Geopolitical and economic risks practice questions.

A government requires that a strategic mineral be processed domestically before export, and takes a larger state share in mining ventures. Which concept describes this?

• Resource nationalism, asserting state control over a strategic resource
• Comparative advantage, specialising in what the country does best
• Trade liberalisation, reducing barriers to exchange
• Structural adjustment, reducing the role of the state

Answer: Resource nationalism, asserting state control over a strategic resource

Resource nationalism aims to capture more of the value chain and more of the rent at home, which is a rational upgrading strategy and simultaneously a risk to importers who had treated supply as secure. The same policy is development strategy from one side and supply risk from the other.

Just-in-time supply chains minimise inventory by scheduling deliveries to arrive as they are needed. Which risk does this design amplify?

• A single disruption anywhere in the chain halts production quickly
• Storage costs rise as more stock is held at each stage
• Suppliers become geographically concentrated in one country only
• Production becomes impossible to relocate between plants

Answer: A single disruption anywhere in the chain halts production quickly

Holding no buffer converts efficiency into fragility: with no stock, a port closure, a component shortage or a factory fire stops the line within days. The reassessment of this trade-off after recent disruptions is why firms have moved towards holding buffers and dual sourcing.

A student writes: 'The blocking of the Suez Canal in 2021 was a disaster because the ship was enormous. The bigger the event, the bigger the disaster.' Which single error does this reasoning contain?

• It treats an economic risk as if it were a geophysical hazard of natural origin.
• It mistakes a national policy decision for an accidental technical failure at sea.
• It equates the size of the event with the size of the impact, ignoring exposure.
• It applies a local scale of analysis where a regional scale would be correct.

Answer: It equates the size of the event with the size of the impact, ignoring exposure.

Impact depends on what is exposed and how vulnerable it is, not on the magnitude of the trigger: the grounding mattered because a large share of Europe-Asia trade is funnelled through one lane with no spare capacity, and a similar grounding in open water would have been news for a day.

Since December 2019 the Appellate Body of the World Trade Organization has had fewer than the three members needed to hear a case, because appointments to it have been blocked. What can a state that loses a WTO panel ruling now do?

• It must comply with the panel report within sixty days or face automatic fines.
• It can appeal to a body that cannot sit, so the report is never adopted.
• It can refer the dispute to the International Court of Justice for a judgment.
• It can ignore the report only if the complainant is not a member state.

Answer: It can appeal to a body that cannot sit, so the report is never adopted.

An appeal suspends adoption of the panel report, so an appeal into a body with no quorum parks the case indefinitely; the rules survive on paper while enforcement stops, which is why some members now use a separate interim arbitration arrangement instead.

A shipping line reroutes tankers away from a blocked canal, so a voyage of 12 400 km becomes 21 700 km. Calculate the increase in distance sailed, to the nearest whole number, in %. Answer: ___

Answer: 75

(21 700 - 12 400) / 12 400 x 100 = 75 %, and because fuel burn and crew time scale with distance the freight rate on the route rises sharply within days of a chokepoint closing.

A factory holds 6 days of component stock. Its sole supplier is shut down by a hazard event for 20 days, and deliveries resume immediately afterwards. Calculate the number of production days lost (to the nearest whole number). Answer: ___

Answer: 14

20 - 6 = 14 days. The buffer converts directly into resilience, which is the cost that lean supply chains trade away in exchange for lower working capital.