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Centre
No.

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No.

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Paper Reference(s)

6356/01

Examiners use only

Edexcel GCE

Team Leaders use only

Economics

Advanced
Unit 6 The UK in the Global Economy
(Synoptic Unit)
Tuesday 2 February 2010 Afternoon
Time: 1 hour 45 minutes

Question Leave
Number Blank

Section
A

Section

Materials required for examination

Nil

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Instructions to Candidates

In the boxes above, write your centre number, candidate number, your surname, initial(s) and
signature.
Check that you have the correct question paper.
Write your answers in the spaces provided in this question paper.
Answer ONE Question from Section A and ONE Question from Section B.
Indicate which question you are answering by marking the box ( ). If you change your mind, put a
line through the box ( ) and then indicate your new question with a cross ( ).

Information for Candidates

This question paper is designed to give you the opportunity to use the skills and ideas developed
throughout the course in a new context. You may include in your answers relevant information from
the whole of your course, where appropriate.
There are 32 pages in this question paper. Any blank pages are indicated.
The marks for the various parts of questions are shown in round brackets: e.g. (2).
Questions in Section A will be marked out of 100; those in Section B will be marked out of 50. The
mark out of 100 for Section A will be divided by two and added to the mark out of 50 on the chosen
question from Section B.

Advice to Candidates

You are advised to divide your time equally between Section A and Section B.
You will be assessed on your ability to organise and present information, ideas, descriptions and
arguments clearly and logically, including your use of grammar, punctuation and spelling.
This publication may be reproduced only in accordance with
Edexcel Limited copyright policy.
2010 Edexcel Limited.
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M36185A

W850/6356/57570 1/1/1/1/1/1/

M36185A_GCE_A_Economics_Unit_6_F1 1

*M36185A0132*

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SECTION A
Answer ONE question from this section.
You should spend approximately 45 minutes on this section.
You may include a diagram in your answer where this is helpful.
1. (a) Assess the impact on the world economy of the growth of regional trade blocs.

(40)

(b) Examine the likely impact of global recession on interdependence between countries
in the world economy.
(60)

Q1

(Total 100 marks)

2. (a) In 2000/01 the UKs public expenditure was 37 per cent of GDP. This is forecast to
increase to over 45 per cent of GDP by 2009/10. Examine the likely economic effects,
apart from increased taxation, of this trend.
(40)

(b) Assess the economic effects of a significant increase in taxation in the UK economy.
(60)

Q2

(Total 100 marks)

3. (a) Examine the likely factors which affect decisions by multinationals to invest in EU
countries.
(40)

(b) The UK has been the largest recipient of inward foreign investment within the EU in
recent years. Evaluate the benefits of such foreign investment for the UK economy.
(60)

Q3

(Total 100 marks)

TOTAL FOR SECTION A: 100 MARKS

Do not use pencil. Use blue or black ink.

Put a cross in the box indicating the question from Section A that you have chosen ( ).
If you change your mind, put a line through the box ( ) and then indicate your new
question with a cross ( ).
Chosen Question Number: Question 1 Question 2 Question 3

M36185A_GCE_A_Economics_Unit_6_F2 2

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M36185A_GCE_A_Economics_Unit_6_F9 9

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SECTION B DATA RESPONSE

Answer ONE question from this section.
You should spend approximately 45 minutes on this section.
If you answer Question 4 put a cross in this box .
Question 4
Extract 1

Tariffs on Textiles
The end of Textiles Quotas

The World Trade Organisation (WTO) ended its Multi-Fibre Agreement (MFA) on
31 December 2004. The MFA was established in the 1970s to give some protection to the
textile industries of industrialised countries facing competition from countries with lower
manufacturing costs such as Bangladesh and China. As part of the MFA, quotas were
introduced to prevent a surge of imports which threatened to cause serious damage to a
countrys own producers. Since 1995, the WTO has been gradually phasing out quotas.

The removal of quotas will not only harm industrial companies but also poor and middle
income countries such as Sri Lanka, Bangladesh, Indonesia and Morocco. The worry
is that, having no competitive advantage beyond abundant cheap labour, they will
lose market share to countries such as China and India which have vertically integrated 10
supply chains.
Some argue that quotas should be retained against other countries. For example, it is
argued that China is keeping its currency at an artificially low level and giving state
subisidies. However, supporters of the MFA claim it will mean increased efficiency and
lower costs for Western consumers. Supporters also argue that the move will see more jobs 15
created in India and China.
Producers in rich countries are also alarmed at the ending of the MFA. In the USA,
textile manufacturers are pressing for protectionism, saying that China will destroy the
American textile industry. Trade unions also argued that 350,000 jobs have been lost in
Americas textile sector between 2001 and 2004 and that, if nothing is done, many of the 20
remaining 695,000 will likewise be on a fast boat to China with the abolition of quotas.
In the EU the industry employed 2.7 million people in 2003 and had a turnover of 225
billion. But the EUs imports of Chinese textiles and clothing almost doubled between
2001 and 2003 and employment in these industries is falling rapidly. However, in the UK,
members of the 195,000 textiles workforce are finding jobs in companies at the top end of 25
the spectrum where there are larger profit margins.
Source: adapted from www.bbc.co.uk and from The Economist, 13 November 2004

10

M36185A_GCE_A_Economics_Unit_6_F10 10

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Extract 2

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Tariffs on textiles

Even after quotas are phased out, exports of these goods from developing to industrialised
nations will face tariff levels that are considerably higher than for other manufactured
goods, as well as sharp tariff peaks for certain goods. The average tax imposed by rich
countries on textiles is 12 per cent, compared with 3.8 per cent for all manufactured goods;
peaks reach up to a remarkable 30 or 40 per cent on particular goods. Mens synthetic
shirts face a huge 32 per cent tariff, for example, at US customs.

The disproportionate tariffs on these goods are evidenced by the fact that, while accounting
for only 6.7 per cent of the value of US imports, shoes and clothes account for $8.7 billion
tariff revenue almost half of all tariff revenue collected. This can be likened to a system
10
of regressive taxation.
Source: adapted from Stitched Up, Oxfam Briefing Paper, April 2004

(a) Briefly explain the role of the WTO.

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*M36185A01132*
M36185A_GCE_A_Economics_Unit_6_F11 11

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(b) Why might the removal of textile quotas harm poor and middle-income countries?
(Extract 1, lines 78)

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(c) With reference to Extract 1, to what extent might the continued use of protectionist
measures against imported textiles from China be justified?

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*M36185A01332*
M36185A_GCE_A_Economics_Unit_6_F13 13

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(d) With the aid of a diagram, assess the effects of tariffs on imports of textiles into the
EU.

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*M36185A01432*
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*M36185A01532*
M36185A_GCE_A_Economics_Unit_6_F15 15

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(e) With reference to Extract 2, discuss the impact of tariffs on textiles on the distribution
of income in the US.

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*M36185A01632*
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(f) To what extent can supply-side policies influence the international competitiveness of
a countrys textile industry?

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*M36185A01732*
M36185A_GCE_A_Economics_Unit_6_F17 17

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Q4

(Total 50 marks)

18

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*M36185A01932*
M36185A_GCE_A_Economics_Unit_6_F19 19

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If you answer Question 5 put a cross in this box .

Question 5

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Balance of Payments and Exchange Rates

Figure 1: UKs trade in goods and services balances 1999 2006
( million) at current prices
Year

Imports of Exports of
Goods
Goods

1999

195 217

166 166

Trade in
Goods
balance
-29 051

Trade in
Services
balance
15 562

2000

220 912

187 936

-32 976

15 002

2001

230 305

189 093

-41 212

17 200

2002

234 229

186 534

-47 695

19 632

2003

236 927

188 320

-48 607

22 612

2004

251 770

190 877

-60 893

28 146

2005

280 297

211 608

-68 689

25 875

2006

319 947

243 635

-76 312

33 108

2007

309 955

220 703

-89 252

41 772

Source: www.statistics.gov.uk/downloads/theme_economy/PinkBook_2008

Figure 2: UKs GDP at current prices ( million) 1999 2006

Year

GDP

1999

928,730

2000

976,533

2001

1,201,828

2002

1,075,564

2003

1,139,746

2004

1,200,595

2005

1,252,505

2006

1,321,860

2007

1,401,042
Source: www.statistics.gov.uk/statbase/product

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Figure 3 Sterling trade-weighted exchange rate

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INDEX

110
105
100
95
90
85
80
1996 1998 2000 2002 2004 2006 2008
Source: The Independent, 17 November 2008

Figure 4 Bank of England base rate

8

97

99

01

03

05

07 08
Source: The Times, 2 March 2009

*M36185A02132*
M36185A_GCE_A_Economics_Unit_6_F21 21

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(a) (i) With reference to Figures 1 and 2, calculate the value of imports of goods as a
percentage of GDP in 1999 and 2007.

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(ii) With reference to the data and other information, discuss the likely economic
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(iii) Examine two possible causes of the decline in exports of goods between 2006
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(b) (i) What relationship might be expected between a countrys interest rate and its
currencys exchange rate? Explain your answer.

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(ii) To what extent do the data in Figures 3 and 4 support this relationship?

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*M36185A02532*
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(iii) Assess two reasons for the fall in the sterling trade weighted exchange rate as
shown in Figure 3 since 2007.

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(c) Evaluate the significance of a decrease in the external value of sterling for the
simultaneous achievement of the governments macroeconomic objectives of low
inflation, economic growth and full employment.

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*M36185A02832*
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Q5

(Total 50 marks)
TOTAL FOR SECTION B: 50 MARKS
TOTAL FOR PAPER: 100 MARKS
END

*M36185A02932*
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