Answer:

Trade Creation: A tariff on imports from France makes French goods more expensive in Britain. This encourages British consumers and firms to switch from buying from domestic producers (Britain) to buying from France. This is trade creation because it leads to an increase in trade with the producer who is now selling at a higher price (France). The diagram shows an increase in the quantity of imports from France to Britain after the tariff.

Trade Diversion: The tariff makes French goods relatively more expensive in Britain compared to other potential suppliers. This discourages British consumers and firms from buying from other countries (potentially more efficient producers) and encourages them to buy from France. This is trade diversion because it leads to a decrease in trade with a more efficient producer (the alternative supplier) and an increase in trade with a less efficient producer (France). The diagram shows a decrease in imports from the alternative supplier (e.g., Germany) and an increase in imports from France.

In summary, the tariff shifts the pattern of trade, leading to increased trade with the protected producer (trade creation) and decreased trade with more efficient producers (trade diversion). The net effect on overall welfare is ambiguous and depends on the relative magnitudes of the gains and losses.

Introduction: This question requires a critical evaluation of the arguments for and against globalization. A strong answer will present a balanced perspective, considering both the advantages and disadvantages, and providing reasoned arguments to support a clear conclusion.

Arguments for Globalization (Benefits):

• Economic Growth: Globalization has facilitated economic growth by increasing trade, investment, and productivity. Access to larger markets allows for economies of scale.
• Lower Prices for Consumers: Increased competition and access to cheaper labor in developing countries have led to lower prices for consumers.
• Increased Innovation and Technology Transfer: Globalization promotes the spread of new technologies and ideas, fostering innovation and economic development.
• Job Creation (in some sectors): Globalization has created jobs in export-oriented industries and in sectors that benefit from increased foreign investment.
• Poverty Reduction (in some countries): Globalization has contributed to poverty reduction in some developing countries, particularly in Asia.

Arguments Against Globalization (Drawbacks):

• Increased Inequality: Globalization has contributed to increased inequality within and between countries. The benefits of globalization have not been evenly distributed.
• Job Displacement (in developed countries): Outsourcing and increased competition from low-wage countries have led to job displacement in developed economies.
• Exploitation of Labor: Globalization can lead to the exploitation of labor in developing countries, with workers facing low wages and poor working conditions.
• Environmental Degradation: Increased production and consumption associated with globalization have contributed to environmental degradation.
• Loss of Cultural Identity: Globalization can lead to the loss of cultural identity as global brands and cultures become dominant.
• Financial Instability: Increased financial integration can increase the risk of financial crises.

Evaluation: The debate over the benefits and drawbacks of globalization is complex. While globalization has undoubtedly brought economic growth and opportunities, it has also created significant challenges. The impacts are unevenly distributed, and the benefits have not been shared equally. The drawbacks, particularly inequality and environmental degradation, are serious concerns that need to be addressed through effective policies.

Conclusion: While globalization offers potential benefits, the drawbacks are significant and cannot be ignored. A more equitable and sustainable form of globalization is needed to ensure that the benefits are shared more widely and the risks are mitigated.

As outlined above, a monetary union involves a single currency and a common monetary policy, while a full economic union extends this to include the harmonization of economic policies across member states, essentially creating a single market with free movement of factors of production. The key difference is the scope of policy integration.

The implications for national sovereignty are significant. A monetary union requires countries to cede control over their monetary policy, while a full economic union requires a much greater degree of policy coordination and potentially the transfer of legislative powers to a supranational authority. This can be politically contentious.

The following table summarises the key differences: