feenstrataylorintltrade3_quiz

Chapter 11 HEADLINES: China-ASEAN Treaty Threatens Indian Exporters

To read the Headline text before answering the questions, click here.

Questions to Consider

After reading China-ASEAN Treaty Threatens Indian Exporters, consider the question(s) below. Then “submit” your response.

Question

1. What is the advantage of a Free Trade Area over just reducing tariffs unilaterally, given that tariffs are generally welfare reducing?

Countries often require an agreement—or commitment—in order to agree to reduce trade barriers bilaterally. Also, tariffs are not always welfare reducing. If the country is large, a tariff may even generate increased social welfare.)

Question

2. Discuss how the China-ASEAN Free Trade Area results in trade creation.

Trade creation would include any new trade created (not existing before the FTA) between China, Brunei, Indonesia, Malaysia, the Philippines, Singapore and/or Thailand.

Question

3. Discuss how the China-ASEAN Free Trade Area results in trade diversion.

Trade diversion would include any trade diverted because of the FTA. That is, trade that previously existed between one of the FTA member countries (e.g., China) and a non-member country (e.g., India) that was diverted from India to intra-FTA trade between FTA member countries as a result of the agreement.