Imagine that you work for the World Bank and you have been called to Ghana to aid the new president to come up with a new international trade strategy.

You are told that the new government is interested in moving away from agriculture and into manufacturing. To do so, the government wants to pursuit a policy of import substitution industrialization (ISI).

You are given a brief about Ghana highlighting the following points:

• About half of Ghana’s population depends on agriculture, but Ghana still imports some of its food.
• The majority of Ghana's people live in rural areas and exist on a subsistence way of life.
• Ghana has one of the highest rates of income inequality in the world.
• Nearly half of the population is employed in agriculture.

QUESTION 1       

Ghana’s president’s ISI strategy is to ask Switzerland to adopt a voluntary export restraint (VER). He believes that this is likely to increase Ghanaian welfare. Using two diagrams (one for each country) explain the Ghanaian welfare consequences of this policy.

QUESTION 2

Explain if the VER is likely to improve the average efficiency of Ghana’s farms?

QUESTION 3     

After a meeting with Ghana’s president you learn that the government is also interested in repatriating migrants that went to European countries to study engineering a decade ago. Explain how this is likely to change Ghana’s comparative advantage.

Answer rating: 100% (QA)

1 Answer Ghanas presidents ISI strategy is to ask Switzerland to adopt a voluntary export restraint VER It will increase the price level in Ghana that ... View the full answer