Trade in Eastern and South-eastern Asia

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Please note general characteristics of all essay answers (see document in the TEST UNIT), especially NO SUB-HEADINGS and following the exact wording of the question.
Topic 1: Trade in Eastern and South-eastern Asia
This must state the purpose and brief structure of the answer
Core of the Answer
This should specify the key characteristics of trade relations in the region (as shown in the document – Figure 1: Trade Matrix). This should include the proportion of world trade accounted for by the region, the growth of this proportion, the range of economies in the region, the special position of China. Reference should also be made to the ‘flying geese model of development.
Factors contributing to trade integration in the region
● Physical proximity (gravity model and supply chain resilience)
● Cultural affinities and tensions;
● The structure of trade in terms of inter-industry trade (for example commodities in one direction and manufactured goods in the opposite direction), intra-industry trade (for example in the shipbuilding industry or electronics with components in the production of final products moving between countries) and intra-firm trade (with goods moving within corporate networks, offshoring, near-shoring and reshoring of production). Reference should be made to trade theories, notably comparative costs theory and new trade theory (including industrial location theory).
● Political factors (notably political relations between states in the region and between countries in the region with China, the EU and the US)
● Regulatory factors notably trade agreements (multilateral, plurilateral and bilateral). Some trade agreements only cover tariff reduction, leaving significant non-tariff barriers – for example local content requirements)
All answers must end with a short conclusion that refers back to the question and the arguments put forward in the core of the answer. Why has the region become more integrated in trade.
Essential Documents to Consult
Trade, Trade Theory and Trade Policy documents plus the SE Asia Trade Matrix documents in the UNIT INTERNATIONAL TRADE. PLUS additional reading
Topic 2: US fiscal policy
In 2021 the United States shifted from reliance on monetary policy for the promotion of economic growth to an emphasis on fiscal policy to stimulate recovery from the effects of the pandemic, illustrated by the $1.9 trillion ‘American Rescue Plan’. This was followed by proposed further stimulus plans that could bring the total stimulus to 4.5-5 trillion dollars, or one quarter of US GDP. This topic looks at how useful the circular flow of income model can be in identifying the main domestic and overseas impacts of this extremely large stimulus.
This must state the purpose and brief structure of the answer
Core of the Answer
● Provide some context in the form of the scale of monetary policy easing in the period from the Great Financial Crisis to the present. A brief comment on why there has been a shift towards fiscal policy and the scale of recent fiscal policy intervention, notably the 1.9tn American rescue Plan. Comment also on the paradigm shift towards a stronger role for government in the economy and renewed support for Keynesian policy
● Show an understanding of the circular flow of income model (the model can be cut and pasted from the document on ‘Economies – Explanation’).
● Explain how the impact of additional government spending impacts the economy by injecting money into it but how these injections may leak away through higher savings, taxes and imports. The latter mean that injections in the US also impact economies from where the US buys its imports.
● Assess the usefulness of the model against the points mentioned above but also on what is absent from the model. The neglect of the monetary side of the economy, the growth of government deficits and debt, the potential impact on inflation and thus upward pressure on interest rates. Inside the US higher interest rates would increase borrowing costs and thus slow down business growth. Higher rates could also lead to a strengthening of the dollar, which would make it more expensive for overseas countries and businesses that have dollar denominated loans to service these loans.
● The lack any indication in the model of how the impact of government spending depends on what the government chooses to spend money on. Examples of different types of government spending and their impact on the economy. Reference could be made here to the greater income and employment multiplier effects of some types of spending.
● The limited indication in the model of what happens to additional government spending once it enters the economy (for example, what people spend money on -they may spend it on domestically produced goods and services, but also on imports, assets (such as houses and stocks)
All answers must end with a short conclusion that refers back to the question and the arguments put forward in the core of the answer. Is the model a useful starting point for analysing the usefulness of the model?
Essential Documents to Consult
Economies – Explanation in the UNIT ECONOMIES- EXPLANATION. The role of the state, Fiscal Policy in the UNIT THE ROLE OF THE STATE, PLUS additional reading
Topic 3: The economics of climate change
This topic looks at how states can promote the reduction of greenhouse gas emissions and switching to a low-carbon economy through regulation, taxes and subsidies, and carbon pricing schemes.
This must state the purpose and brief structure of the answer
Core of the Answer
● Climate change as a global phenomenon and not one that can be solved by individual states, the goals of climate change policy around the world and the reasons behind these goals, and the nature of a low carbon economy.
● Distinguish between government led initiatives and market led ones such as pressures from banks through their credit policies, from financial regulators on financial activities and consumers in contributing towards the shift to low carbon economies.
● Market failure and the externalities of greenhouse gas emissions
● Disruptive technologies emerging from the shift to low-carbon economies
Policies for switching to low carbon economies
● Explanation of forms of regulation, taxes and subsidies, and carbon pricing schemes (cap and trade, carbon credits, offsetting credits)
● The global nature of the climate change challenge and the diversity of national commitments
● The political problems and economic costs of direct government intervention through regulation, taxes and subsidies and the issues associated with carbon trading schemes, notably the reduction in competitiveness of national industries in relation to external industries.
● Carbon border taxes under WTO trade rules, protectionism and trade retaliation.
All answers must end with a short conclusion that refers back to the question and the arguments put forward in the core of the answer. It should make clear what you consider from your arguments to be the most important issues.
Essential Documents to Consult
The document Climate Change in the UNIT CLIMATE CHANGE. PLUS additional reading

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