A-LevelEconomicsInternational economic issues9708/23 · May/June 2020 · Q420 Marks

Explain why the theory of comparative advantage may not give a true account of the benefits of free trade.

(a)Explain why the theory of comparative advantage may not give a true account of the benefits of free trade.[8]
(b)In April 2018, the United States (US) government threatened to impose tariffs of 25% on a wide range of imports from China including steel, technological products, medicines and household goods such as washing machines. In turn, China threatened to retaliate with the same proposed tariff on imports from the US of soya beans, cars and chemicals. Discuss whether the US and China could both benefit from the imposition of tariffs on goods such as those identified.[12]

Mark scheme

Marking points from the official mark scheme (May/June 2020). The mark or mark type is shown in brackets.

[2] of comparative advantage: Lower opportunity cost of producing a product because of differing resources (1 mark) leads to specialisation and trade (1 mark)
[6] For consideration of the reasons why the law of comparative advantage may not lead to benefits through trade. (Up to 2 marks for each reason explained)
[4] For an explanation of how each country might benefit from the imposition of tariffs (Up to 4 marks)
[4] For an explanation of how each country might lose from the imposition of tariffs (Up to 4 marks)
[4] With 1 mark reserved for a clear final conclusion of whether both countries might benefit.

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