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Question 23M.2.SL.TZ0.g

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Date May 2023 Marks available [Maximum mark: 15] Reference code 23M.2.SL.TZ0.g
Level SL Paper 2 Time zone TZ0
Command term Discuss Question number g Adapted from N/A
g.
[Maximum mark: 15]
23M.2.SL.TZ0.g

Using information from the texts/data and your knowledge of economics, discuss the impact of economic integration on the Uruguayan economy.

[15]

Markscheme
 
Command term
“Discuss” requires candidates to offer a considered and balanced review that includes a range of arguments, factors, or hypotheses. Opinions or conclusions should be presented clearly and supported by appropriate evidence.
 
Responses may include:
  • a definition of economic integration
  • a definition of a common market
  • a definition of a free-trade agreement
  • diagrams (eg AD/AS, tariff, quota).
  • The advantages of membership of the MERCOSUR common market and EU - MERCOSUR free trade agreement:
    • Greater access to a market of 290 million consumers through the MERCOSUR common market and possibility to access the markets of the 27 members of the EU; offer potential for economies of scale for Uruguayan producers who would otherwise be limited to the small size of the domestic market (Text A, paragraph 1 and Text B, paragraph 1).
    • Increase in export revenue has contributed to economic growth and higher real GNI per capita (Text A, paragraphs 2 and 3, Table 2) and poverty reduction (Text A, paragraph 5; Table 2). Although the country benefitted significantly from exports to China, which is not a member of either trade bloc (Text A, paragraph 2).
    • Membership to the EU-MERCOSUR free trade agreement may lead to greater exports to the EU (Text B, paragraphs 1 and 2) and may help restore Uruguay’s growth rate (Text A, paragraph 3). This could be contrasted with the negative/low balance of trade (table 1). But quotas, which cause inefficiencies and higher prices, remain for some items (Text B, paragraph 2).
    • With freedom of movement of labour within MERCOSUR, there are greater employment opportunities. However, the freedom of movement might have contributed to the unemployment rate (Text A, paragraph 5).
    • Uruguay’s tariff-free access to MERCOSUR and the EU makes it an attractive destination for foreign investors (Text A, paragraph 6 and Text B, paragraph 4).
    • A high common external tariff protects Uruguayan producers from cheap imports from China (Text C, paragraph 1).
    • Membership in a trading bloc may allow for stronger bargaining power in multilateral negotiations such as the EU-MERCOSUR free trade agreement.
    • Greater political stability and cooperation.
  • The disadvantages of membership of the MERCOSUR common market and free trade agreement:
    • Uruguay is susceptible to external shocks (Text A, paragraph 3). As Uruguay is over reliant on trade of primary products and is not diversifying its exports (Text A, paragraph 4), this may explain why the Gini index and real GNI per capita have only narrowly improved since the end of the commodity boom (Table 2).
    • Increased production of meat, paper and wood for exports represent a threat to sustainability (Text B, paragraphs 1 and 4).
    • Lowered protectionist measures may lead to more structural unemployment (Text B, paragraph 3) once tariffs are removed/reduced as part of the EU- MERCOSUR free trade agreement.
    • Uruguay has suffered from a loss of sovereignty, which prevents the country from entering bilateral trade agreement(s) and reducing its tariffs (Text C, paragraphs 1 and 2).
    • Challenge to multilateral trading negotiations.

Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.

Examiners report

To address the specific demands of this question, candidates were expected to provide a balanced discussion on both the benefits and drawbacks of economic integration. Responses that focused solely on one aspect of economic integration, particularly participation in the free trade agreement with the EU, only partially addressed the demands of the question (descriptor for the 7-9 markband). High-achieving responses presented a well-rounded perspective, considering both the benefits and drawbacks of membership in the MERCOSUR common market and the impacts of the free trade agreement, with reference to the provided texts and data. Weaker answers tended to summarize the text and disproportionately emphasized the impact of trade with China, which was largely irrelevant as Uruguay is not part of a trading bloc with China. The strongest responses added value to the information from the texts such as explaining how freedom of movement of capital or access to a larger market in a common market can drive an increase in foreign direct investment (FDI). Moreover, these strong answers incorporated trade-related concepts like economies of scale, rather than simply restating statements such as "the MERCOSUR common market allows Uruguayan producers tariff-free access to 290 million consumers".

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