For many years the USA did not conduct normal trading relations with Vietnam. In 2001 a trade agreement was signed between the two countries which reduced tariffs, encouraged foreign direct investment and opened up export markets.
a. How does the theory of comparative advantage explain why a developed country such as the USA might wish to trade with a developing country such as Vietnam?  b. Discuss what effect such a trade agreement might have on the economies of the participating countries. 
Although most candidates made a reasonable response to this question, part (b) of the question once again produced a generally disappointing discussion. Part (a) discriminated well, with a number of well-prepared candidates producing the top (Level 3) marks.
(a) This part was answered well by those candidates who understood comparative advantage and could illustrate their answer with a numerical example. A significant number of candidates described comparative advantage correctly but then used a numerical example of absolute advantage. Below this were those answers that could only describe good reasons for trade.
(b) This part was less well done for two main reasons. First, many candidates failed to apply their answers to the specific countries i.e. Vietnam and the USA. Secondly, points were often stated rather than explained. Weaker answers tended to give one side of the argument only. The best answers in contrast gave good well-balanced discussion, which, as required, was clearly applied to the developed, and developing, economy cases. Many answers were spoilt by too much generalized comment.
● Teach the students to use schematic planning to answer this question. ● Lead them to come up with both the thesis and anti-thesis statements.
Note: This question requires the student to explain and discuss the potential consequences (both positive/negative) when a developed and a less developed country open up their respective economies to international trade and investments
| | | |INTRODUCTION | | | | | |BODY | | | | | |THESIS |ANTI-THESES | |Such a trade agreement brings about benefits to the economies of the |Such a trade agreement brings about problems to the economies of the | |participating countries. |participating countries. | | | | | |Any evaluation/Critical Comments? | |Effects on economy: One should think of the impact on 4 macro goals | | |(namely impact on growth, employment, general price and BOP) and 2 | | |micro goals (resource allocation and income disparity). | | |...