Evaluate the impact on SF of country B becoming a member of the NFTA international trading agreement.

Mark scheme

Marking points from the official mark scheme (May/June 2024). The mark or mark type is shown in brackets.

1. Free trade area removes tariffs and quotas between member states but allows country B to set tariffs against non-member states.
2. Reduce cost of trading between countries.
3. Increased competition.
4. Reduce import costs.
5. Increased potential ability to export products.
6. Reduce cost of fertiliser imports from country D.
7. A member of the NFTA is one of the largest producers of soya in the world.
8. High income of NFTA member states.
9. Membership will facilitate exports of Sosoy Ice Cream.
10. Country B currently has tariffs on agricultural commodities and processed food products.
11. SF's manufactured products are likely to be income elastic.
12. Removal of tariffs will reduce the cost of importing fertiliser and therefore reduce the costs of producing soya and maize AN. Therefore, potential increase in profit margins or can reduce prices to increase sales L2AN.
13. Free trade will increase competition from member states of NFTA which may result in lower sales for SF AN and reduce revenue and profit L2AN.
14. Increase in consumer incomes due to free trade will increase demand for food products that SF sells AN
15. As member states are high income countries free trade should enable SF to take advantage of likely demand for its food products AN and can increase exports L2AN
16. Elements that the evaluation/judgement might depend on: Impact on costs depends on proportion of imported inputs used in the production process.
17. Increased competition in the soya market likely to have significant impact as the product is undifferentiated so SF will have to reduce the price of its soya beans sold to manufacturers of soymeal and soy oil.
18. Export success of SF manufactured foods will depend on brand loyalty that exists in country D and other member states.
19. Supported identification of most important factor or consequence.