗸🗸
A large percentage of the annual budget is allocated to education. 🗸🗸
Because of our constitution certain basic services must be supplied by the government. 🗸🗸
These services have a direct effect on people’s living standards. 🗸🗸
Electricity 🗸🗸
Refuse disposal🗸🗸
Water supply🗸🗸
Sanitation🗸🗸

Housing and urbanisation

Urbanisation the process by which an increasing proportion of a country’s population is concentrated in its urban areas as a result of natural increase and migration from rural areas. 🗸🗸
This measures is important as more people come to live in urban areas the greater the demand for housing, services, education, health care etc. 🗸🗸
Housing the percentage of the population living in a permanent dwelling or house. 🗸🗸
The government issue housing subsidies to help poor people to own a house South African citizens or permanent residents earning R3 500 or less a month could apply for this subsidy. 🗸🗸

International comparisons

Figures collected by the World Bank, International Monetary Fund (IMF) and United Nations provide the best data for comparison purpose. 🗸🗸

Other measures used:

Purchasing power parity (PPP) The number of units of one country’s currency that give the holder the same purchasing power as one unit of another country’s currency. 🗸🗸
The Big Mac Index, The index is based on the price of the Big Mac around the world as compared to its price in the United States. 🗸🗸 [Max 40]

CONCLUSION From the above discussion it is clear that social indicators play a significant role in South Africa. It is, therefore, of the utmost importance that we should study their uses in depth. [Max 2]

MICROECONOMICS-PAPER 2

INTRODUCTION A perfect market is a market structure which has a large number of buyers and sellers. OR The market price is determined by the industry (demand and supply curves). OR This means that individual businesses are price takers, i.e. they are not able to influence prices. OR Perfect competition is an imaginary situation, whereas monopolistic competition is a reality. 🗸🗸 [Accept any other relevant introduction] [Max 2]

BODY-MAIN PART

The indicating of the equilibrium positions on the perfect market structure is of utmost importance because from this point where MC = MR
The dotted lines will be drawn to show economic profit or economics loss.
Where the dotted lines intersect the AC and AR curves either normal profit or economic profit or economic loss will be indicated and shadowed.

Mark allocation for graph:

Position / shape of MC curve = 1 mark
MR curve = 1 mark
Position / shape of AC curve = 2 marks
Equilibrium point = 1 mark
Indication of price / quantity = 1 mark
Shading of economic loss = 2 marks MAX MARKS = (8)

Allocate marks on the graph according to the rubric provided and if facts are duplicated again in writing, do not allocate marks. Max of 8 marks.

Equilibrium is at E 1 i.e. where MC = MR
At this point Q 1 goods are produced at a price of P 1
The averages cost for Q 1 units is point R on the AC curve
Price / AR is greater than AC ( TR > TC)
Therefore economic profit is represented by the area P 1 SRE 1
Equilibrium is at E 1 i.e. where MC = MR
At equilibrium (point E 1 ) average cost is equal to price
The AC curve is tangent to the demand curve which means that P/AR = AC (TR = TC)
The business makes normal profit which is the minimum earnings required to prevent the entrepreneur from leaving the industry.
Equilibrium is at E1, i.e. where MC = MR
At this point Q1 goods are produced at a price of P1
At equilibrium (point E1) price/AR is less than average cost/the AC curve is lies above the demand curve which means that P/AR < AC (TR < TC)
The business makes an economic loss A maximum of 24 marks will be allocated for graph illustration and analysis: 8 marks max per graph illustration - (Max 26 marks)

ADDITIONAL PART CONDITIONS For a market to successfully operate under perfect competition, the following conditions should prevail at the same time:

No firm can influence the market price (price takers) due to a large number of buyers and sellers
Products are identical (homogeneous)
There are no barriers of entry, meaning that there is freedom of entry and exit
Buyers and sellers act independently - no collusion between sellers
No government interference to influence the market – the market is unregulated
Free movement between markets - all factors of production are completely mobile
Both buyers and sellers have full knowledge of all the prevailing market conditions (perfect information)
If any of the above conditions are not met, the market is regarded as an imperfect market Any 5 x 2 = [Max 10 marks]

CONCLUSION Freedom of entry and exit into the perfect market alter the supply of goods on the market. This will result in changes in price which influences the profit or loss of a business. If price falls to a level where it is equal to the AVC then the firm will shut-down. [Max 2] Discuss the monopoly in detail (with/without the aid of graphs) (Imperfect Market)

INTRODUCTION A firm is regarded as a monopolist when it owns or controls the total supply of a scarce factor of production. Monopoly is a market structure where only one seller operates. 🗸🗸

BODY: MAIN PART The characteristics of a monopoly

Number of firms

The monopoly consists out of one single firm. 🗸🗸
The monopoly is also the industry. 🗸🗸
Example: Eskom or De Beers – diamond-selling 🗸🗸 [Accept any other relevant example]

Nature of product

The product is unique with no close substitute. 🗸🗸
Example: Diamonds are unique. 🗸🗸

Market entry

Refers to how easy or difficult it is for businesses to enter or to leave the market 🗸🗸
Is entirely/completely blocked. 🗸🗸
Economies of scale 🗸🗸
Limited size of the market 🗸🗸
Exclusive ownership of raw materials 🗸🗸
Licensing 🗸🗸
Sole rights 🗸🗸
Import restrictions 🗸🗸

They decide on their production level

The monopolist cannot set the level of output and the price independently of each other. 🗸🗸
If a monopolist wants to charge a higher price, it has to sell fewer units of goods. 🗸🗸 Alternatively, a reduction in price will result in a higher output sold. 🗸🗸
A monopolist is confronted with a normal market demand curve 🗸🗸
The demand curve slopes downwards from left to right 🗸🗸
Any point on the monopolist’s demand curve (D) is an indication of the quantity of the product that can be sold and the price at which it will trade. 🗸🗸

They are exposed to market forces

Consumers have limited budgets and a monopoly can therefore not demand excessive prices for its product. 🗸🗸
The monopolist’s product has to compete for the consumer’s favour and money with all other products available in the economy. 🗸🗸

They face substitutes

There are few products that have no close substitutes. 🗸🗸
For example, cell phones can compete with telephone services. 🗸🗸

They may enjoy favourable circumstances

Sometimes an entrepreneur may enjoy favourable circumstances in a certain geographical area. 🗸🗸
For example, there may be only one supplier of milk in a particular town. 🗸🗸

They may exploit consumers

Because a monopolist is the only supplier of a product, there is always the possibility of consumer exploitation. 🗸🗸
However, most governments continually take steps to guard against such practices. 🗸🗸

Market Information

All information on market conditions is available to both buyers and sellers. 🗸🗸
This means that there are no uncertainties. 🗸🗸

Control over price

In the case of a monopoly there are considerable price control, but limited by market demand and the goal of profit maximisation. 🗸🗸

Long-run economic profit Can be positive

Because new entries are blocked and short-run economic profit therefore cannot be reduced by new competing firms entering the industry 🗸🗸
The monopoly can thus continue to earn economic profit as long as the demand for its product remains intact 🗸🗸

Heading = 1 mark AC = 1 mark DD/AR = 1 mark MC = 1 mark Profit maximisation point =1 mark Labelling of the axis = 1 mark Labelling on the axis = 1 mark

Long run equilibrium of a perfect competitor

CONCLUSION A monopoly does not always make economic profit in the short run; it can also make economic loss in the short run if the total cost exceeds total revenue. 🗸🗸

INTRODUCTION

The oligopoly is a type of imperfect market in which only a few large producers dominate the market. 🗸🗸 [Accept any other relevant and correct response]

MAIN PART Nature of product

The product may be homogeneous in a pure oligopoly. 🗸🗸
If the product is differentiated, it is known as a differentiated oligopoly. 🗸🗸

Market information

There is incomplete information on the product and the prices. 🗸🗸
Market entry is not easy, it is limited in the sense that huge capital outlay might be necessary. 🗸🗸
Oligopolists have considerable control over price, it can influence price, but not as much as the monopolist. 🗸🗸
Oligopolies can frequently change their prices in order to increase their market share and this result in price wars. 🗸🗸

Mutual dependence

The decision of one firm will influence and be influenced by the decisions of the other competitors. 🗸🗸
Mutual dependence (interdependence) exists amongst these businesses.
A change in the price or change in the market share by one firm is reflected in the sales of the others. 🗸🗸

Non-price competition

Non - price competition can be through advertising, packaging, after-sales services. 🗸🗸
Since price competition can result in destructive price wars, oligopolies prefer to compete on a different basis. 🗸🗸
Participants observe one another carefully- when one oligopolist launches an advertising campaign, its competitors soon follow suite. 🗸🗸
If oligopolies operate as a cartel, firms have an absolute cost advantage over the rest of the other competitors in the industry. 🗸🗸
Collusion is a strategy used by firms to eliminate competition amongst each other. 🗸🗸
It can be in a form of overt collusion where firms can work together to form a cartel and tacit collusion where a dominating business controls the price. 🗸🗸

Limited competition

There are only a few suppliers manufacturing the same product. 🗸🗸

Economic profit

Oligopolies can make an economic profit over the long term. 🗸🗸
Abnormal profits may result to joint decision-making in an oligopoly. 🗸🗸

Demand curve

Slope from left down to the right. 🗸🗸
It is known as the kinked demand since it contains the upper relatively elastic slope and the lower relatively inelastic slope. 🗸🗸 [Accept any other relevant and correct response] [Max. 26]

ADDITIONAL PART Oligopolist may increase their market share using non-price competition strategies by:

branding their product to create an impression that its product is for a particular age group or income group. 🗸🗸
aggressive advertising which inform customers about the business or product it provides.🗸🗸
Using appealing packaging to bring out important features of their product.
improving their customer service in order to ensure that they return to their businesses.🗸🗸
providing relevant and precise information, which is crucial to the customers, since there are competitors in the market, customers will patronize the businesses that provides relevant information. 🗸🗸
extending shopping hours to the convenience of customers.
Offering loyalty rewards to customers which will encourage their return to spend accumulated rewards. 🗸🗸 [Accept any other relevant response] [Max.10]
In South Africa, oligopolists have been found to be illegally manipulating prices to their benefit, yet to the detriment of consumers and have been penalized for such action. 🗸🗸 [Accept any other relevant response]

Compare and contrast any TWO types of market structures (perfect to imperfect/imperfect to imperfect) in detail in terms of the following. - Number of businesses - Nature of product - Entrance - Control over prices - Information - Examples - Demand curve - Economic profit/loss - Decision-making - Collusion - Productive/Technical efficiency - Allocative efficiency (Perfect Market and Imperfect Market)

‘’Market structures are classified under Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly’’ Compare all FOUR market structures in a tabular form. NB: Learners should write in full sentences even if the comparison is done in a tabular format). (Marks depend on the combination of market structures to be examined)


Number of firms	So many that no firm can influence the market price	So many that each firm thinks others will not detect its actions	So few that each firm must consider the others’ actions and reactions	One seller and there is no competition. The seller is the price maker.
Nature of product	Homogeneous/i dentical in terms of the physical appearance	Heterogeneous /differentiated	Homogeneous or heterogeneous	Only one product with no close substitutes
Entry	Completely free/easy to enter. There are no barriers to enter	Free. There are no barriers to enter	Varies from free to restricted	Completely blocked by legal restrictions and cost advantages e.g. natural and artificial monopolies
Information	Complete	Incomplete	Incomplete	Complete/ Incomplete
Collusion	Impossible	Impossible	Possible	Unnecessary
Firm’s control over the price of the product	None. Prices are determined by demand and supply	Some	Considerable, but less that in monopoly	Considerable, but limited by goal of profit maximisation
Demand curve for the firm’s product	Horizontal (perfectly elastic)	Downward- sloping	Downward- sloping, may be kinked	Equals market demand curve: downward-sloping
Long run economic profit	Zero/normal profit	Zero/normal profit	Can be positive/econom ic profit	Can be positive/economi c profit

PLEASE NOTE: THE ABOVE TABLE SHOULD BE VERBALLY WRITTEN AS PER ESSAY INSTRUCTION

INTRODUCTION Market failure is when the forces of supply and demand fail to allocate resources efficiently / when markets fail to allocate goods and services efficiently. 🗸🗸 [Accept any other correct introduction] [Max 2]

BODY: MAIN PART

1. Missing Markets

Markets are often incomplete in the sense that they cannot meet the demand for certain goods. 🗸🗸
Public goods:
They are not provided by the price mechanism because producers cannot withhold the goods from non-payment and there is often no way of measuring how much a person consumes. 🗸🗸

Public goods have the following features: Non-rivalry:

The consumption by one person does not reduce the consumption of another person e.g. a lighthouse. 🗸🗸

Non-excludability:

Consumption cannot be confined to those who have paid, so there are free riders e.g. radio and TV in South Africa. 🗸🗸

Merit goods

These are goods/services that are deemed necessary or beneficial to the society, e.g. education, health care etc. 🗸🗸
These goods are highly desirable for general welfare but not highly rated by the market, therefore provide inadequate output/supply. 🗸🗸
If people had to pay market prices for them relatively too little would be consumed – the market will fail. 🗸🗸
The reason for undersupply of merit goods is that the market only takes the private costs and benefits into account and not the social costs and benefits. 🗸🗸

Demerit goods

These are goods/services that are regarded as bad or harmful for consumption hence we should use less of these e.g. alcohol, cigarettes, etc. 🗸🗸
Demerit goods lead to a lot of social costs, therefore, the government charges sin tax / excise duties to discourage the consumption of such goods. 🗸🗸
While the market is willing to supply demerit goods, it tends to oversupply demerit goods. 🗸🗸
Some consumers may be unaware of the true cost of consuming them. 🗸🗸

2 Lack of information

Technical and allocative efficiency require that both producers and consumers have complete and accurate information about the costs and benefits of the goods and services produced and consumed in the market. Producers and consumers make production and consumption decisions based on the information they have. 🗸🗸
When information is incomplete or inaccurate, it leads to wrong decisions about what to produce, how to produce and for whom to produce, and a waste of resources occurs. 🗸🗸
Producers might not know all the different technologies and production techniques that are available and the different resources that can best be used to produce goods/services more efficiently. 🗸🗸
Consumers might not know that the price of a product is lower from some other suppliers or about the harmful effects of a product since they might just base their decisions to consume on the information from a misleading suppliers. 🗸🗸

3. Immobility of factors of production

Markets do not respond to changes in consumer demand if resources cannot be easily reallocated or due to a lack of information🗸🗸
Labour takes time to move to into new occupations and geographically to meet the changes in consumer demand. 🗸🗸
Physical capital e.g. equipment, buildings, land and raw materials can only move from one place to another at a high cost, but cannot be moved to fit a change in demand. 🗸🗸
Technological applications change production methods e.g. use of robots rather than physical labour. It takes time for most industries to adapt. 🗸🗸
With greater technological change there is an increasing need for workers to become flexible, to update skills, change employment, occupations and work patterns. 🗸🗸 [Max 26]
Motivate why government has implemented a national minimum wage in the labour market. 🗸🗸
Pressure was put on the South African government to introduce labour laws which require employers to pay minimum wages. 🗸🗸
The application of minimum wage laws is needed to improve a redistribution of income. 🗸🗸

The main objectives were:

To redress inequality (Gap between wealthy and poor) 🗸🗸
To improve the standard of living. 🗸🗸
Government tried to protect domestic workers and farm workers — thus preventing exploitation. 🗸🗸 [Max 10] [Accept any other correct relevant response]

CONCLUSION Governments intervene in the market when market forces cannot achieve the desired output. [Max 2] [Accept any other relevant conclusion]

INTRODUCTION The purpose of government intervention is to ensure that the right quantity of resources is allocated to the production of output so that society as a whole [Accept any other relevant introduction] [Max 2] maximizes its benefits. 🗸🗸

Sometimes government will set the price of a good or service at a maximum level that is below the market price 🗸🗸
The government intervene and passes a law that suppliers may not charge more than the maximum price 🗸🗸
The immediate effect is that quantity supply will drop 🗸🗸
The original market equilibrium price and quantity is P and Q respectively 🗸🗸
The price set by the government is P1, at this price the demand will increase to Q1 and the supply will decrease to Q2 🗸🗸
The difference between Q1 and Q2 is the shortfall that will be created on the market 🗸🗸
The shortage caused by the price ceiling creates a problem of how to allocate the good since the demand has increased 🗸🗸
Black markets start to develop [Mark allocation: Graph 6 and discussion max. 10 marks]
The appropriate way to intervene in the market by government is by levying taxes as a method to recover external cost 🗸🗸
The original market equilibrium at e, with P as the equilibrium price and Q as the equilibrium quantity 🗸🗸
The tax increase will shift the supply curve to the left 🗸🗸
New equilibrium at E1 🗸🗸
A tax would raise the price from P to P1 🗸🗸
The production will decrease from Q to Q1 🗸🗸 [Mark allocation: Graph total 6 marks and discussion max 10 marks]
Explain the supply of undesirable goods in South Africa and how the government can deal with it. 🗸🗸
Items such as cigarettes, alcohol and non-prescription drugs are examples of demerit or undesirable goods. 🗸🗸
These goods are often over supplied in the market, due to the fact that the external cost is not added to the market price. 🗸🗸
Some consumers may be unaware of the true cost of consuming them, their negative externalities. 🗸🗸
Government can ban their consumption or reduce it by means of taxation. 🗸🗸
Taxation on these products will increase the market price and hopefully the demand for these products will drop. 🗸🗸 [10 marks] [Accept any other correct relevant response]

CONCLUSION The intervention of government ensures that inefficiencies is eliminated and that the market is operating effectively 🗸🗸 [Accept any other relevant conclusion] [Max 2]

CONTEMPORARY ECONOMIC ISSUES-PAPER 2

This is a constant and significant increase in the general price level of goods and services in the country over a certain period of time, e.g. a year. 🗸🗸 [Max 2] [Accept any relevant introduction]

BODY-MAIN PART Creditors and Debtors

Whereas borrowers (debtors) benefit from price increases, lenders (creditors) suffer due to price increases. 🗸🗸
This is because borrowers receive money with a relatively high purchasing power and they repay their loans with money with low purchasing power, unless interest rates are sufficient to prevent this occurrence. 🗸🗸

Salary and Wage Earners

Price increases affect people whose incomes are relatively fixed (in other words, people whose incomes remains constant or do not increase at the same rate as prices do. 🗸🗸
This group includes retired people, pensioners and the poor. 🗸🗸
As prices increase, their almost fixed incomes purchase less and less. 🗸🗸
However there are individuals and entrepreneurs whose incomes often increase at a rate that is higher than the inflation rate and they do not suffer but gain from inflation. 🗸🗸
Globalization results in increased employment opportunities in the economy due to increased productivity, the need to produce more goods both for local and international markets rises in globalised economies. 🗸🗸
The demand for increased skilled labour becomes a need as a result, this demand for labour benefits the local labour market in increased employment opportunities and growth. 🗸🗸

Investors and Savers

Different types of investments are affected by inflation: Assets with fixed nominal values. 🗸🗸
These assets have a fixed nominal value and give a return if they are held until maturity. 🗸🗸
When they are paid, because their nominal values remain constant, the purchasing power of the nominal values decreases as prices increase (that is, their real value decreases). 🗸🗸

Assets with Flexible Market Values

The holders of shares and fixed property usually gain by price increases because the nominal values of these assets tend to increase at least proportionately to the rate of inflation (that is, their market values are flexible). 🗸🗸
Often the prices of these assets increase more rapidly than increases in the general price level.🗸🗸
In this case, inflation creates wealth to the advantage of those holding such assets. 🗸🗸
South Africa has a progressive personal income tax system. 🗸🗸
This means that marginal and average tax rates increase in harmony with the income level. 🗸🗸
The higher level an individual’s income, the greater the percentage of income he or she has to pay tax. 🗸🗸
With inflation, taxpayers’ nominal income (wages and salaries) rise even when their real income remain unchanged. 🗸🗸

Taxes are levied on nominal income and not on real income.

Therefore if the income tax schedule remains unchanged inflation increases the average rate of personal income tax. 🗸🗸
Individuals will have to pay higher taxes even if they are actually no better off than before. 🗸🗸
This phenomenon known as bracket creep, lads to a redistribution of income from taxpayers to the government. 🗸🗸
Bracket deep results from a combination of inflation and progressive income tax. 🗸🗸
It has the same effect as an increase in the tax rate. 🗸🗸

Industrial Peace

Wage bargaining is often accompanied by strikes and mass action. 🗸🗸
These actions can sometimes spill over into violence, which affects society at large. 🗸🗸
In extreme situations in the presence of exceptionally high inflation together with a government that is determined not to yield to wage increase demands (which can push inflation to even higher levels), widespread civil unrest follows. 🗸🗸

Inflation has a negative effect on economic growth

Inflation leads to increased uncertainty in the economy. 🗸🗸
This uncertainty discourages savings and investments especially in the long term. 🗸🗸
Which are necessary for economic growth –result reduced economic growth. 🗸🗸

Inflation affects the real money value and savings

Because inflation reduces the real value of money, it affects the real value of money saved in particular. 🗸🗸
This means that inflation, the rand buys fewer goods and services than before. 🗸🗸
It also means that the real money value saved is worth less at the end of the savings period than when the money was saved. 🗸🗸
e.g. if a consumer receives 5 % interest on his/her savings account while the inflation rate is 8%, then the real rate of interest on the consumer’s savings is -3%.🗸🗸

Inflation has an adverse effect on a country’s balance of payments (BOP).

If a country’s rate of inflation is higher than that of its trading partners the prices of exported goods increase while the prices of imported goods decrease. 🗸🗸
This leads to loss of competitiveness in the export market, which in turn leads to decreased exports. 🗸🗸

This has a negative effect on the country’s balance of payments (BOP).

The loss of export competiveness can also increase unemployment inflation affects the redistribution of income in a country. 🗸🗸

The effects of inflation are uneven.

While it does not clearly benefit anyone and certainly harms most, it also harms some less than others. 🗸🗸
Inflation also tends to redistribute income from low-income groups to higher income groups. 🗸🗸
This is because people in the low income groups do not have assets than can rise in value faster than the rate of inflation to help them overcome the effects of inflation. 🗸🗸
Powerful groups such as trade unions large companies and the wealthy people, are able to increase their share of national income at the expense of disadvantaged people such as pensioners the unemployed and the welfare recipients. 🗸🗸

Inflation has social and political costs

When inflation continually causes rising prices it makes people unhappy and can disturb relations between employers and the employees and between customers and traders or service providers. 🗸🗸
People in lower-income brackets feel severe effects of increases in the price of essential items such as bread, maize meal rental and transport costs. 🗸🗸
This can lead to social unrest and political unrest. 🗸🗸

Inflation feeds on itself and causes further inflation

This is called the inflation spiral. 🗸🗸 e.g. higher wage demands cause producers to increase their prices to maintain their profits.
This happens again and again pushing prices further every time. 🗸🗸
If the government does not keep this wage price spiral in check, inflation may get out of control and become hyperinflation. 🗸🗸 [Max 26]

ADDITIONAL PART Debate the merits (benefits) of administered prices by the government

These are prices regulated by the government e.g. home owner’s costs on water/household fuel (paraffin and electricity) medical care (public hospitals) communication (telephone calls, telephone rentals and installations/postage cell communications /transport (petrol). 🗸🗸
Most of the administered prices are adjusted once a year which brings price stability. 🗸🗸
Regulated prices are restricted as to the extent to which prices may vary, depending on the government’s objectives. 🗸🗸
Administered prices provide additional revenue to national treasury. 🗸🗸
It appears that some of these prices remain extremely robust over the short term. 🗸🗸 [Accept any other relevant response] [Max 10]
If inflation is not controlled by the proper and effective instruments, it can have challenging problems to the economy in general. 🗸🗸

INTRODUCTION COST PUSH Inflation is a sustained and significant increase in general price level over a period of time and a simultaneous decrease in the purchasing power of money. Accept any other relevant introduction. 🗸🗸 [Max 2]

BODY: MAIN PART Causes of cost-push inflation

Increase in Wages:

In South Africa, increase in wages constitute more than 50% of Gross Value Added at basic prices 🗸🗸
If the increase in wages is not accompanied by an increase in production, the cost of production will rise 🗸🗸
Producers will increase the prices of their products to offset the high cost of production strikes and stay-aways / labour union activities 🗸🗸

Key inputs/ increase in prices of imported capital goods

When the prices of key inputs that are imported increase, domestic cost of production 🗸🗸
increases especially in the manufacturing sector 🗸🗸
Supply shocks e.g. sudden increase of oil causes a knock-off effect 🗸🗸

Exchange rate depreciation

A decrease in the value of the rand will result in an increase in prices of imports 🗸🗸

Profit margins

When firms increase profit margins, the prices that consumers pay also increase 🗸🗸
Sometimes firms use their market power to push up prices 🗸🗸

Productivity

Less productive factors of production will lead to increased cost per unit 🗸🗸
Strikes and stay-aways often reduce production output and can result in price increases 🗸🗸

Natural disasters

Natural disasters such as drought, flood and global warming can impact on the cost of production 🗸🗸
This is often the case in relation to food prices 🗸🗸
An increase in interest rates results businesses paying more money for capital loaned firms recover these costs by increasing the prices of their products 🗸🗸

Increase in taxation

Increase in direct tax like company income tax may lead to businesses increasing their prices to offset the extra burden 🗸🗸
Increase in indirect tax such as custom duty will lead to increase in costs of supplying a particular product, therefore the price will increase 🗸🗸
Administered prices increase e.g. fuel prices
Shoplifting and losses caused by employees are added to the prices of products 🗸🗸 [Accept any other relevant fact. Maximum 8 marks for headings] [Max. 26]

DEMAND PULL INFLATION Total spending on domestic goods and services in the economy consists of the spending by households, firms, the government and the foreign sector.

Total spending = C + I + G + (X-M). 🗸🗸

Causes of demand inflation Increase in consumption [C] – consumers expenditure will increase mainly for three reasons:

a. If consumers save less & spend more🗸🗸
b. Decrease in personal income tax. 🗸🗸
c. A greater availability of consumer credit, because of decrease in interest rate. 🗸🗸

Investment [I] –When business invest this increase demand for labour, cement, sand and bricks. 🗸🗸

Supply cannot keep up with the increase in demand and this will increase prices. 🗸🗸
Lower interest rates may result in an improvement in the sentiment and profit expectations of businesses. 🗸🗸
Businesses invest more and this may lead to an increase in the demand of goods and services that are part of the investment (for example, a new building requires cement bricks and labour).🗸🗸
If aggregate demand increases at a faster rate than aggregate supply, price increases will follow.🗸🗸

Government Spending [G] – Three main reasons.

a. New capital projects🗸🗸
b. Consumption expenditure on education, health, and protection. 🗸🗸
c. Social expenditure on public work programme to create jobs and increase in social allowances. 🗸🗸

Export earnings [X]

a. When economy of trading country improve. 🗸🗸
b. When global economy expands. 🗸🗸

Access to credit

There is greater availability of consumer credit (by means of credit cards) of the availability of cheaper credit as a result of decreases in lending rates. As new credit is extended the credit multiplier kicks in and more credit is created. 🗸🗸

Consumption spending

Most governments will at times increase expenditures on education, health, protection and safety (for example, military equipment such as bomber jets and submarines). 🗸🗸

Social spending

Governments sometimes feel they have to do something substantive about unemployment and poverty. 🗸🗸
They borrow money and spend it on public works programmes or raise the level of social grants year after year at a higher rate than the inflation rate. 🗸🗸
Such expenditures invariably lead to inflation because they add to aggregate demand without adding anything to aggregate supply. 🗸🗸

Commodities demand

The world’s demand for commodities expands and contracts like business cycles do. During an expansionary period, foreign demand increases and this leads to greater volumes of exports. The income earned from these exports adds to aggregate demand and prices increase. 🗸🗸

BODY: ADDITIONAL PART YES / NO

Inflation targeting is when a particular percentage is set as an acceptable level for an increase in general price levels 🗸🗸
The SARB's inflation target is a range of 3% and 6% 🗸🗸
The aim of inflation targeting policy is to achieve and maintain price stability 🗸🗸
The implementation of the inflation target is easy to understand – expressed in numbers which makes it very clear and transparent 🗸🗸
It reduces uncertainty and promotes sound planning in the public and private sectors 🗸🗸
It provides an explicit yardstick that serves to discipline monetary policy and improves the accountability of the central banks 🗸🗸
The SARB make use of monetary policy, specifically the repo rate to keep the inflation within the target range 🗸🗸
The government make use of fiscal policy regarding public sector revenue and expenditure 🗸🗸

Positive effects

Where demand is higher than supply an increase in interest rates help to bring the demand down 🗸🗸
The policy can helps businesses to make economic plans without worrying about the effects of high inflation 🗸🗸
South Africa's price level has been fairly stable since the introduction of the inflation targeting policy in 2000 🗸🗸

Negative effects

Inflation targeting can cause a reduction in economic growth 🗸🗸
This is because the raising of interest rates, result in a decrease in total spending which is needed for production to increase 🗸🗸
Decreased economic growth can increase unemployment 🗸🗸
South Africa has been experiencing an increase in unemployment since the implementation of the policy in 2000 🗸🗸
Inflation targeting is difficult to implement when the cause of inflation is supply shocks 🗸🗸 [Max. 10]
A summary of what has been discussed without repeating facts already mentioned in the body. 🗸🗸
An opinion or valued judgement on the facts discussed. 🗸🗸
Additional support information to strengthen the discussion. 🗸🗸
A contradictory viewpoint with motivation. 🗸🗸
Recommendations. 🗸🗸
E.g. Inflation can be a threat to the normal functioning of the economy; therefore, measures like monetary and fiscal are vital to keep the phenomenon under control. 🗸🗸
This is the activities of people travelling to and staying in places outside their usual environment for a period not longer than one consecutive year for leisure, business and other purposes and not related to a remunerative activity from within the place visited 🗸🗸 [Max 2]

BODY - MAIN PART Gross domestic product (GDP)

Tourism impacts mostly on the services industry than on agriculture or manufacturing although there are upstream effects when agriculture provides foodstuffs to restaurants and manufacturing provides vehicles for transport 🗸🗸

Direct contribution on GDP

Statistics South Africa (SSA) shows that in 2020 inbound tourists contributed R69 billion and domestic tourists R billion, amounting to R billion - about % of South Africa's GDP 🗸🗸

Indirect contribution on GDP

If the indirect contribution is added, tourism add about % to GDP 🗸🗸
The WTTC estimated that tourism contributed % to the GDP of the world economy in 2020🗸🗸
In developing economies the service sector is responsible for around % of GDP, while it is responsible for more than % of GDP in developed economies 🗸🗸
South Africa is similar to that of developed economies and services contributed more than % of GDP in 2020. 🗸🗸
Tourism has a major effect on employment and this amounted to million workers in 2020🗸🗸
Tourism is the world’s largest generator of jobs 🗸🗸
Tourism is labour intensive 🗸🗸
More jobs can be created with every unit of capital invested in tourism than elsewhere
Tourism employs many skills 🗸🗸
It ranges from accountants and hairdressers to tour guides and trackers, 🗸🗸
the tourism industry draws upon numerous skills 🗸🗸
Tourism can provide immediate employment 🗸🗸
If one quarter of tourists’ accommodation establishment in South Africa starts to offer live entertainment to quests, thousands of entertainers could be employed within days 🗸🗸
Tourism provides entrepreneurship opportunities 🗸🗸
The tourism industry accommodates informal sector enterprises, from craft and fruit vendors to pavement vendors, chair rentals 🗸🗸
Tourism is widely recognized as one of the fastest and more effective redistribution mechanisms in development 🗸🗸
It brings development to the poor in rural areas 🗸🗸
Tourism provides an alternative to urbanisation, permitting women and youth to continue a rural family lifestyle while giving them business opportunities 🗸🗸
E.g. to start and operate small-scale tourism businesses around community asserts (forests, parks and rivers) 🗸🗸

Externalities

The rapidly expanding tourism industry could have both positive and negative impacts that extend well into the future 🗸🗸
While tourism attracts large amount of revenue, it can also cause undue environmental damage that can harm the very foundation on which it depends 🗸🗸
All other economic resources, tourism uses resources and produces wastes and also creates environmental costs (pollution) and benefits in the process 🗸🗸
Rapid growth in tourism aiming at short-term benefits usually results in more negative effects and these includes the degeneration of traditions and cultural values and environmental damage to sites and setting 🗸🗸

Environment Tourism activities create environmental stress:

Permanent environmental restructuring which includes major infrastructure 🗸🗸
Waste product generation such as biological and non-biological waste that damages fish production 🗸🗸
Direct environmental stress caused by tourist activities, e.g. the destruction of vegetation and dunes 🗸🗸
Effects on population dynamics such as migration and increased urban densities 🗸🗸
Transport infrastructure, e.g. roads, airports 🗸🗸
Communication and infrastructure including telephone lines, electronic signal stations and radio, TVs’ 🗸🗸
Energy infrastructure such electricity and liquid fuel 🗸🗸
Basic service infrastructure such as clean water and sewerage systems 🗸🗸 [Max. 26]

ADDITIONAL PART How can Indigenous Knowledge Systems be used to promote tourism in South Africa?

More cultural villages can be improved to facilitate and promote tourism e.g. Shangana in Mpumalanga, Basotho in the Free State and Simunye Zulu Lodge in Kwazulu-Natal. 🗸🗸
Where guides explain and demonstrate storytelling and indigenous knowledge practices. 🗸🗸
Advertising campaigns domestically and internationally by travel agencies, hotels and B & B, lodges and SA Tourism can focus on promoting these heritage sites in brochures and fliers, social media. 🗸🗸
These actions will make tourists more aware of these attractions 🗸🗸
Encourage tourists to experience different cultures and townships - experience life at home with a household and eat at a shebeen or township restaurant 🗸🗸
World Heritage Sites of South Africa can be promoted for their cultural significance e.g. the Fossil Hominid Sites of Sterkfontein, Mapungubwe Cultural Landscape, Richtersveld Cultural and Botanical Landscape, Vredefort Dome and Robben Island 🗸🗸
Environmental World Heritage Sites of South Africa selected for their natural importance namely the Cape Floral Region Protected Areas, Isimangaliso Wetlands Park as well as uKhahlamba/Drakensberg Park which has been selected for its mixed significance 🗸🗸
Arts and culture festivals e.g. the National Arts Festival, the Hermanus Festival, Awesome Africa Music Festival and Macufe African Cultural Festival should more widely be advertised to encourage tourists to attend 🗸🗸
According to the World Health Organisation, a large majority of the African population make use of traditional medicines for health, social-cultural and economic reasons and forms part of the unique experience tourists experience when visiting local villages 🗸🗸
In South Africa tourists are made more aware of the important role traditional medicine plays in poverty reduction and employment creation 🗸🗸
Relaxation of restrictive tourist visa laws to facilitate easier entry into South Africa 🗸🗸 [Accept any other relevant answers] [Max. 10]
South Africa attracted over million tourists in 2020 /For every 8.1 additional tourist to South Africa, one new job is created/one per cent increase in tourism adds R million annually to the SA economy. 🗸🗸 [Accept any other relevant higher order conclusion] [Max. 2]
Tourism is the activities of people travelling to and staying in places outside their usual environment for no more than one consecutive year for leisure, business or other purposes PP 🗸🗸 [Accept any other correct relevant response] [Max 2]

MAIN PART Business sector

Tourism stimulates business in areas such as accommodation and entertainment 🗸🗸
The construction industry, in private-public partnership with the government to provide the infrastructure, manufacturing sector and recreation sector all benefits from increased demand due to tourism 🗸🗸
The previously disadvantaged communities get entrepreneurial opportunities through the black economic empowerment schemes 🗸🗸
A large number of people get business opportunities in the informal sector e.g. selling of artefacts 🗸🗸
Local retailers may have an increase in sales (and profits) because of increased demand from tourists 🗸🗸
Private businesses and government work in partnership to provide the infrastructure needed for tourism 🗸🗸
This increases the market share of and income of the these businesses 🗸🗸
Allow existing businesses to improve the quality and variety of their products PP 🗸🗸
Allow natural monopolies e.g. Table Mountain Cableway to achieve abnormal profits PP 🗸🗸
The public sector also provides a range of financial incentives for private sector tourism investment (grants, subsidies, loans, tax rebates) PP 🗸🗸 [Max 10]

Infrastructure development

Adequate and well-maintained infrastructure is essential for tourist destinations PP. 🗸🗸
Locals share this infrastructure with tourists 🗸🗸
Government often prioritises economic infrastructure such as ports and beaches 🗸🗸
In addition to physical and basic infrastructure, social infrastructure is also important for the growth of tourism🗸🗸
Most of the SDIs and development corridors also have tourism as an important focus PP 🗸🗸 [Max 8]
Members of households earn income from the tourism sector as tour operators, travel agents etc. 🗸🗸
Many households are indirectly involved in tourism as employees e.g. in hotels, transport sector. 🗸🗸
Entrepreneurs from households that operate as curio producers or musicians can earn income from tourism . 🗸🗸
A large number of households acquire skills in the tourism industry. 🗸🗸
School curriculum and learnership offer opportunities to acquire these skills . 🗸🗸
Encourages rural development because many tourist attractions are located in rural areas PP 🗸🗸 [Accept any other correct relevant response] [Max. 26]

ADDITIONAL PART Tourism can be successfully marketed in less popular destinations by:

advertising the firms' attractions in a variety of media including social media and internet which may reach both local and international potential tourists. 🗸🗸
focusing on a clear message that concentrates on the strength of the attraction/ uniqueness of the destination. 🗸🗸
using the indigenous knowledge systems of that particular area where possible PP. 🗸🗸
describing the service offered in the best possible way to catch the interest of the likely tourist PP E.g. the use of slogans. 🗸🗸
charging a price that is competitive and money well spent for the service offered. 🗸🗸
helping the tourist to view the entire service as value for money – deliver a worldclass visitor experience 🗸🗸
highlighting other places of interest in the vicinity of the attraction as part of a package 🗸🗸
focusing on proudly South African products/services / Sho’t Left campaign PP 🗸🗸
help disadvantaged South Africans to benefit from tourist attractions in the less popular destinations PP 🗸🗸 [Accept any other correct relevant response] [Max. 10]

CONCLUSION A weaker exchange rate has been a major contributing factor to South Africa's tourism industry growth over many years. 🗸🗸 [Accept any correct relevant response] [Max 2]

INTRODUCTION Environmental sustainability can be defined as development that meets the need of the present without compromising the ability of future generations to meet their own needs. 🗸🗸

BODY: MAIN PART Public sector intervention Because it is difficult to enforce measures to ensure sustainability the government has to intervene. 🗸🗸

Environmental taxes Environmental taxes (green taxes) can be added to the cost of goods and services for the negative impact they have on the environment. 🗸🗸 The government uses the income generated through these taxes to protect the environment. 🗸🗸 Taxes can be imposed on petrol, paper, emission gases etc. 🗸🗸 In 2003 the government has legislated the use of biodegradable plastic bags which consumers had to pay for🗸🗸 The hope is that they will use fewer bags and ensure a litter free environment. 🗸🗸

Charging for dumping of waste A monthly fee as part of municipal accounts is charged for collection of waste, sewage and garbage. 🗸🗸 Households already pay for the collection of rubbish. 🗸🗸 The factory owner might clean up his waste if it cost him to dump it. 🗸🗸 Industries might also pay for emitting gases that can be harmful to people and the environment. 🗸🗸 Subsidies Subsidies can be awarded to businesses that are willing to reduce pollution and waste. 🗸🗸 Waste can also be reduced by using new techniques or equipment such as solar energy. 🗸🗸 Emission gases from factories can be reduced using new technology. 🗸🗸

Granting property rights Normally owners of properties tend to be more protective over their resources than users who are only interested in the profits the resources offer. 🗸🗸 For this reason the government might grant property rights over a specific area. 🗸🗸 Property rights empowers owners to negotiate contracts with businesses who wish to exploit the area’s resources. 🗸🗸

Marketable permits A government can decide on the maximum desired level of pollution in an area. 🗸🗸 It then distribute pollution rights (marketable permits) to factories within that area. 🗸🗸 This means that each factory can pollute to a certain limit. 🗸🗸 It means that marketable permits are licenses that polluters can buy or sell to meet the control levels set by government. 🗸🗸

Education Incorporating topics into the curriculum of school fosters awareness. 🗸🗸 The public is gradually been made aware of this rising problem. 🗸🗸 Plastic, bottles and cartons can be recycled or made biodegradable. 🗸🗸

Public sector control If the government’s intervention does not attain the desired results, then it has to intervene more directly by setting and enforcing limits. 🗸🗸

Environmental Impact Assessment In SA every projected construction, mining or similar development has to undergo an assessment by qualified environmental professionals. 🗸🗸 To prove that it will not cause unwarranted environmental damage and that the damage can be repaired after construction. 🗸🗸 The cost if built into the project. 🗸🗸

Command and Control Regulations that are set and enforce environmental limits or standards. 🗸🗸 Quantity: e.g. set the limit to the amount of fish to catch, or limit the season catching certain species of fish. 🗸🗸 Quality: e.g. drinking water quality is carefully monitored and controlled. 🗸🗸 Air quality in workplace is subject to minimum standards. 🗸🗸 Social effect: e.g. noxious fumes from factories, dumping of medical waste near settlements, and noise pollution. 🗸🗸

Voluntary agreements Agreements between government and businesses voluntarily to address negative environmental impacts of industries. 🗸🗸 Businesses voluntary agree to decrease the emissions of pollutants. 🗸🗸 Most prefer negotiations so that they can tailor their specific needs and include it into their planning🗸🗸 Agreements can be formal, which is legally binding contract or informal. 🗸🗸 [Max 26]

ADDITIONAL PART Government does not exercise effective control over the continuous dumping of waste because of a lack of coordination between departments. 🗸🗸 The fines imposed on industries that dump waste are too lenient and they continue polluting the environment. 🗸🗸

The minimum standards set for hazardous gas and fuel emissions are not enforced or adjusted. 🗸🗸 The recycling of waste materials are not widely encouraged and promoted and landfill sites are overflowing. 🗸🗸 Government has various laws that is not really effectively implemented. 🗸🗸 Poor service delivery also adds to the problem in certain areas. 🗸🗸 [Accept any other relevant answer] [Max 10]

CONCLUSION Each and every individual, business and government needs to stand together to save our planet. [Accept any other relevant conclusion] [Max 2] Discuss in detail the following problems and the international measures taken to ensure sustainable development (Environmental Sustainability)

INTRODUCTION Environment refers to the physical surroundings and physical conditions that affect people’s lives. 🗸🗸 The ever-increasing pressure on our environment originates from increasing population numbers and excessive consumption🗸🗸 Our air, land, and water are under constant assault from the ever-growing ravages of man-made pollution generated chiefly by industrialized societies. 🗸🗸 [Accept any appropriate introduction] [Max 2]

BODY-MAIN PART Conservation

Conservation is necessary because human actions cause pollution and over-utilisation of resources. 🗸🗸
Conservation is a strategy aimed at achieving the sustainable use and management of natural resources. 🗸🗸
Conservation seeks a creative continuity of the environment while ensuring that change is sympathetic to the quality of life for both present and future generations. 🗸🗸
Certain aspects of conservation need to be taken into account.
Firstly, there is an opportunity cost. 🗸🗸
Secondly, externalities are often present. 🗸🗸
Lastly, self-interest has a short term horizon – meaning that decisions cannot be left entirely to market forces. 🗸🗸
Over utilization of resources causes a reduction in supply, increase in prices, contradiction of demand and a search for substitutes. 🗸🗸
This necessitates conservation of both renewable and non-renewable resources. 🗸🗸
Conservation has to be concerned with limiting what is harvested in order to maintain a stable stock at least at the minimum level. 🗸🗸
Government can use permits and quotas as two possible direct control methods in order to maintain the stock of resources at the minimum level. 🗸🗸

Preservation

Preservation involves any strategy undertaken to safeguard the environment, maintain its current condition and keep it as habitable as possible for people and animals. 🗸🗸
Heritage sites, indigenous forests, specifies of animals etc. that have special cultural or environmental significance, are often targeted preservation. 🗸🗸
Preservation is not likely to work as a private enterprise because the benefit to society is much bigger than the income of the producer. 🗸🗸
It may be possible to use cost-benefit analysis to calculate the social benefits of preservation of the environment.
The weaknesses in market solutions require the government to intervene in order to preserve environment assets. 🗸🗸
Government could do any of the following:
Buy or expropriate – Environmental assets are simply closed for human use. 🗸🗸
Subsidise-A subsidy would increase net benefits to the owner and raise the property’s present value. 🗸🗸
Controls – The government can compel the owner to apply control measures like restricting the quantities exploited or number of visitors allowed per day. 🗸🗸 [26 Max]

ADDITIONAL PART Stockholm Conference (1972)

The Stockholm Conference was the first major large scale international meeting on the environment convened with the support of the United Nations. 🗸🗸
The meeting agreed upon a declaration containing 26 principles concerning the environment and development, an action plan with 109 recommendations and a resolution. 🗸🗸
The meeting directly impacted on the environmental policies of many countries. 🗸🗸

Rio de Janeiro Earth Summit (1992)

This meeting acknowledged the importance of cooperation in addressing environmental concerns that threaten sustainability. 🗸🗸
The conference helped to make countries around the world aware of the dangers of unsustainable development. 🗸🗸
Unfortunately the principles outlined and accepted at the summit were not binding and subsequently many countries did not confirm to them. 🗸🗸

Rio + 5 (1997)

This conference noted that globalization made some countries poorer – 🗸🗸
In particular African countries and the least developed countries showed a low level of growth or even declined. 🗸🗸

Kyoto Protocol for Climate Change (1997)

Countries committed themselves to reducing their total emissions of greenhouse by 5 %.🗸🗸
Unfortunately, China was excluded from this agreement and the USA withdrew. 🗸🗸

World Summit on Sustainable Development (2002)

The objective of this summit held in Johannesburg was to conserve natural resources in a world that is growing in population. 🗸🗸
The meeting focused on issues like poverty eradication, water and sanitation, energy, health agriculture and biodiversity. 🗸🗸

COP 17 (2011)

The main goal of the conference held in Durban was to establish a treaty to limit carbon emissions and plan strategies to keep global temperature rise to less than 2 degree Celsius in the 21st Century. 🗸🗸
Although the framework for this treaty was established it was not finalised. 🗸🗸
The solution to our environmental problems will depend on our ability to make sound economic decisions that take account of the natural environment and to change our individual behaviour and attitudes. 🗸🗸 [Accept any other relevant conclusion] [Max 2]

Essays in International Trade and Public Economics

dc.contributor.author	Kalamova, Margarita
dc.date.accessioned	2019-01-10 23:55
dc.date.accessioned	2018-12-01 23:55:55
dc.date.accessioned	2020-01-13 15:28:01
dc.date.accessioned	2020-04-01T11:35:10Z
dc.date.available	2020-04-01T11:35:10Z
dc.date.issued	2018
dc.identifier	1003041
dc.identifier	OCN: 1082954280	en_US
dc.identifier.uri	http://library.oapen.org/handle/20.500.12657/26991
dc.description.abstract	The essays of this book are contributions to the empirical Literature in International Trade and Public Economics. They deal with the relationship between the structure and quality of the public sector and the process of economic integration. Two of the essays add to the empirical determinants of trade and foreign direct investment (FDI) and to the numerous applications of the theory of government decentralization. Decentralization tends to discourage inward FDI and domestic trade and to increase imports and exports. A third essay focuses on the effect of governments’ intangible assets – such as consumer perceptions about countries and products from these countries – on FDI. A country’s nation brand is shown to have a significant and large positive effect on investment flows.
dc.language	English
dc.relation.ispartofseries	Finanzwissenschaftliche Schriften
dc.subject.classification	thema EDItEUR::K Economics, Finance, Business and Management::KC Economics::KCA Economic theory and philosophy	en_US
dc.subject.classification	thema EDItEUR::K Economics, Finance, Business and Management::KC Economics::KCL International economics::KCLT International trade and commerce	en_US
dc.subject.classification	thema EDItEUR::K Economics, Finance, Business and Management::KC Economics::KCP Political economy	en_US
dc.subject.other	Economics
dc.subject.other	Essays
dc.subject.other	Federalism
dc.subject.other	Fiscal Decentralization
dc.subject.other	Foreign Direct Investment
dc.subject.other	International
dc.subject.other	Kalamova
dc.subject.other	Nation Brands
dc.subject.other	Panel Econometrics
dc.subject.other	Public
dc.subject.other	Trade
dc.title	Essays in International Trade and Public Economics
dc.type	book
oapen.identifier.doi	10.3726/b13718
oapen.relation.isPublishedBy	e927e604-2954-4bf6-826b-d5ecb47c6555
oapen.relation.isbn	9783631751626
oapen.series.number	122
oapen.pages	139
oapen.place.publication	Bern
oapen.identifier.ocn	1082954280

Files in this item

This item appears in the following Collection(s)

Imported or submitted locally

Export search results

The export option will allow you to export the current search results of the entered query to a file. Differen formats are available for download. To export the items, click on the button corresponding with the preferred download format.

A logged-in user can export up to 15000 items. If you're not logged in, you can export no more than 500 items.

To select a subset of the search results, click "Selective Export" button and make a selection of the items you want to export. The amount of items that can be exported at once is similarly restricted as the full export.

After making a selection, click one of the export format buttons. The amount of items that will be exported is indicated in the bubble next to export format.

Cookie Acknowledgement

This website uses cookies to collect information to improve your browsing experience. Please review our Privacy Statement for more information.

Administration
Toggle Search
Find People

Four Essays in International Trade and Economic Development

Type of degree.

Agricultural Economics and Rural Sociology

Restriction Status

Restriction type, date available.

This dissertation comprises four essays investigating the impact of trade agreements on trade outcomes and the relationship between export diversification and economic growth. Chapter 1 investigates the effect of the U.S. African Growth and Opportunity Act (AGOA) on Sub-Saharan African (SSA) countries’ exports to the U.S. We used synthetic control method and U.S.-AGOA data. The study reveals that AGOA member nations experienced a significant $818.11 million annual increase (42%) in exports compared to levels expected without AGOA. The impact varied across countries and product types, with agricultural, mineral, and textile/apparel exports surging annually by 42%, 15%, and 52%, respectively. This was validated using difference-in-differences and event study approaches, confirming the robustness of the findings. Chapter 2 focuses on the impact of Brexit on trade flows between the United Kingdom (UK) and the European Union (EU) and the rest of the world (ROW). I used trade data from BACI and CEPII Gravity Database. The study employed a difference-in-difference approach integrated into the gravity model framework and estimated using the Heckman selection model. Brexit led to reduced UK imports and exports values with both the EU and ROW, affecting durable and non-durable goods. In the UK, the import value from the EU decreased by 0.41%, whereas imports from the rest of the world (ROW) dropped by 0.20%. Specifically, imports of durable goods from the EU and ROW declined by 0.39% and 0.24%, respectively. Non-durable goods also saw decreases in imports, with a 0.41% fall from the EU and a 0.18% drop from the ROW. Conversely, UK exports faced declines as well, with a 0.86% decrease in total export value to the EU and a 0.47% decrease in export value to the ROW. Durable goods exports from the UK experienced a 0.64% decrease to the EU and a 0.61% decrease to the ROW. Non-durable goods exports followed a similar trend, declining by 0.91% to the EU and 0.43% to the ROW. These results are supported by robustness checks using various methods. Chapter 3 explores how the North American Free Trade Agreement (NAFTA) unrestricted sugar trade agreement impacted sugar consumption and diabetes prevalence in the United States. We applied methods including synthetic control method, difference-in-difference, and panel event-study to estimate the impact of the policy using sugar consumption and health data for seven countries. Post-agreement, US sugar consumption increased annually by 16% (5240g per capita), corresponding to a 1% annual rise in diabetes prevalence, incurring an estimated $324.37 million yearly. State-level impacts varied, notably affecting areas with specific demographic characteristics such as higher poverty level, greater Black population, lower percentage of the population with a high school degree, and higher percent female population. Chapter 4 investigates the relationship between export diversification and economic growth in thirty-nine Sub-Saharan African countries. We used macroeconomic data from United Nations Conference on Trade and Development (UNCTAD) and the Arellano-Bond difference generalized method-of-moment estimator, the study finds positive economic growth effects with better corruption control and governance quality, showcasing export diversification beyond the growth-optimized level. This was confirmed through robustness checks using country-fixed effect regression, ensuring the stability of the findings.

https://etd.auburn.edu//handle/10415/9119

Liberty Fund
Adam Smith Works
Law & Liberty
Browse by Author
Browse by Topic
Browse by Date
Search EconLog
Latest Episodes
Browse by Guest
Browse by Category
Browse Extras
Search EconTalk
Latest Articles
Liberty Classics
Search Articles
Books by Date
Books by Author
Search Books
Browse by Title
Biographies
Search Encyclopedia
#ECONLIBREADS
College Topics
High School Topics
Subscribe to QuickPicks
Search Guides
Search Videos
Library of Law & Liberty
Home /

ECONLIB CEE

International Trade

By arnold kling.

By Arnold Kling,

O n the topic of international trade, the views of economists tend to differ from those of the general public. There are three principal differences. First, many noneconomists believe that it is more advantageous to trade with other members of one’s nation or ethnic group than with outsiders. Economists see all forms of trade as equally advantageous. Second, many noneconomists believe that exports are better than imports for the economy. Economists believe that all trade is good for the economy. Third, many noneconomists believe that a country’s balance of trade is governed by the “competitiveness” of its wage rates, tariffs, and other factors. Economists believe that the balance of trade is governed by many factors, including the above, but also including differences in national saving and investment .

The noneconomic views of trade all seem to stem from a common root: the tendency for human beings to emphasize tribal rivalries. For most people, viewing trade as a rivalry is as instinctive as rooting for their national team in Olympic basketball.

To economists, Olympic basketball is not an appropriate analogy for international trade. Instead, we see international trade as analogous to a production technique. Opening up to trade is equivalent to adopting a more efficient technology. International trade enhances efficiency by allocating resources to increase the amount produced for a given level of effort. Classical liberals, such as Richard Cobden, believed that free trade could bring about world peace by substituting commercial relationships among individuals for competitive relationships between states. 1

History of Trade Theory

David Ricardo developed and published one of the first theories of international trade in 1817. “England,” he wrote, may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time….

To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England. 2

If a painter takes twenty hours to paint a house, and a surgeon could do the job in fifteen hours, it still makes sense for the surgeon to hire the painter. The surgeon can earn enough money in a few hours of surgery to pay for the entire house-painting job. We say that the surgeon’s comparative advantage is in doing surgery, while the painter’s comparative advantage is in painting houses. Ricardo’s theory of comparative advantage explains why a surgeon will hire a house painter and why a lawyer will hire a secretary.

The opportunity to trade with the painter enables the surgeon to paint her house by doing a few hours of surgery. Similarly, international trade enables one country to obtain cloth more cheaply by specializing in the production of wine and trading for cloth, rather than producing both goods for itself.

What determines the pattern of specialization and trade? In the 1920s, Eli Heckscher and Bertil Ohlin offered one theory, called the factor proportions model. The idea is that a country with a high ratio of labor to capital will tend to export goods that are labor-intensive, and vice versa.

The Ricardo and Heckscher-Ohlin theories tend to predict clear patterns of specialization in trade. A country will focus on one type of industry for exports and another type of industry for imports. In fact, the types of industries in which a country exports and the types in which it imports are not dramatically different. This fact has led to the emphasis on another theory of trade, developed by Paul Krugman and others. The idea is that patterns of specialization develop almost by accident and that these patterns persist because of positive feedback. This is known as the increasing-returns model of international trade. “Increasing returns” means that the more of something you produce, the more efficient you get at producing it.

In the United States, for example, Detroit became an automobile-manufacturing center. Once the first large automaker located in Detroit, it was natural that other auto companies would be started there because it was easier to find employees with the right skills. Likewise, people with the skills to produce movies were first located in Hollywood. It became uneconomical to try to build an auto plant in Hollywood or a movie studio in Detroit. Thus, Detroit became an exporter of automobiles, and Hollywood became an exporter of movies. The same model of efficiency explains the international arena—why, for example, the Swiss specialize in watches and the Japanese in portable music players.

Gains from Trade

All of the economic theories of international trade suggest that it enhances efficiency. In this regard, international trade is like a new technology. It adds to the productive capacity of all countries that engage in trade. Some of the efficiency is due to comparative advantage, as in the Ricardo and Heckscher-Ohlin theories. In addition, some efficiency comes from taking advantage of increasing returns.

Trade based on comparative advantage should tend to benefit small countries more than large countries. That is because the benefits of comparative advantage are proportional to the difference between the relative prices in world markets and the relative prices that would prevail in home markets without trade. If that difference is large, then a country earns a large advantage from trade. If that difference is small, then there is only a small advantage from trade. Small countries are more likely than large countries to find that relative prices in the world market differ significantly from what would prevail in their home markets.

Another benefit from trade is that it promotes dynamism and innovation within an economy. Improvements in manufacturing quality and productivity in the United States in recent decades have been credited, in part, to the pressure of competition from Japan and elsewhere.

An economy that is closed to trade is one in which inefficient industries and laggard firms are well protected. In fact, studies suggest that barriers to trade are a major cause of extreme underdevelopment. The countries that are most closed to trade tend to be the poorest in the world. Countries that have reduced trade barriers and increased the share of imports and exports in their economies tend to be among the fastest-growing nations.

According to a World Bank study, twenty-four developing countries that became more integrated into the world economy in the 1980s and 1990s had higher income growth, longer life expectancy, and better schooling. Per capita income in these countries, home to half the world’s population , grew by an average of 5 percent in the 1990s compared with only 2 percent in rich countries. China, India, Hungary, and Mexico are among the countries that adopted policies that allowed their people to take advantage of global markets. As a result, they sharply increased the amount of their GDP accounted for by trade. Real wages in these countries rose and the number of poor people fell.

The study also points out that two billion people—particularly in sub-Saharan Africa, the Middle East, and the former Soviet Union—are in countries being left behind. These countries’ integration into the world economy has not increased, and their ratio of trade to GDP has stagnated or fallen. Their economies have generally contracted, poverty has increased, and education levels have risen less rapidly than in the more globalized countries. 3

Another report notes that exports plus imports as a share of output among the richest countries rose from 32.3 percent to 37.9 percent between 1990 and 2001. Moreover, among developing countries, that share rose from 33.8 percent to 48.9 percent over that period. The success of India and China recently, and Japan, Taiwan, South Korea, and other countries in the 1970s and 1980s, is due in large part to trade. 4

The OECD countries, which together have more than $25 trillion in GDP, account for most of world trade. Poor countries account for less than $300 billion in GDP, which is less than one-tenth of world output, and thus account for only a miniscule fraction of world trade.

Purchasing Power Parity

If goods were perfectly tradable across borders, with no trade barriers or transactions costs, then there would be no reason for prices to differ. This gives rise to the idea of purchasing power parity, a theory of exchange-rate adjustment based on the law of one price.

If the same good sells for one hundred dollars in the United States and one hundred euros in Europe, then according to the law of one price the exchange rate between dollars and euros ought to be one. The theory of purchasing power parity is that this relationship holds for an overall market basket of goods and services.

Empirical tests tend to show only a weak tendency for exchange rates to move in the direction of purchasing power parity. This means that cross-border trade is not nearly friction free. The failure of purchasing power parity to hold, except perhaps in the long run, indicates that transportation costs, language-translation costs, and other factors limit the integration of global markets.

Capital Flows and the Balance of Trade

In 2000, U.S. exports were $1.1 trillion and U.S. imports were close to $1.5 trillion. The excess of imports over exports is called a current account deficit. What caused this deficit? Modern economists believe that the trade surplus and capital flows are mutually determined. When a nation’s domestic saving (personal saving plus retained earnings of corporations ) exceeds the domestic uses of saving (financing its private investment and its government budget deficit), then that nation will run a trade surplus, and vice versa.

Imagine that all international trade took place in the form of barter of goods and services. If you wanted to buy a Japanese car, you would have to offer something of equivalent value in return. In that case, trade in goods and services would have to balance, and there would be no trade deficits.

To obtain a Japanese car without trading goods and services, the Japanese have to accept financial assets in exchange for cars. These assets could be dollars, shares of U.S. companies, corporate bonds or other private debt instruments, or U.S. government debt. A country that is accumulating foreign assets will necessarily run a trade surplus. A country that is selling assets to foreigners will necessarily run a trade deficit. A country will accumulate assets when its domestic saving is greater than its domestic uses of saving. A country will sell assets when its national saving is insufficient for its domestic uses of saving.

Typically, one would expect wealthy countries to have excess saving and to invest in capital-poor countries. From this perspective, it is an anomaly that the United States is a capital importer and China is a capital exporter. However, the United States is a relatively attractive country in which to invest, and American policies tend to encourage consumption rather than saving.

Economic theory indicates that international trade raises the standard of living. A comparison between the performance of open and closed economies confirms that the benefits of trade in practice are significant.

About the Author

Arnold Kling is the author of Learning Economics, a nonmathematical introduction to economics. He was an economist at the Federal Reserve and at Freddie Mac before founding Homefair.com in 1994. His personal Web site is http://arnoldkling.com .

Essays in international trade

Other Contributors

Show Statistical Information

Essays on International Trade and Economic Growth

Embargo until, journal title, journal issn, volume title, description, collections.

An official website of the United States government

U.S. International Trade in Goods and Services, July 2024

News Release
Related Materials
Additional Information

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $78.8 billion in July, up $5.8 billion from $73.0 billion in June, revised.

U.S. International Trade in Goods and Services Deficit
Deficit:	$78.8 Billion	+7.9%°
Exports:	$266.6 Billion	+0.5%°
Imports:	$345.4 Billion	+2.1%°
Next release: Tuesday, October 8, 2024 (°) Statistical significance is not applicable or not measurable. Data adjusted for seasonality but not price changes Source: U.S. Census Bureau, U.S. Bureau of Economic Analysis; U.S. International Trade in Goods and Services, September 4, 2024

Goods and Services Trade Deficit: Seasonally adjusted

Exports, Imports, and Balance (exhibit 1)

July exports were $266.6 billion, $1.3 billion more than June exports. July imports were $345.4 billion, $7.1 billion more than June imports.

The July increase in the goods and services deficit reflected an increase in the goods deficit of $5.6 billion to $103.1 billion and a decrease in the services surplus of $0.2 billion to $24.3 billion.

Year-to-date, the goods and services deficit increased $36.2 billion, or 7.7 percent, from the same period in 2023. Exports increased $65.9 billion or 3.7 percent. Imports increased $102.1 billion or 4.5 percent.

Three-Month Moving Averages (exhibit 2)

The average goods and services deficit increased $1.3 billion to $75.7 billion for the three months ending in July.

Average exports increased $1.4 billion to $$264.2 billion in July.
Average imports increased $2.7 billion to $339.9 billion in July.

Year-over-year, the average goods and services deficit increased $10.5 billion from the three months ending in July 2023.

Average exports increased $12.3 billion from July 2023.
Average imports increased $22.8 billion from July 2023.

Exports (exhibits 3, 6, and 7)

Exports of goods increased $0.7 billion to $175.1 billion in July.

Exports of goods on a Census basis decreased $0.1 billion.

Passenger cars decreased $1.3 billion.
Gem diamonds decreased $0.7 billion.
Semiconductors increased $1.7 billion.

Net balance of payments adjustments increased $0.8 billion.

Exports of services increased $0.6 billion to $91.5 billion in July.

Government goods and services increased $0.3 billion.
Financial services increased $0.2 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods increased $6.4 billion to $278.2 billion in July.

Imports of goods on a Census basis increased $6.3 billion.

Computer accessories increased $2.4 billion.
Nonmonetary gold increased $1.1 billion.
Finished metal shapes increased $0.9 billion.

Net balance of payments adjustments increased $0.1 billion.

Imports of services increased $0.8 billion to $67.2 billion in July.

Charges for the use of intellectual property increased $0.5 billion.
Transport increased $0.3 billion.
Travel decreased $0.3 billion.

Real Goods in 2017 Dollars – Census Basis (exhibit 11)

The real goods deficit increased $6.3 billion, or 6.9 percent, to $97.6 billion in July, compared to a 6.6 percent increase in the nominal deficit.

Real exports of goods decreased $1.7 billion, or 1.2 percent, to $144.4 billion, compared to a less than 0.1 percent decrease in nominal exports.
Real imports of goods increased $4.6 billion, or 1.9 percent, to $242.0 billion, compared to a 2.3 percent increase in nominal imports.

Exports and imports of goods and services were revised for January through June 2024 to incorporate more comprehensive and updated quarterly and monthly data.

Revisions to June exports

Exports of goods were revised up $0.1 billion.
Exports of services were revised down $0.8 billion.

Revisions to June imports

Imports of goods were revised up $0.3 billion.
Imports of services were revised down $1.0 billion.

Goods by Selected Countries and Areas: Monthly – Census Basis (exhibit 19)

The July figures show surpluses, in billions of dollars, with Netherlands ($4.7), South and Central America ($4.2), Hong Kong ($1.8), Australia ($1.5), Belgium ($1.0), Brazil ($0.8), and United Kingdom ($0.8). Deficits were recorded, in billions of dollars, with China ($27.2), European Union ($18.4), Mexico ($13.6), Vietnam ($9.5), Taiwan ($8.3), Germany ($7.7), Canada ($7.6), Ireland ($6.6), South Korea ($5.7), Japan ($5.4), Italy ($3.6), India ($3.3), Switzerland ($3.2), Singapore ($1.6), Malaysia ($1.5), France ($1.2), Israel ($0.4), and Saudi Arabia (less than $0.1).

The deficit with China increased $4.9 billion to $27.2 billion in July. Exports decreased $1.0 billion to $11.5 billion and imports increased $3.9 billion to $38.7 billion.
The deficit with Canada increased $3.0 billion to $7.6 billion in July. Exports decreased $1.4 billion to $27.3 billion and imports increased $1.7 billion to $35.0 billion.
The deficit with Vietnam decreased $1.4 billion to $9.5 billion in July. Exports increased $1.0 billion to $2.1 billion and imports decreased $0.3 billion to $11.6 billion.

Goods and Services by Selected Countries and Areas: Quarterly – Balance of Payments Basis (exhibit 20)

Statistics on trade in goods and services by country and area are only available quarterly, with a one-month lag. With this release, second-quarter figures are now available.

The second-quarter figures show surpluses, in billions of dollars, with Netherlands ($19.9), South and Central America ($17.4), Australia ($8.8), Singapore ($8.2), Brazil ($7.3), Hong Kong ($5.0), United Kingdom ($3.8), Saudi Arabia ($2.2), and Belgium ($1.4). Deficits were recorded, in billions of dollars, with China ($60.5), Mexico ($42.9), European Union ($38.1), Vietnam ($30.8), Germany ($23.8), Taiwan ($17.1), Japan ($16.1), South Korea ($15.9), Italy ($13.3), India ($11.3), Canada ($7.1), Malaysia ($5.6), France ($5.2), Ireland ($4.1), Switzerland ($2.1), and Israel ($1.8).

The balance with Switzerland shifted from a surplus of $3.5 billion in the first quarter to a deficit of $2.1 billion in the second quarter. Exports decreased $3.8 billion to $18.7 billion and imports increased $1.8 billion to $20.8 billion.
The deficit with Vietnam increased $3.6 billion to $30.8 billion in the second quarter. Exports decreased less than $0.1 billion to $3.4 billion and imports increased $3.6 billion to $34.2 billion.
The deficit with China decreased $1.3 billion to $60.5 billion in the second quarter. Exports decreased $1.8 billion to $50.0 billion and imports decreased $3.1 billion to $110.5 billion.

All statistics referenced are seasonally adjusted; statistics are on a balance of payments basis unless otherwise specified. Additional statistics, including not seasonally adjusted statistics and details for goods on a Census basis, are available in exhibits 1-20b of this release. For information on data sources, definitions, and revision procedures, see the explanatory notes in this release. The full release can be found at www.census.gov/foreign-trade/Press-Release/current_press_release/index.html or www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services . The full schedule is available in the Census Bureau's Economic Briefing Room at www.census.gov/economic-indicators/ or on BEA’s website at www.bea.gov/news/schedule .

Next release: October 8, 2024, at 8:30 a.m. EDT U.S. International Trade in Goods and Services, August 2024

Full Release & Tables (PDF)

Tables only (excel), release highlights (pdf), historical comparisons (pdf), u.s. trade in goods and services, 1960-present (excel), u.s. trade in goods and services by selected countries and areas, 1999-present (excel), seasonal adjustment by selected countries and areas, frequently asked questions.

Goods Data Inquiries U.S. Census Bureau, Economic Indicators Division, International Trade 301-763-2311 [email protected]
Goods Media Inquiries U.S. Census Bureau, Public Information Office 301-763-3030 [email protected]
Services Data Inquiries Balance of Payments Division 301-278-9559 [email protected]
Services Media Inquiries Thomas Dail 301-278-9003 [email protected]

Explanatory Notes

Goods (Census basis)

Data for goods on a Census basis are compiled from the documents collected by U.S. Customs and Border Protection (CBP) and reflect the movement of goods between foreign countries and the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and U.S. Foreign Trade Zones. They include government and non-government shipments of goods and exclude shipments between the United States and its territories and possessions; transactions with U.S. military, diplomatic, and consular installations abroad; U.S. goods returned to the United States by its Armed Forces; personal and household effects of travelers; and in-transit shipments. The General Imports value reflects the total arrival of merchandise from foreign countries that immediately enters consumption channels, warehouses, or Foreign Trade Zones.

For imports, the value reported is the CBP-appraised value of merchandise—generally, the price paid for merchandise for export to the United States. Import duties, freight, insurance, and other charges incurred in bringing merchandise to the United States are excluded. The exception is exhibit 17a, which shows CIF import value. The CIF (cost, insurance, and freight) value represents the landed value of the merchandise at the first port of arrival in the United States. It is computed by adding import charges to the customs value and therefore excludes U.S. import duties.

Exports are valued at the f.a.s. (free alongside ship) value of merchandise at the U.S. port of export, based on the transaction price including inland freight, insurance, and other charges incurred in placing the merchandise alongside the carrier at the U.S. port of exportation.

Revision procedure (Census basis)

Monthly revisions: Monthly data include actual month's transactions as well as a small number of transactions for previous months. Each month, the U.S. Census Bureau revises the aggregate seasonally adjusted (nominal and real, or chained-dollar) and unadjusted export, import, and trade balance figures, as well as the end-use totals for the prior month. Country detail data and commodity detail data, based on the Standard International Trade Classification (SITC) Revision 4 and the North American Industry Classification System (NAICS), are not revised monthly. The timing adjustment shown in exhibit 14 is the difference between monthly data as originally reported and as recompiled.

For June 2024, unadjusted exports of goods were revised up $0.1 billion and unadjusted imports of goods were revised down less than $0.1 billion. Goods carry-over in July 2024 was $0.2 billion (0.1 percent) for exports and $0.1 billion (less than 0.1 percent) for imports. For June 2024, revised export carry-over was $0.1 billion (less than 0.1 percent) and revised import carry-over was less than $0.1 billion (less than 0.1 percent).

Quarterly revisions to chain-weighted dollar series: For March, June, September, and December statistical month releases, revisions are made to the real, or chained-dollar, series presented in exhibits 10 and 11: the previous five months are revised to incorporate the U.S. Bureau of Labor Statistics' (BLS) revisions to price indexes, which are used to produce the real series and to align Census data with data published by the U.S. Bureau of Economic Analysis (BEA) in the national income and product accounts (NIPAs).

Annual revisions: Each June, not seasonally adjusted goods data are revised to redistribute monthly data that arrived too late for inclusion in the month of transaction. In addition, revisions are made to reflect corrections received subsequent to the monthly revisions. Seasonally adjusted data are also revised to reflect recalculated seasonal and trading-day adjustments. These revisions are reflected in totals, end-use, commodity, and country summary data.

Other revisions: For December and January statistical month releases, each prior month of the most recent full year is revised so that the totals of the seasonally adjusted months equal the annual totals.

U.S./Canada data exchange and substitution

Data for U.S. exports to Canada are derived from import data compiled by Canada. The use of Canada's import data to produce U.S. export data requires several alignments in order to compare the two series.

Coverage - Canadian imports are based on country of origin. U.S. goods shipped from a third country are included. U.S. exports exclude these foreign shipments. For July 2024, these shipments totaled $289.0 million. U.S. export coverage also excludes U.S. postal shipments to Canada. For July 2024, these shipments totaled $33.4 million. U.S. import coverage includes shipments of railcars and locomotives from Canada. Effective with January 2004 statistics, Canada excludes these shipments from its goods exports to the United States, therefore creating coverage differences between the two countries for these goods.
Valuation - Canadian imports are valued at the point of origin in the United States. However, U.S. exports are valued at the port of exit in the United States and include inland freight charges, making the U.S. export value slightly larger than the Canadian import value. Canada requires inland freight to be reported separately from the value of the goods. Combining the inland freight and the Canadian reported import value provides a consistent valuation for all U.S. exports. Inland freight charges for July 2024 accounted for 1.6 percent of the value of U.S. exports to Canada.
Re-exports - Unlike Canadian imports, which are based on country of origin, U.S. exports include re-exports of foreign goods. Therefore, the aggregate U.S. export figure is slightly larger than the Canadian import figure. For July 2024, re-exports to Canada were $4,937.4 million.
Exchange Rate - Average monthly exchange rates are applied to convert the published data to U.S. currency. For July 2024, the average exchange rate was 1.3714 Canadian dollars per U.S. dollar.
Other - There are other minor differences, such as rounding error, that are statistically insignificant.

Canadian estimates: Effective with January 2001 statistics, the current month data for exports to Canada contain an estimate for late arrivals and corrections. In the following month, this estimate is replaced, in the news release exhibits only, with the actual value of late receipts and corrections. This estimate improves the current month data for exports to Canada and treats late receipts for exports to Canada in a manner that is more consistent with the treatment of late receipts for exports to other countries.

Nonsampling errors

The goods data are a complete enumeration of documents collected by CBP and are not subject to sampling errors. Quality assurance procedures are performed at every stage of collection, processing, and tabulation. However, the data are still subject to several types of nonsampling errors. The most significant of these include reporting errors, undocumented shipments, timeliness, data capture errors, and errors in the estimation of low-valued transactions.

Reporting errors: Reporting errors are mistakes or omissions made by importers, exporters, or their agents in their import or export declarations. Most errors involve missing or invalid commodity classification codes and missing or incorrect quantities or shipping weights. They have a negligible effect on aggregate import, export, and balance of trade statistics. However, they can affect the detailed commodity statistics.

Undocumented shipments: Federal regulations require importers, exporters, or their agents to report all merchandise shipments above established exemption levels. The Census Bureau has determined that not all required documents are filed, particularly for exports.

Timeliness and data capture errors: The Census Bureau captures import and export information from administrative documents and through various automated collection programs. Documents may be lost, and data may be incorrectly keyed, coded, or recorded. Transactions may be included in a subsequent month's statistics if received late.

Low-valued transactions: The total values of transactions valued as much as or below $2,500 for exports and $2,000 ($250 for certain quota items) for imports are estimated for each country, using factors based on the ratios of low-valued shipments to individual country totals for past periods.

The Census Bureau recommends that data users incorporate this information into their analyses, as nonsampling errors could impact the conclusion drawn from the results. See " U.S. Merchandise Trade Statistics: A Quality Profile " (October 2014) for a detailed discussion of errors affecting the goods data.

Area groupings

North America: Canada, Mexico.

Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR): Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua.

Europe: Albania, Andorra, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Georgia, Germany, Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Kazakhstan, Kosovo, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Monaco, Montenegro, Netherlands, North Macedonia, Norway, Poland, Portugal, Romania, Russia, San Marino, Serbia, Slovakia, Slovenia, Spain, Svalbard-Jan Mayen Island, Sweden, Switzerland, Tajikistan, Turkey, Turkmenistan, Ukraine, United Kingdom, Uzbekistan, Vatican City.

European Union: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Euro Area: Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain.

Pacific Rim: Australia, Brunei, China, Hong Kong, Indonesia, Japan, Korea (South), Macau, Malaysia, New Zealand, Papua New Guinea, Philippines, Singapore, Taiwan.

South/Central America: Anguilla, Antigua and Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Curacao, Dominica, Dominican Republic, Ecuador, El Salvador, Falkland Islands (Islas Malvinas), French Guiana, Grenada, Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Montserrat, Netherlands Antilles, Nicaragua, Panama, Paraguay, Peru, Sint Maarten, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos Islands, Uruguay, Venezuela.

Africa: Algeria, Angola, Benin, Botswana, British Indian Ocean Territories, Burkina Faso, Burundi, Cabo Verde, Cameroon, Central African Republic, Chad, Comoros, Congo (Brazzaville), Congo (Kinshasa), Djibouti, Egypt, Equatorial Guinea, Eritrea, Eswatini, Ethiopia, French Southern and Antarctic Lands, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte, Morocco, Mozambique, Namibia, Niger, Nigeria, Reunion, Rwanda, St. Helena, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, South Sudan, Sudan, Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe.

Adjustments for seasonal and trading-day variations

Goods are initially classified under the Harmonized Commodity Description and Coding System (Harmonized System), which is an internationally accepted standard for the commodity classification of traded goods. The Harmonized System describes and measures the characteristics of the goods and is the basis for the systems used in the United States: Schedule B for exports and Harmonized Tariff Schedule for imports. Combining trade into approximately 140 export and 140 import end-use categories makes it possible to examine goods according to their principal uses (see exhibits 7 and 8). These categories are used as the basis for computing the seasonal and trading-day adjusted data. These adjusted data are then summed to the six end-use aggregates for publication (see exhibit 6). The Census Bureau provides these data to BEA for use in the NIPAs and in the U.S international transactions accounts (balance of payments accounts).

Exhibit 19 shows goods (Census basis) that are seasonally adjusted for selected countries and world areas. Unlike the commodity-based adjustments discussed above, these adjustments are developed and applied directly at the country and world area levels. For total exports and imports, data users should refer to the commodity-based totals shown in the other exhibits. The seasonally adjusted country and world area data will not sum to the seasonally adjusted commodity-based totals because the seasonally adjusted country and world area data and the commodity-based totals are derived from different aggregations of the export and import data and from different seasonal adjustment models. Data users should use caution drawing comparisons between the two sets of seasonally adjusted series.

The seasonal adjustment procedure (X-13ARIMA-SEATS) is based on a model that estimates the monthly movements as percentages above or below the general level of series (unlike other methods that redistribute the actual series values over the calendar year). Because the data series for aircraft is highly variable, users studying data trends may wish to analyze trade in aircraft separately from other trade.

Adjustments for price change

Data adjusted for seasonal variation on a real, or chained-dollar, basis (2017 reference year) are presented in exhibits 10 and 11. This adjustment for price change is done using the Fisher chain-weighted methodology. The deflators are primarily based on the monthly price indexes published by the BLS using techniques developed for the NIPAs by BEA.

Principal commodities

Goods data appearing in exhibit 15 are classified in terms of the SITC Revision 4, with the exception of agricultural and manufactured goods. Agricultural goods are defined by the U.S. Department of Agriculture (USDA) based on World Trade Organization guidance; they consist of non-fishery food products, raw fibers, feeds, and derivatives. Manufactured goods conform to the NAICS; they consist of goods that have been mechanically, physically, or chemically transformed. USDA agricultural goods and NAICS manufactured goods are not mutually exclusive categories.

Re-exports are foreign merchandise entering the country as imports and then exported in substantially the same condition as when imported. Re-exports, which are included in overall export totals, appear as separate line items in exhibit 15.

Advanced technology products

About 500 of some 22,000 Schedule B and Harmonized Tariff Schedule classification codes used in reporting U.S. merchandise trade are identified as "advanced technology" codes, and they meet the following criteria:

The code contains products whose technology is from a recognized high technology field (e.g., biotechnology).
These products represent leading edge technology in that field.
Such products constitute a significant part of all items covered in the selected classification code.

The aggregation of the goods results in a measure of advanced technology trade that appears in exhibits 16 and 16a. This product- and commodity-based measure of advanced technology differs from broader NAICS-based measures, which include all goods produced by a particular industry group, regardless of the level of technology embodied in the goods.

Goods trade in the Advance Economic Indicators Report

In addition to the U.S. International Trade in Goods and Services report (FT-900), which is released jointly with BEA, the Census Bureau also releases advance statistics on international trade in goods, along with advance estimates on retail and wholesale inventories, in the Advance Economic Indicators Report ( Advance Report ). Trade statistics in the Advance Report, released on average 24 to 26 calendar days after the end of the reference month, reflect nearly complete coverage of goods trade, while statistics in the FT-900, released on average 34 to 36 calendar days after the end of the reference month, reflect complete coverage.

The Advance Report contains advance statistics for goods trade on a Census basis by principal end-use category, thus providing users an earlier high-level snapshot of U.S. international trade for the featured month. Commodity and country details and statistics for goods trade on a balance of payments (BOP) basis and for services trade are released several days later in the FT-900. See the Advance Report Frequently Asked Questions for more information.

The FT-900 is the primary source for the goods trade data used in BEA's quarterly gross domestic product (GDP) statistics. However, for the advance GDP estimate, FT-900 data for the third month are not yet available, so BEA uses data from the Advance Report. Because only goods trade on a Census basis by principal end-use category is available in the Advance Report, BEA applies adjustments, such as BOP and coverage adjustments, to the Advance Report statistics to produce detailed estimates for incorporation into the advance GDP estimate. See the "Key Source Data and Assumptions" table that accompanies each GDP release for more information.

Goods (BOP basis) and services

Quarterly and annual statistics for goods on a BOP basis and for services are included in the U.S. international transactions accounts (ITAs), which are published by BEA in news releases in March, June, September, and December and in the Survey of Current Business in January, April, July, and October. The next release of the ITAs is scheduled for September 19, 2024.

In addition, BEA releases detailed monthly and quarterly goods statistics , which consist of statistics on trade in goods by end-use category and commodity on both a Census basis and a BOP basis, and detailed annual services statistics , which consist of statistics on trade in services and on services supplied through affiliates of multinational enterprises. The services statistics provide detail on U.S. trade in services by type and by country and area and detail on services supplied through affiliates by industry and by country and area.

Goods (BOP basis)

Goods on a Census basis are adjusted by BEA to a BOP basis to align the data with the concepts and definitions used to prepare the international and national economic accounts. These adjustments, which are applied separately to exports and imports, are necessary to supplement coverage of the Census data, to eliminate duplication of transactions recorded elsewhere in the international accounts, and to value transactions at market prices. They include both additions to and deductions from goods on a Census basis and are presented in this release as net adjustments . Adjustments that exhibit significant seasonal patterns are seasonally adjusted. BEA also publishes more detailed quarterly and annual statistics for net adjustments in ITA Table 2.4. U.S. International Trade in Goods, Balance of Payments Adjustments .

The export adjustments include:

Gold exports, nonmonetary - This addition is made for gold that is purchased by foreign official agencies from private dealers in the United States and held at the Federal Reserve Bank of New York. The Census data only include gold that leaves the U.S. customs territory.

Goods procured in U.S. ports by foreign carriers - This addition is made for foreign air and ocean carriers' fuel purchases in U.S. ports.

Net exports of goods under merchanting - This addition is made to include the net value of the purchase and subsequent resale of goods abroad without the goods entering the United States. Because these goods do not cross the U.S. customs frontier, their value is not recorded in the Census data.

Other adjustments to exports include:

Deductions for equipment repairs (parts and labor), developed motion picture film, military grant-aid, and, for periods prior to 2010, goods identified in the Census data as exports under the Foreign Military Sales (FMS) program. Additions for sales of fish caught in U.S. territorial waters, exports of electric energy to Mexico, private gift parcels, military goods transferred through grants, vessels and oil rigs for which ownership changes, valuation of software exports at market value, low-value (below reporting threshold) transactions for 1999–2009 to phase in a revised Census Bureau low-value methodology that was implemented for goods on a Census basis beginning with statistics for 2010, and, for periods prior to 2010, FMS goods exports reported to BEA by the U.S. Department of Defense.

The import adjustments include:

Gold imports, nonmonetary - This addition is made for gold sold by foreign official agencies to private purchasers out of stock held at the Federal Reserve Bank of New York. The Census data only include gold that enters the U.S. customs territory.

Goods procured in foreign ports by U.S. carriers - This addition is made for U.S. air and ocean carriers' fuel purchases in foreign ports.

Imports by U.S. military agencies - This addition is made for purchases of goods abroad by U.S. military agencies, which are reported to BEA by the Department of Defense. The Census data only include imports of goods by U.S. military agencies that enter the U.S. customs territory.

Inland freight in Canada and Mexico - This addition is made for inland freight in Canada and Mexico. Imports of goods from all countries should be valued at the customs value—the value at the foreign port of export including inland freight charges. For imports from Canada and Mexico, this should be the cost of the goods at the U.S. border. However, the customs value for imports for certain Canadian and Mexican goods is the point of origin in Canada or Mexico. BEA makes an addition for the inland freight charges of transporting these goods to the U.S. border to make the value comparable to the customs value reported for imports from other countries.

Other adjustments to imports include:

Deductions for equipment repairs (parts and labor), repairs to U.S. vessels abroad, and developed motion picture film. Additions for non-reported imports of locomotives and railcars from Canada and Mexico, non-reported imports of aircraft, imports of electric energy from Mexico, conversion of vessels for commercial use, valuation of software imports at market value, and low-value (below reporting threshold) transactions for 1999–2009 to phase in a revised Census Bureau low-value methodology that was implemented for goods on a Census basis beginning with statistics for 2010.

The services statistics cover transactions between foreign countries and the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and other U.S. territories and possessions. Transactions with U.S. military, diplomatic, and consular installations abroad are excluded because these installations are considered to be part of the U.S. economy.

Services statistics are based on quarterly, annual, and benchmark surveys and information obtained from monthly government and private sector reports. For categories for which monthly data are not available, monthly statistics are derived from quarterly statistics through temporal distribution, or interpolation. The interpolation methodology used by BEA is the modified Denton proportional first difference method. This method preserves the pattern of the monthly indicator series, if available, while satisfying the annual aggregation constraints. See " An Empirical Review of Methods for Temporal Distribution and Interpolation in the National Accounts " (May 2008) for more information. Services are seasonally adjusted when statistically significant seasonal patterns are present.

Services are shown in eleven broad categories. The following is a brief description of the types of services included in each category:

Maintenance and repair services n.i.e. (not included elsewhere) - Consists of maintenance and repair services performed by residents of one country on goods that are owned by residents of another country. The repairs may be performed at the site of the repair facility or elsewhere. Excludes such services in which the cost is included in the price of the goods and is not billed separately or is declared as a part of the price of the goods on the import or export declaration filed with U.S. Customs and Border Protection. Maintenance and repair of computers are included under computer services, and some maintenance and repair of ships, aircraft, and other transport equipment are included under transport. Construction maintenance and repair are included under construction.

Transport - Consists of transactions associated with moving people and freight from one location to another and includes related supporting and auxiliary services. Transport covers all modes of transportation, including air, sea, rail, road, space, and pipeline. Postal and courier services and port services, which cover cargo handling, storage and warehousing, and other related transport services, are also included.

Travel (for all purposes including education) - Includes goods and services acquired by nonresidents while abroad. A traveler is defined as a person who stays, or intends to stay, for less than one year in a country of which he or she is not a resident or as a nonresident whose purpose is to obtain education or medical treatment, no matter how long the stay. Purchases can be either for own use or for gifts to others. Travel is a transactor-based component that covers a variety of goods and services, primarily lodging, meals, transportation in the country of travel, amusement, entertainment, and gifts. Travel excludes air passenger services for travel between countries, which are included in transport, and goods for resale, which are included in goods.

Travel includes business and personal travel. Business travel covers goods and services acquired for use by persons whose primary purpose for travel is for business (including goods and services for which business travelers are reimbursed by employers). Business travel also includes expenditures by border, seasonal, and other short-term workers in their economy of employment. Personal travel covers travel for all non-business purposes, including for medical or educational purposes.

Construction - Consists of the services provided to create, renovate, repair, or extend buildings, land improvements, and civil engineering constructions, such as roads and bridges. Additionally, in concept, inputs purchased by foreign construction contractors for projects in the United States are included in construction exports, and inputs purchased abroad by U.S. construction contractors are included in construction imports. However, in practice, data are not available to estimate inputs purchased by foreign contractors for projects in the United States, so BEA statistics on construction exports do not include this component.

Insurance services - Includes the direct insurance services of providing life insurance and annuities, non-life (property and casualty) insurance, reinsurance, freight insurance, and auxiliary insurance services. Insurance is measured as gross premiums earned plus premium supplements less claims payable, with an adjustment for claims volatility. Premium supplements represent investment income from insurance reserves, which are attributed to policyholders who are treated as paying the income back to the insurer. Auxiliary insurance services include agents' commissions, brokerage services, insurance consulting services, actuarial services, and other insurance services.

Financial services - Includes financial intermediary and auxiliary services, except insurance services. These services include those normally provided by banks and other financial institutions, such as securities brokerage and underwriting, financial management, financial advisory, and custody services; credit card and other credit-related services; and securities lending, electronic funds transfer, and other services. Financial services include services for which an explicit commission or fee is charged as well as implicit charges, such as (1) implicit fees for bond transactions, measured as the difference between bid and ask prices; (2) margins on buying and selling transactions (called market-making services); and (3) margins between interest payable and the reference rate on loans and deposits (called financial intermediation service charges indirectly measured, abbreviated as FISIM).

Charges for the use of intellectual property n.i.e. - Includes (1) charges for the use of proprietary rights, such as patents, trademarks, copyrights, and franchises, and (2) charges for licenses to reproduce and/or distribute intellectual property embodied in produced originals (such as copyrights on books and manuscripts, computer software, cinematographic works, and sound recordings) and related rights (such as for live performances and television, cable, or satellite broadcast). Charges for end-user rights to use general-use computer software and outright sales of customized computer software are included under computer services. Charges for end-user rights to use audiovisual content, such as film, television programming, and sound recordings, as well as outright sales of audiovisual originals, are included under audiovisual services, a component of personal, cultural, and recreational services.

Telecommunications, computer, and information services - Telecommunications services include the broadcast or transmission of sound, images, data, or other information by electronic means. These services do not include the value of the information transmitted. Computer services consist of hardware- and software-related services and data processing services. Sales of customized software and related use licenses, as well as licenses to use non-customized software with a periodic license fee, are also included, as is software downloaded or otherwise electronically delivered. Cross-border transactions in non-customized packaged software with a license for perpetual use are included in goods. Information services include news agency services, database services, and web search portals.

Other business services - Consists of research and development services, professional and management consulting services, and technical, trade-related, and other business services. Research and development services include services associated with basic and applied research and experimental development of new products and processes as well as outright sales of the outcomes of research and development (such as patents, copyrights, and information about industrial processes). Professional and management consulting services include legal services, accounting, management consulting, managerial services, public relations services, advertising, and market research. Amounts received by a parent company from its affiliates for general overhead expenses related to these services are included. Technical, trade-related, and other business services include architectural and engineering, waste treatment, operational leasing, trade-related, and other business services.

Personal, cultural, and recreational services - Consists of the following three subcategories: (1) audiovisual services, which covers production of audiovisual content, end-user rights to use audiovisual content, and outright sales and purchases of audiovisual originals; (2) artistic-related services, which includes the services provided by performing artists, authors, composers, and other visual artists; set, costume, and lighting design; presentation and promotion of performing arts and other live entertainment events; and fees to artists and athletes for performances, sporting events, and similar events; and (3) other personal, cultural, and recreational services, which includes services such as education services delivered online, remotely provided telemedicine services, and services associated with museum and other cultural, sporting gambling, and recreational activities, except those acquired by customers traveling outside their country of residence.

Government goods and services n.i.e. - Includes goods and services supplied by and to enclaves, such as embassies, military bases, and international organizations; goods and services acquired from the host economy by diplomats, consular staff, and military personnel located abroad and their dependents; and goods and services supplied by and to governments that are not included in other goods and services categories. Goods and services supplied by and to governments are classified to specific goods and services categories when source data permit.

Goods (BOP basis) and services by country and area

Monthly country and area detail is not available for goods on a BOP basis or for services. However, quarterly statistics on goods on a BOP basis and on services that are seasonally adjusted by geography are shown in exhibit 20. Unlike the seasonal adjustments by commodity and by service type that are applied to the global totals, these adjustments are developed and applied directly at the country and world area levels. For total exports and imports, data users should refer to the by-commodity and by-service type totals shown in the other exhibits. The seasonally adjusted country and world area data will not sum to the seasonally adjusted by-commodity and by-service type totals because the two sets of statistics are derived from different aggregations of the export and import data and from different seasonal adjustment models. Data users should use caution drawing comparisons between the two sets of seasonally adjusted series.

The definitions of the world areas shown in exhibit 20 are consistent with the definitions for goods on a Census basis (see Area groupings above) with a few exceptions. For services, CAFTA-DR is not available because trade with this area currently is not reviewed for seasonality. For goods on a BOP basis and for services, European Union reflects the composition of the areas at the time of reporting.

Revision procedure (goods on a BOP basis and services)

Monthly revisions : Each month, a preliminary estimate for the current month and a revised estimate for the immediately preceding month are released. After the initial revision, no further revisions are made to a month until more complete source data become available in March, June, September, and December.

Quarterly revisions : The releases in March, June, September, and December contain revised estimates for the previous six months to incorporate more comprehensive and updated source data.

Annual revisions : Each June, historical data are revised to incorporate newly available and revised source data, changes in definitions and classifications, and changes in estimation methods. Seasonally adjusted data are also revised to reflect recalculated seasonal and trading-day adjustments.

Other revisions : The release for December statistical month contains revisions to goods for January through November of the most recent year; the release for January statistical month contains revisions to both goods and services for all months of the most recent year. These revisions result from forcing the seasonally adjusted months to equal the annual totals.

Data availability

The FT-900 and the FT-900 Supplement are available at www.census.gov/ft900 or www.bea.gov/data/intl-trade-investment/international-trade-goods-and-services .

Census Bureau's application programming interface (API): The Census Bureau's API, available at www.census.gov/developers , lets developers create custom apps to reach new users and makes key demographic, socio-economic, and housing statistics more accessible than ever before.

BEA's data API: BEA's data API, available at apps.bea.gov/API/signup/ , provides programmatic access to BEA's published economic statistics using industry-standard methods and procedures.

An official website of the United States government

Here's how you know

The .gov means it’s official. Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.

The site is secure. A lock ( ) or https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Keyboard Navigation

Use these commands to navigate the primary menu and its sub menus via keyboard.
Function	Key
Primary menu:	↑
Sub menu:	↓
Primary menu:	Alt + o
Close menu:	Esc

Agriculture and Food Security
Anti-Corruption
Conflict Prevention and Stabilization
Democracy, Human Rights, and Governance
Economic Growth and Trade
Environment, Energy, and Infrastructure
Gender Equality and Women's Empowerment
Global Health
Humanitarian Assistance
Innovation, Technology, and Research
Water and Sanitation
Burkina Faso
Central Africa Regional
Central African Republic
Côte d’Ivoire
Democratic Republic of the Congo
East Africa Regional
Power Africa
Republic of the Congo
Sahel Regional
Sierra Leone
South Africa
South Sudan
Southern Africa Regional
West Africa Regional
Afghanistan
Central Asia Regional
Indo-Pacific
Kyrgyz Republic
Pacific Islands
Philippines
Regional Development Mission for Asia
Timor-Leste
Turkmenistan
Bosnia and Herzegovina
North Macedonia
Central America and Mexico Regional Program
Dominican Republic
Eastern and Southern Caribbean
El Salvador
Middle East Regional Platform
West Bank and Gaza
Dollars to Results
Data Resources
Strategy & Planning
Budget & Spending
Performance and Financial Reporting
FY 2023 Agency Financial Report
Records and Reports
Budget Justification
Our Commitment to Transparency
Policy and Strategy
How to Work with USAID
Find a Funding Opportunity
Organizations That Work With USAID
Resources for Partners
Get involved
Business Forecast
Safeguarding and Compliance
Diversity, Equity, Inclusion, and Accessibility
Mission, Vision and Values
News & Information
Operational Policy (ADS)
Organization
Stay Connected
USAID History
Video Library
Coordinators
Nondiscrimination Notice and Civil Rights
Collective Bargaining Agreements
Disabilities Employment Program
Federal Employee Viewpoint Survey
Reasonable Accommodations
Urgent Hiring Needs
Vacancy Announcements
Search Search Search

International Data & Economic Analysis (IDEA) Database

International Data & Economic Analysis (IDEA) Database allows USAID staff and partners to access and use country-level data from different third-party sources, including over 10,000 data series from over 200 sources. IDEA also offers various tools to facilitate identification and analysis of the data, such as IDEA Query, which contains source data from organizations such as the United Nations Food and Agriculture Organization and the World Bank. EMD uses the IDEA database and its tools to conduct analysis that informs USAID activity designs, country strategies, and evaluations.

IMAGES

International Trade and Global Marketing Free Essay Example
(PDF) Argumentative Essay on International Business and Trade
PPT
International Trade and Economic Bloc Free Essay Example
International Organisations and Free Trade Agreements Essay
Economic history-international trade essay

VIDEO

International trade: Nice South Africa
INTERNATIONAL ECONOMICS:AN INTRODUCTION TO INTERNATIONAL ECONOMICS 1
International Economics 06 International Trade Policy; Tariff and Non-Tariff Barriers to Trade
SSEI CFA L 1 Economics International Trade and Capital Flows
INTRODUCTION OF INTERNATIONAL ECONOMICS
INTERNATIONAL TRADE ||Class 12 Economics solutions #neb #nepal #commerce #economics #exercise #exam

COMMENTS

Economic Essays Grade 12
Economic Essays Grade 12
PDF ESSAYS ON INTERNATIONAL TRADE
Department of Economics June 2020 Title: Essays on International Trade Through trade policy actions, decades of global trade liberalization have resulted in lower formal trade barriers. However, there remain signi cant barriers to trade that fall outside the realm of traditional policy tools. This dissertation
PDF Essays in International Economics
include international trade, development, agricultural economics, and microeconomic theory. His most recent book is Eight Lectures on India's Economic Reforms (2000). The following Essay was delivered as the Frank D. Graham Memorial Lecture on April 13, 2000. A com-plete list of Graham Memorial Lecturers is given at the end of this volume ...
PDF ESSAYS ON INTERNATIONAL TRADE AND
University of Hawai'i - Manoa, 103D Miller Hall, 2515 Campus Road, Honolulu, Hawai'i 96822, USA. E-mail: [email protected]. ** Assistant Professor, College of Management and Economics at University of Electronic Science and Technology of China, No. 4 Section 2, North Jianshe Road, Chengdu, Sichuan 610054, China.
PDF Essays in International Trade and Macroeconomics
The thesis consists of three essays on international trade, macroeconomics and finance. In the first essay (joint with Marc de la Barrera and Masao Fukui), we study how the interaction between China's productivity growth and currency peg to the US dollar affected the labor market and trade imbalance in the United States. Empirically, we
Three essays on international trade
dc.description.abstract. This thesis consists of three essays about international trade and wage inequality. Essay I characterizes optimal trade and FDI policies in a model with monopolistic competition and firm-level heterogeneity similar to Helpman et al. (2004). I find that both the optimal import tariffs and the optimal FDI subsidies ...
Essays on International Trade and Economic Growth
In this dissertation I study the relationship between trade and economic growth, with a focus on developing economies. I specifically provide a critical review of the consensus view in trade and growth, according to which a liberal trade regime is generally the best policy stance to promote growth. In the first essay of this dissertation, I ...
PDF Three Essays in International Trade
This thesis is a collection of three essays in international trade. Chapter 1 explains how firm heterogeneity and market structure can distort the geography of international trade. By considering only the intensive margin of trade, Krugman (1980) predicts ... international economics by Rudi Dornbusch. Rudi embodied the spirit of elegance ...
Essays in International Trade and Public Economics on JSTOR
The present thesis is a collection of three essays in International Trade and Public Economics. They all deal with the relationship between the structure and quality of the public sector and the process of economic integration. Furthermore, all three of them use the tools and methods of panel data econometrics in their investigation analyses.
Essays in International Economics on JSTOR
Written form 1957 through 1978 by one of the foremost authorities in the field of international economics, this collection of Peter Kenen's previously published essays deals with issues in the pure theory of international trade, international monetary theory, and international monetary reform. The essays in Part I, "Trade, Tariffs, and Welfare ...
Essays in International Trade and Public Economics
The essays of this book are contributions to the empirical Literature in International Trade and Public Economics. They deal with the relationship between the structure and quality of the public sector and the process of economic integration. Two of the essays add to the empirical determinants of trade and foreign direct investment (FDI) and to ...
PDF Essays on Macroeconomics and International Trade
Essays on Macroeconomics and International Trade by Masao Fukui Submitted to the Department of Economics on May 19, 2021, in partial fulﬁllment of the requirements for the degree of Doctor of Philosophy in Economics Abstract This thesis consists of three essays. In the ﬁrst essay, I develop a new theory of wage rigid-ity and unemployment ...
PDF Essays on International Trade, Growth and Finance
Two concerns in international economics motivate the essays. I. Does foreign trade harm or foster growth?Two essays look at this question from di erent perspectives. The rst essay takes a dynamic general-equilibrium approach. Contrary to earlier partial-equilibrium models, the essay shows that trade can contribute to reducing the
International Trade: Commerce among Nations
International Trade: Commerce among Nations
PDF Essays on international trade
This dissertation makes a direct contribution to this literature by focusing on three related, but self-contained essays. Hence, while Chapter 1 of the thesis presents the general motivation and background of the three empirical essays, Chapter 2 examines how capital controls affect a country's export activities.
PDF Essays on international trade
While the first essay has undergone additional review process to make it into the thesis in its current format, its earlier versions has been published in International Economics Journal. The second essay is also expected to be submitted to a peer-reviewed journal, while the third essay is currently under a second round of review in a Journal. 143
Four Essays in International Trade and Economic Development
Metadata. This dissertation comprises four essays investigating the impact of trade agreements on trade outcomes and the relationship between export diversification and economic growth. Chapter 1 investigates the effect of the U.S. African Growth and Opportunity Act (AGOA) on Sub-Saharan African (SSA) countries' exports to the U.S.
International trade
Instant Access to A/AS/O-Level Exam Preparation Materials! Explore the world of international trade and economics with compelling essays on various topics. From international relations to the global business environment, find insightful ideas and examples in our collection. Discover the essence of global trade through engaging essays.
International Trade
International Trade
Essays in international trade
This thesis is a collection of essays on the effect of trade costs on international trade. Chapter 1 derives and empirically examines how factor proportions determine the structure of commodity trade when international trade is costly. It combines a many-country version of the Heckscher-Ohlin model with a continuum of goods developed by ...
Essays on International Trade, Protectionism and Financial Flows
Dissertation Director: Professor Thomas J. Prusa. This dissertation brings together three essays investigating the changing dynamics of international trade, protection and financial flows since the mid-1980s, a period marked by the beginning of sharp increases in the worldwide flows of goods and capital. In the first essay, I study empirically ...
International Trade: Benefits and Challenges
International trade, as a dynamic and influential force, shapes the global economy in profound ways. Its benefits encompass increased economic efficiency, foreign direct investment, economic growth, and a greater variety of products available to consumers. However, international trade also poses challenges in the form of trade disputes ...
Essays on International Trade and Economic Growth
My dissertation studies the dynamics of specialization patterns in relation to economic growth. The first chapter employs a quantitative framework to study whether and how knowledge diffusion could explain the cross-country convergence in industry-level productivity and its implications on specialization dynamics. The second chapter focuses on the network aspects of economic diversification in ...
U.S. International Trade in Goods and Services, July 2024
In addition to the U.S. International Trade in Goods and Services report (FT-900), which is released jointly with BEA, the Census Bureau also releases advance statistics on international trade in goods, along with advance estimates on retail and wholesale inventories, in the Advance Economic Indicators Report (Advance Report). Trade statistics ...
ChatWTO: An Analysis of Generative Artificial Intelligence and
Generative artificial intelligence could contribute an estimated $4.4 trillion annually to the global economy, reshaping industries and international trade. This white paper explores how this emerging technology is transforming global trade by enhancing productivity, streamlining supply chains, and creating new opportunities for cross-border ...
International Data & Economic Analysis (IDEA) Database
International Data & Economic Analysis (IDEA) Database allows USAID staff and partners to access and use country-level data from different third-party sources, including over 10,000 data series from over 200 sources. IDEA also offers various tools to facilitate identification and analysis of the data, such as IDEA Query, which contains source data from organizations such as the United Nations ...

Grade 12 Economic Essays for the Next Three-Year Cycle (2021-2023)

ESSAYS FOR THE NEXT THREE-YEAR CYCLE (2021-2023)

ECONOMIC PURSUITS-PAPER 1

Related Items

MICROECONOMICS-PAPER 2

CONTEMPORARY ECONOMIC ISSUES-PAPER 2

Related items

Essays in International Trade and Public Economics

Files in this item

This item appears in the following Collection(s)

Export search results

Four Essays in International Trade and Economic Development

Restriction Status

International Trade

History of Trade Theory

Gains from Trade

Purchasing Power Parity

Capital Flows and the Balance of Trade

About the Author

Further Reading

RELATED CONTENT By Douglas A. Irwin

Essays in international trade

Other Contributors

Essays on International Trade and Economic Growth

U.S. International Trade in Goods and Services, July 2024

Full Release & Tables (PDF)

Keyboard Navigation

International Data & Economic Analysis (IDEA) Database

IMAGES

VIDEO

COMMENTS