INTERNATIONAL TRADE MK, UNIT 27 Reader, p.20-23

Match to get OPPOSITES Free trade Developing country Developed industry Competitive Import Deficit Surplus Uncompetitive Advanced/developed Developing/underdevel oped/infant Protectionism Export

Make word partnerships (MK,p. 132) Comparative cost Absolute Comparative Strategic Infant Industry Principle Industry 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 barrier 1.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:

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 PRINCIPLE ABSOLUTE/COMPARATIVE ADVANTAGE (REASONS & EXAMPLES)‏ Read paragraphs 3, 4 & 5 to explain: PROTECTIONISM AND REASONS FOR PROTECTIONISM TYPES 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/remove Rollover/renew Reschedule/postpone Raise Specialize Protect Achieve Compete reduce 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 standard p ______ strategic industries r_______ a balance of payments deficit d________ or w________ competitors r________ against restrictions i_________ restrictions a_________ economies of scale s______ a limit to imports

p______ revenue for the government g______ favourable conditions p_____ the interest r______ the principal r______ (renew) a loan r _________ (postpone) repayments l_______the economy l_______trade barriers

The Import-Export Balance Fill 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

quiz 1.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/deficit TRADE 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 exports Trade gap narrows: exports start rising Trade surplus widens: exports keep rising over imports Trade surplus narrows: __________________________?

Reading and discussion: For and against free trade (MK, p )  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. Noam Chomsky on Globalization: Further interesting videos and presentations: HW: Reading & writing: Education and protection, MK p 133 Read and answer the questions in writing (in detail). ‏