Trade Agreements, Trading Blocs and Globalisation - Worksheets, Questions and Revision

8 original exam-style questions - 2 pages of questions with a full mark scheme - free printable PDF.

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This topic is chapter 11 of A Level Economics: Macroeconomics Practice Book 2.

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2.25 Trade Agreements, Trading Blocs and Globalisation

AQA 7136 · Calculators not allowed · about 65 minutes

Total Marks

Name: _______________________________ Date: ____ / ____ / ______

Answer all questions. Full sentences are required for questions worth 4 marks or more. Allow about 90 minutes for the whole pack.

Define globalisation as the growing economic interdependence of national economies, and state one way technological change has accelerated globalisation in recent decades.

(Total for Question 1 is 2 marks)

Define a customs union and state one advantage it has over a free trade area for reducing trade costs inside the bloc, with reference to a regional bloc such as the East African Community considering deeper integration.

(Total for Question 2 is 2 marks)

Evaluate the view that globalisation has been a net benefit for developing countries over the last forty years. In your answer, consider economic growth, inequality, sovereignty and the role of multinational companies, and draw a supported conclusion. You should refer to diagrammatic or empirical reasoning where appropriate and consider counterarguments.

Evaluate the view that globalisation has been a net benefit for developing countries over the last forty years.

(Total for Question 3 is 25 marks)

Define a common market and name one additional freedom it permits beyond a customs union, in the context of the European Economic Community moving towards a single market.

(Total for Question 4 is 2 marks)

Define a monetary union and state one cost that members may face when joining a monetary union such as the Eurozone.

(Total for Question 5 is 2 marks)

Define the role of the World Trade Organization (WTO) in the multilateral trading system, naming one function it performs in promoting trade liberalisation and cooperation among nations.

(Total for Question 6 is 2 marks)

Explain the WTOs dispute settlement role, in the context of a small economy using the WTO to challenge higher tariffs imposed by a larger trading partner.

(Total for Question 7 is 3 marks)

Explain two possible effects that multinational corporations (MNCs) can have on host developing countries, using real-world logic about investment, employment and technology transfer.

(Total for Question 8 is 4 marks)

Mark scheme · 2.25 Trade Agreements, Trading Blocs and Globalisation

Question 1

B1 globalisation is the increasing economic integration and interdependence of countries through trade, capital flows, migration and the spread of technology
B1 example technological driver: improvements in telecommunications and the internet have lowered transaction costs and enabled global supply chains and services trade
Answer: Globalisation is increasing economic integration and interdependence between countries; the internet and improved telecommunications have accelerated it by lowering transaction costs and enabling global supply chains.

Question 2

B1 a customs union is a group of countries that remove internal tariffs between members and adopt a common external tariff on imports from non-members
B1 advantage: eliminates the need for complex rules of origin and some border checks between members, reducing administrative costs and delays
Answer: A customs union removes internal tariffs and sets a common external tariff; it reduces administrative and border checks because members do not need rules of origin checks between themselves.

Question 3

Level 1 (1-5): Basic statements about globalisation and developing countries with limited development or evidence, little or no evaluation, and no clear conclusion.
Level 2 (6-10): Clear description of benefits and costs of globalisation with some use of examples or reasoning, partial evaluation of trade offs, but limited depth or balance and a weakly supported conclusion.
Level 3 (11-15): Well developed analysis using economic reasoning and examples, considers multiple arguments for and against including issues of growth, inequality, sovereignty and MNCs, assesses strengths and weaknesses of each argument and reaches a supported and balanced conclusion.
Level 4 (16-20): Detailed and well balanced evaluation, integrates quantitative or diagrammatic reasoning, examines distributional impacts and policy responses, challenges assumptions and provides a justified conclusion with clear nuance.
Level 5 (21-25): Comprehensive evaluation that synthesises multiple lines of evidence and theory, critically examines causation and counterfactuals, provides policy-relevant implications and a clear, well argued judgement referencing both empirical and theoretical considerations.
Indicative content:
- Arguments that globalisation has benefited developing countries: faster economic growth through access to larger markets and foreign investment, export-led growth examples (East Asia), technology transfer from FDI raising productivity, access to cheaper imports raising consumer welfare, and potential fiscal gains from tax revenues and improved infrastructure via investment.
- Arguments that globalisation has harmed or yielded mixed outcomes: rising within-country inequality and uneven distribution of gains, dependence on volatile global markets and capital flows increasing vulnerability to external shocks, profit repatriation by MNCs limiting local value capture, and erosion of policy space and sovereignty when countries feel forced to liberalise quickly.
- Consideration of sectoral and country differences: low-income commodity exporters may have experienced weaker benefits than manufacturing exporters; some countries attracted sustainable investment and industrialisation while others remained trapped in low-value activities.
- Evaluation points: magnitude and timing of effects, the role of domestic institutions and governance in shaping outcomes, how complementary policies (education, infrastructure, industrial policy) affect the ability to capture gains, and whether short-term shocks are offset by long-term structural improvements.
- Use of diagrams or empirical reasoning: supply and demand for labour and potential effect on real wages, Lorenz curve or Gini discussions for inequality, or a hypothetical growth path comparison with and without openness to illustrate cumulative gains.
- Policy implications and mitigations: selective liberalisation, investment in human capital, taxation and redistribution, stronger bargaining and regulation of MNCs, regional cooperation to improve bargaining power.
- Conclusion should weigh the evidence, noting that globalisation has brought substantial opportunities and growth for many developing countries but that benefits are uneven, and that domestic policy choices and institutions determine whether globalisation is a net benefit.

Question 4

B1 a common market is a customs union that also allows the free movement of factors of production between member countries
B1 additional freedom: free movement of labour or capital, for example workers can move and work freely across member states
Answer: A common market combines a customs union with free movement of factors of production; for example it allows workers and capital to move freely between members.

Question 5

B1 a monetary union is a group of countries that adopt a single currency and a common monetary policy
B1 cost: loss of independent monetary policy, so members cannot set their own interest rates or devalue their currency to respond to country-specific shocks
Answer: A monetary union adopts a single currency and common monetary policy; a cost is the loss of independent interest rate and exchange rate policy to respond to country-specific shocks.

Question 6

B1 the WTO is an international organisation that provides a framework of rules for international trade between member countries
B1 function: administers trade agreements, monitors members compliance and facilitates negotiations aimed at liberalising trade
Answer: The WTO provides an international rules-based framework for trade and facilitates negotiations; it administers trade agreements and monitors member compliance to promote multilateral liberalisation.

Question 7

B1 the WTO operates a dispute settlement mechanism that allows members to bring complaints against other members alleged to violate WTO rules
B1 the mechanism provides panels and an appeals process to investigate and rule on disputes, giving smaller economies a formal route to challenge larger partners
B1 if a violation is found the WTO can authorise remedies such as allowing retaliatory measures or recommending adjustments, encouraging compliance with agreed rules
Answer: The WTO offers a formal dispute settlement system where members can bring complaints, panels and appeals examine the case, and remedies can be authorised to enforce compliance, helping smaller countries challenge larger partners under common rules.

Question 8

M1 identifies effect: MNCs can bring foreign direct investment, creating jobs and raising incomes in the host country
A1 development: investment often funds factories and services and can reduce unemployment and increase tax revenues if repatriation is limited
M1 identifies effect: MNCs can transfer technology and management skills to local firms and workers
A1 development: this can raise productivity and help build local capabilities, though gains depend on local absorptive capacity and linkages to the domestic economy
Answer: MNCs can provide FDI that creates employment and raises incomes, and can transfer technology and management skills that increase productivity; the benefits depend on factors such as repatriation, local linkages and absorptive capacity.

Trade Agreements, Trading Blocs and Globalisation - Worksheets, Questions and Revision

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