International Trade RB, MK, Unit 27

What do you know about? Adam Smith David Ricardo

Watch and take notes cKY cKY What did A. Smith want to understand with his research for his book The Wealth of Nations? What is the „invisible hand of the market”? Why is it important for international trade? What is absolute advantage? How did D. Ricardo supplement A. Smith’s theory on international trade? What is the difference between absolute advantage and comparative advantage?

Watch and take notes Write down the key economic terms you hear in the video UPU UPU

Fill in the gaps and then use these phrases to talk about absolute and comparative advantage Produce ____ a lower cost than any competitor Using fewer ____ and/or more efficient _____ Undercut competitor’s ____ and earn higher ___ Specialization based on areas of comparative _____ Country with the lowest opportunity ___ Specialize in the area where it is most _____

Fill in the gaps and then use these phrases to talk about absolute and comparative advantage Produce at a lower cost than any competitor Using fewer inputs and/or more efficient processes Undercut competitor’s prices and earn higher profits Specialization based on areas of comparative advantage Country with the lowest opportunity cost Specialize in the area where it is most productive

Tasks MK, p. 132/ Vocabulary

Watch and listen HHUc HHUc What reasons for protectionism are mentioned in the video? What are the reasons against protectionism? Which protectionist measures are listed? Tariffs, quotas, anti-dumping duties Subsidies, tax breaks Explain why these last two can be used to protect the home industy.

RB, p. 45 reading: Answer the questions What is the difference between quotas and tariffs? What is the GATT? What is the WTO? What types of trade barriers are mentioned in the text?

Name the trade barriers defined here: Taxes on imported goods. They raise the price to customers and make them less attractive: Tariffs Limits on the quantity of a product that can be imported into a country e.g. 100,000 cars: Quotas Laws and safety guidelines: Safety norms Making it difficult to arrange all certificates necessary to import into a country: Customs difficulties and delays When a country produces and protects goods that cost more than those made abroad: Import substitution

Fill in the missing verbs Impose /raise /lower /remove Rollover / renew Reschedule / postpone raise Specialize Protect achieve Compete reduce Tariff / trade barriers A loan A payment Living standards In the production of goods Strategic industries Economies of scale Internationally A deficit

Which is the odd one out? 1. Absolute advantage, barriers, comparative advantage, free trade 2. Autarky, counter-trade, invisible trade, visible trade 3. Balance, deficit, dumping, surplus 4. Banking, insurance, merchandise, tourism 5. Comparative advantage, protectionism, quotas, tariffs 6. Non-tariff barriers, norms, quotas, taxes 7. Barter, import substitution, infant industries, tariff barriers 8. Debt, reschedule, rollover, trade 9. Liberalize, protect, subsidize, substitute

Read: p. 47/IV What kinds of steps did China and the EU take against each other in the dispute about solar panel sales? 1. Chinese solar panels sold at dumping prices 2. EU imposes punitive tariffs (12%, but expected to rise to 50% on 6 August). 3. China threatens to punish EU exports of wine and polysilicon 4. Truce Terms: minimum sales price (lower than expected) set a (generous) quota

Free trade v. Fair trade Can you explain the difference? Tsmk Tsmk Try to come up with 3 arguments for free trade and 3 for protectionism. Do MK, p. 135

Read RB, p. 49 You were given the task of writing a report on the effects of agricultural subsidies. Find information in the text. Effect on third world countries: Low volume of export from developing countries Displacing the locally grown product Not allowing trade between poor countries Violating the comparative cost principle Effect on EU countries: Winners large refiners, not EU farmers => taxpayers’ money to help private businesses

Visible and Invisible Trade (RB, p. 51) What is the difference between visible and invisible trade? What is the difference between the balance of payments and the balance of trade?

HW RB, p. 48/V HAND IT IN NEXT MONDAY. Read RB, p. 52