INTERNATIONAL TRADE

MK, UNIT 27Reader, p.20-23

Match to get OPPOSITES

• Free trade• Developing country• Developed industry• Competitive• Import• Deficit

• Surplus• Uncompetitive• Advanced/developed• Developing/

underdeveloped/infant• Protectionism• Export

Make word partnerships (MK,p. 132)

• Comparative cost• Absolute• Comparative• Strategic• Infant

• Industry• Principle• Industry• Advantage• Advantage

Absolute or comparative advantage?

• Brazil-coffee• China-shoes

• USA-computers

• Canada-timber

• South Korea –hi-fi

• Absolute• Comparative(low labour

costs)• Comparative• (technologically

advanced)• Absolute• Comparative (educated

labour force, low labour costs)

Free trade vs. Protectionism

• International trade (imports and exports) without government restrictions

• Trade of goods and services without trade barriers

• Protection of domestic industries against foreign competition

• Government restrictions are placed on the imports of foreign competitors

(tarrifs, quotas and subsidies)

TRADE BARRIERS

• Tariffs• Import quotas • Embargo• Subsidies• Non-tariff barriers:

Import substitution

Safety norms

Customs difficulties and delays

Verb opposites

set/impose tariffs/quotas/barriers

v.

lift /abolish quotas/embargo

Name the trade barrier1. Taxes on imported goods. They raise the price to customers

and make them less attractive.2. Limits on the quantity of a product that can be imported

into a country e.g. 200,000 cars. 3. Laws and safety guidelines. 4. Making it difficult to arrange all certificates necessary to

import into a country.5. When a country produces and protects goods that cost

more than those made abroad.6. Money paid by a government to producers of certain goods

to help them provide low-priced goods without loss to themselves.

7. A government order to stop trade with another country.

Tariffs

Quotas

Subsidy

Safety norms

Import substitution

Embargo

Custom difficulties and delays

FREE TRADE or PROTECTIONISM? • It protects jobs (votes).

• It allows specialization. • It strengthens

absolute/comparative advantage.

• It makes import more expensive.

• It provides access to more markets.

• It prevents dumping.• It breaks down barriers

between the peoples and nations

• It protects domestic industries (esp. strategic / infant industries).

• It allows freer movement of resources.

• It adds costs to consumers.• It increases international

competition and efficiency.• It guarantees consumers

the lowest possible prices• I

THE WORLD TRADE ORGANIZATION (WTO)

• The only global international organization dealing with the rules of trade between nations.

• At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments.

• The goal is to help producers of goods and services, exporters, and importers conduct their business.

IMF – International Monetary Fund An international organization created for the purpose of:

1. Promoting global monetary and exchange stability. 2. Facilitating the expansion and balanced growth of

international trade. 3. Assisting in the establishment of a multilateral system of payments for current transactions.

The IMF plays three major roles in the global monetary system.• 1. The Fund surveys and monitors economic and financial developments• 2. Lends funds to countries with balance-of-payment difficulties • 3. Provides technical assistance and training for countries requesting it. SOURCE: www.businessdictionary.com

Vocabulary in focus:

GRANT A LOAN

REPAY A LOAN

RESCHEDULE A LOAN POSTPONE A LOAN

PAY INTEREST REPAY THE PRINCIPAL

RENEW A LOAN ROLLOVER A LOAN

READING

PROTECTIONISM AND FREE TRADE RB, p.20, 21

Read paragraphs 1 & 2 to explain:THE COMPARATIVE COST PRINCIPLEABSOLUTE/COMPARATIVE ADVANTAGE(REASONS & EXAMPLES)

Read paragraphs 3, 4 & 5 to explain:PROTECTIONISM AND REASONS FOR PROTECTIONISMTYPES OF TRADE BARRIERS

Read paragraphs 6 & 7 to explain:

FREE TRADE: GATT AND WTO

OPPOSITION TO FREE TRADE

Read paragraphs 8 & 9 to explain:

PROBLEMS & FEARS OF DEVELOPING COUNTRIES (IMF)

THE POSITIVE EXAMPLE OF THE “ASIAN TIGERS” COUNTRIES

Match the collocations:

Impose/raise/lower/removeRollover/renewReschedule/postponeRaiseSpecializeProtectAchieveCompetereduce

a deficit a payment tariff/trade barriers in the production of goods living standard strategic industries a loan economies of scale internationally

VOCABULARY

COLLOCATIONS: WHICH VERB IS MISSING?

r_______ the living standardp ______ strategic industriesr_______ a balance of payments deficitd________ or w________ competitorsr________ against restrictionsi_________ restrictionsa_________ economies of scales______ a limit to imports

p______ revenue for the governmentg______ favourable conditionsp_____ the interest r______ the principalr______ (renew) a loanr _________ (postpone) repaymentsl_______the economyl_______trade barriers

The Import-Export BalanceFill in the gaps:An _________advantage exists if a country can ________

something more ______ than anyone else. Examples are: _______ from Saudi Arabia, _______ from Canada and ____ from Brazil.Cheaply, absolute, produce, coffee, timber, oil

A country has a comparative ______ for ______ that it can make more _______ or ______than other goods. China has low ________ costs. It gives it comparative advantage. In producing labour- intensive goods such as ______ and _____.

Better, shoes, goods, labour, textiles, advantage, cheaply

BALANCE OF TRADE (trgovinska bilanca)-the ___ in value between the products a

country ____ and those it ____. imports, exports, difference

MATCH THE CONCEPT AND ITS EXPLANATION:If a country exports more than it imports it has a

______ ______.If a country imports more than it exports, it has

_____ _____.

Trade deficit

Trade surplus

• KEY

• If a country exports more than it imports it has a trade surplus.

• If a country imports more than it exports, it has trade deficit.

BALANCE OF PAYMENTS (PLATNA BILANCA)It is a comparison between total receipts and

payments arising from a country’s international trade in goods, services and financial transactions

Visible trade is trade in goods, physical things you can touch and weigh :

Food and produce Manufactured goods Specialist goods Raw materials Electrical appliances Machine tools

Invisible trade is trade in services like: tourism

banking government

payments shipping civil aviation travel

quiz1. India bought wine from

Spain.2. Indian student goes to

Spain for studies.3. Indian Insurance Company

insures a Spanish ship.4. UK car dealer buys

German cars.5. German tourist visits UK

for holidays.6. UK resident uses German

bank.

A. Invisible export for UK.

B. Visible export for Spain.

C. Invisible import for Spain.

D. Invisible exports for Germany.E. Visible exports for

Germany.F. Invisible export for Spain.

KEY: 1 B 2 F 3 C 4 E 5 A 6 D

VOCABULARY: TRADE SURPLUS ≠ TRADE GAP/deficitTRADE SURPLUS→ when the export is bigger than import TRADE GAP → when the import of goods and services is bigger than export

EXPLAIN THE FOLLOWING NEWS HEADLINES: “China trade surplus widens in January”

“The US trade gap narrowed to $58.2bn in November”“U.S. trade gap widens in April”

Trade gap (deficit) widens: imports keep rising over exportsTrade gap narrows: exports start risingTrade surplus widens: exports keep rising over importsTrade surplus narrows: __________________________?

• Reading and discussion: For and against free trade (MK, p. 134-5) Classify the statements, for and against

International trade

Which set of arguments regarding free trade and the policies of WTO do you find

the most convincing?

• For or against – MK, p 135

HOMEWORK: Read on international trade and protectionism in our materials, watch and read to inform your opinion on the positive and negative effects of free trade and globalization.

Pick a side in the debate will hold on Friday.The topic: Free trade is the only form of fair trade.http://www.youtube.com/watch?v=Vvfzaq72wd0

Noam Chomsky on Globalization:http://www.youtube.com/watch?v=RdYwAXZh0MEFurther interesting videos and presentations:http://www.youtube.com/watch?v=SyJ23a7_fvQ&feature=relatedhttp://www.youtube.com/watch?v=oh03fuIlQNI&feature=related

HW: Reading & writing:Education and protection, MK p 133Read and answer the questions in writing (in detail).