Quick questions on Free trade, comparative advantage and protection: HSC Economics Topic 1

Trade according to comparative advantage delivers:

The WTO is the multilateral body that administers world trade rules and dispute resolution. Created in 1995 as successor to the GATT. Three pillars: trade in goods, trade in services (GATS), and intellectual property (TRIPS). Decisions are by consensus among 164 member economies.

A free trade agreement (FTA) is a treaty between two or more countries that progressively eliminates tariffs and other barriers between them. Australia is party to 17 FTAs, including:

Suppose Australia and Japan can each produce wheat or cars with one unit of labour:

A tax on imports. Raises the price of imports, reduces import volume, raises domestic price, transfers some surplus from consumers to domestic producers and the government, and creates a deadweight loss.

A government payment to domestic producers. Shifts the domestic supply curve right, reduces the import price gap, transfers from taxpayers to producers, and creates a deadweight loss similar to a tariff (but no government revenue).

A quantitative limit on imports. Raises the domestic price like a tariff but the revenue goes to the importer holding the quota licence rather than the government.

Require firms to use a specified percentage of domestic inputs. Common in defence and automotive procurement. Distort input choice and raise production cost.

A labelled two-country, two-good table with the opportunity-cost calculation shown earns marks a verbal description alone cannot; markers are trained to look for the arithmetic.

Producer surplus gain, government revenue and the two deadweight-loss triangles - in that order - every time a tariff or subsidy question appears, even if the diagram was not explicitly requested.

"The US has imposed tariffs on Chinese imports since 2018" or "Australia is party to 17 FTAs including RCEP (2022)" earns marks a vague claim like "some countries protect their industries" cannot.