Topic 6 - International trade & globalisation

This topic considers the importance of trade between countries and the causes and consequences of globalisation. It covers a range of international trade principles such as specialisation, the role of free trade, the role of multinational companies, foreign exchange rates, and balance of payments stability.
Click on the relevant hyperlink to access the InThinking resources for this section of the syllabus:
- Topic 6.1 - Specialisation and free trade
- Topic 6.2 - Globalisation and trade restrictions
- Topic 6.3 - Foreign exchange rates
- Topic 6.4 - Current account of the balance of payments
Teachers can click on the section below to see the changes to the new syllabus (first exams 2027).

Please be aware of the following changes to this topic in the new syllabus, especially when using or referring to resource for the previous course, such as past exam papers.
- Topic 6.1 is renamed as "Specialisation and free trade" (which was previously called "International specialisation"). Hence, free trade (including the advantages and disadvantages) has moved from Topic 6.2.
- Topic 6.1.1 (Specialisation by country) - Candidates are now expected to be able to define “specialisation by country”. In addition, the wording "advantages and disadvantages of specialisation at a national level" (legacy 6.1.2) has been changed to “advantages and disadvantages of specialisation”.
- Topic 6.1.2 (Free trade) - The definition of “free trade” is now explicitly mentioned in the syllabus. In addition, the disadvantages of free trade have been added (previously, only the benefits of free trade were mentioned).
- Topic 6.2 is renamed as "6.2 Globalisation and trade restrictions" (which was previously called "Globalisation, free trade and protection").
- Topic 6.2.2 is a completely new topic in the syllabus and covers the following : (1) causes of changes in globalisation, and (2) effects of changes in globalisation. The specific points are as follows:
- Causes of changes in globalisation:
- changes in trade restrictions
- changes in transport costs
- changes in communication costs
- movement of multinational companies (MNCs) - Effects of changes in globalisation:
- international trade
- competition
- the environment
- migration
- income distribution
- economic development.
Previously, only the definition of globalisation was required.
- Topic 6.2.5 (Reasons for trade restrictions) - There is now explicit reference to the protection of sunrise (infant) industries and sunset (declining) industries. This Topic also now includes four additional reasons for trade restrictions:
- to reduce a deficit on the current account of the balance of payments
- to raise tax revenue
- to restrict the import of demerit goods
- to promote environmental sustainability.
This is in addition to the four reasons given in the legacy syllabus: (i) protect infant (sunrise) industries, (ii) protect declining (sunset) industries, (iii), protect strategic industries, and (iv) avoid dumping.
- Topic 6.2.6 (Consequences of trade restrictions) - The advantages and disadvantages of restricting free trade have been added to this section of the syllabus, in addition to the learning outcome “impact of trade restrictions on the home country and its trading partners”, which also featured in legacy Topic 6.2.6. (Consequences of protection).
- Topic 6.3.2 (Reasons for buying and selling foreign currencies) is new content, covering the following reasons for buying and selling foreign currencies:
- trade in goods and services
- speculation (in currency markets)
- government intervention in currency markets
- payment of profit, interest, and dividends between countries
- workers’ remittances (money sent from overseas workers or incomes earned abroad)
- investment in capital goods between countries.

Filipino migrant workers in Hong Kong
- Topic 6.3.3 (Determination of foreign exchange rate in foreign exchange market) - The entry or departure of MNCs has been removed from the syllabus as a determinant of foreign exchange rates. In addition, fixed exchange rates have been removed (legacy Topic 6.3.1 and 6.3.5). However, note that government intervention in currency markets is still covered in Topic 6.3.2 (Reasons for buying and selling foreign currencies). Nevertheless, there is no need to cover fixed exchange rates.
- This means that the learning outcome for legacy Topic 6.3.5 (Floating and fixed foreign exchange rates) has been removed, i.e., there is no longer the need to teach "The difference between, and the advantages and disadvantages of, a floating foreign exchange rate and a fixed foreign exchange rate system".
- Also note that in the new Topic 6.3.3, the terms “appreciation”and “depreciation” have been added. For this section of the syllabus, candidates are now expected to be able to define (i) floating exchange rate, (ii) appreciation, and (iii) depreciation.
