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Development in an African Context

Free trade, trade blocs and protectionism

  • 3 things to know
  • Component 3 Section B

Overview

Free trade, tariff escalation and its effect on Ghana and share of world cocoa grown by Ghana and Côte d'Ivoire.

What you need to know

Answer each one before you reveal it.

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Key term

Define free trade.

Key term

What is a tariff?

Key term

Explain tariff escalation and its effect on Ghana.

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    Define free trade.

    Model answer

    Free trade is the exchange of goods between countries without tariffs, quotas or other barriers. Producers in principle sell wherever they are most competitive.

  2. 2

    What is a tariff?

    Model answer

    A tariff is a tax charged on an imported good at the border. The tax raises the price to consumers and shelters domestic producers.

  3. 3

    Explain tariff escalation and its effect on Ghana.

    Model answer

    Tariff escalation means importing countries charge higher duties on processed goods than on raw materials. Ghana can ship cocoa beans freely but faces duties on chocolate, so processing stays abroad.

  4. 4

    State the share of world cocoa grown by Ghana and Côte d'Ivoire.

    Model answer

    Ghana and Côte d'Ivoire together grow around 60% of the world's cocoa beans. The two countries capture only a small fraction of the value of the chocolate industry.

  5. 5

    What is the Living Income Differential?

    Model answer

    The Living Income Differential is a premium of $400 a tonne charged on cocoa sales by Ghana and Côte d'Ivoire. The two governments introduced the charge from the 2020 to 2021 season to lift farmer incomes.

  6. 6

    Define a quota in international trade.

    Model answer

    A quota is a physical limit on the quantity of a good that may be imported. The limit shelters domestic producers even where foreign goods are cheaper.

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