1. INTERNATIONAL TRADE UNIT 27

2. INTERNATIONAL TRADE
the exchange (buying and selling) of goods and services between
different countries
imports - goods and
services bought from
abroad
exports - goods and
services sold to abroad

3. HOW DOES THIS STATEMENT RELATE TO INTERNATIONAL TRADE?
‘Every time we buy
a foreign car, we put
someone else out of
work.’
Woodrow Wyatt ( )
British politician and writer

5. Discuss these questions.
Consider the clothes and shoes you’re wearing. Where were they made?
Try to recall the meals you’ve eaten in the last 24 hours. How much of the food came from abroad?
Which cosmetic products or toiletries that you have you used this week are imported?
Where do your car (if you have one), television, laptop, mobile phone, watch and so on come from?
Do you think products in your country are better than the products made in other countries?
What are Croatia’s major trading partners?
What are Croatia’s most important exports?
Does Croatia try to restrict imports?
Can you imagine living in a country that did not import anything, where only locally produced food and textiles and products were available?

7. VISIBLE AND INVISIBLE TRADE, RB p. 51
I Study the chart and explain the difference
between:
PRIMARY / SECONDARY PRODUCTS
VISIBLE / INVISIBLE TRADE
BALANCE OF TRADE / BALANCE OF PAYMENTS

8. VISIBLE TRADE – trade in goods
R_______ Materials
F_______ and Produce
M_______ Goods VISIBLE TRADE
S_______ Goods Exports
E_______ Appliances
M_______ Tools Imports

9. VISIBLE TRADE – trade in goods
Raw Materials
Foods and Produce
Manufactured Goods VISIBLE TRADE
Specialist Goods Exports
Electrical Appliances
Machine Tools Imports

10. INVISIBLE TRADE – trade in services
Government P________
Specialist A________
S________ INVISIBLE TRADE
B________ Imports
T________ and tourism
E________ Exports
Other S________

11. INVISIBLE TRADE – trade in services
Government Payments
Specialist Aviation
Shipping INVISIBLE TRADE
Banking Imports
Travel and tourism
Entertainment Exports
Other Services

12. VISIBLE AND INVISIBLE TRADE
FOOD FOR THOUGHT...
1 Can you add to the list of invisible exports or imports?
2 If you go abroad and buy music, clothes, books, eat in
a restaurant, is it recorded as imports or exports for
Croatia?
3 When foreign tourists come to Croatia, spend money in
night clubs, shops, restaurants, buy food, or pay for a
hotel room, is it imports or exports for Croatia?
4 If our transport companies ship foreign goods through
Croatia, is it recorded as our exports or imports in the
balance of payments?

13. HOW MUCH DO YOU KNOW ABOUT INTERNATIONAL TRADE?
trade in tangible goods
trade in services (banking, tourism, and so on)
the difference between a country’s total earnings from exports and its total expenditure on imports of goods and services
direct exchange of goods without the use of money
the (impossible) situation in which a country is completely self-sufficient and has no foreign trade
the difference between the money that a country receives for its exports of goods and pays for its imports of goods

14. HOW MUCH DO YOU KNOW ABOUT INTERNATIONAL TRADE?
the situation where a country exports more than it imports (a positive balance of trade or payments)
the situation where a country imports more than it exports (a negative balance of trade or payments)
imposing trade barriers to restrict imports into a country
taxes charged on imports
quantitative limits on the import of particular products or commodities
selling goods abroad at a lower price than in the home market, or even at (or below) cost price in order to obtain foreign exchange

15. READING – PROTECTIONISM AND FREE TRADE – RB, pp. 45 & 46
COMPARATIVE COST
PRINCIPLE
EXAMPLES
3, 4 PROTECTIONISM AND
REASONS FOR
PROTECTIONISM
TYPES OF TRADE BARRIERS
FREE TRADE: GATT AND
WTO
OPPOSITION TO FREE TRADE
PROBLEMS OF DEVELOPING COUNTRIES (IMF)
FEARS OF DEVELOPING COUNTRIES

16. READING – PROTECTIONISM AND FREE TRADE – RB, pp. 45 & 46
II Read the text and answer the following questions.
Why do most economists oppose protectionism?
Why do most governments impose tariffs and/or quotas?
Why were many developing countries for a long time opposed to GATT?
Why have many developing countries recently reduced protectionism and increased their international trade?
III Do the TASK III, p. 47.

17. ABSOLUTE AND COMPARATIVE ADVANTAGE
Watch the video and take notes to further clarify these two concepts.

18. INTERNATIONAL TRADE - VOCABULARY
●AUTARKY ●BALANCE OF PAYMENTS
●BALANCE OF TRADE ●TRADE DEFICIT
● TRADE SURPLUS ●BARTER OR COUNTER-TRADE
●DUMPING ●PROTECTIONISM
●INVISIBLE TRADE ●QUOTAS ●TARIFFS
●TRADE ●BARRIERS ●COMMODITIES
●VISIBLE TRADE (GB) OR MERCHANDISE TRADE (US)
●COMPARATIVE COST PRINCIPLE
●COMPARATIVE ADVANTAGE ●DEREGULATION
●ABSOLUTE ADVANTAGE
●INFANT INDUSTRIES ●IMPORT SUBSTITUTION
●STRATEGIC INDUSTRIES ●SUBSIDIES

19. INTERNATIONAL TRADE SUMMARY
REASONS
some products can only be produced in particular places (Scotch whisky in Scotland, guano, a natural fertiliser, only in a few places in South America), so people from other countries have to import them.
some products are cheaper to produce in some countries than others (it is cheaper to import bananas from abroad than to grow them in expensive greenhouses)
foreign firms may produce higher quality products at more competitive prices, so customers choose to buy from abroad

20. INTERNATIONAL TRADE SUMMARY
BENEFITS
consumers benefit through increased choice and
lower prices – this increases living standards
efficient firms increase sales and profits by
exporting their products – they gain economies of scale
the economy can specialise in what it is best at (the UK-world leader in financial services; What about Croatia?)
WTO – democratic organization

21. INTERNATIONAL TRADE SUMMARY
PROBLEMS
it can be difficult for firms in one country to
develop a particular industry when other
countries with more experience of that industry are
producing cheap exports
overspecialisation can make the economy too dependent on imports and vulnerable if demand for the things it specialises in exporting falls

22. PROTECTIONISM SUMMARY
steps that governments take to restrict imports of
products and protect domestic producers
it is becoming more and more rare because of
the membership of the EU and the World Trade
Organization
REASONS
ways of raising revenue for the government (tariffs)
protecting an infant industry (a new domestic industry which doesn’t yet have the economies of scale of foreign competitors)
protecting strategic industries important for a country’s economy
(a lot of jobs would be lost if the domestic firms closed down)
protecting domestic producers from unfair foreign competition (some producers dump unsold products abroad – selling them at prices low enough to drive domestic producers out of business)

23. RESTRICTIONS TO FREE TRADE SUMMARY
INSERT THE RIGHT WORDS:
SUBSIDIES – QUOTAS – EMBARGO – TARIFFS – EXCHANGE
CONTROLS
_____________ – physical limits on the quantity of a product that it can be imported during a year
_____________ – taxes or customs duties imposed on imported goods to increase the price of foreign goods, making them less competitive
_____________ - an outright ban on imports
_____________ - restricting the availability of a foreign currency to importers thus restricting their ability to pay for imports
_____________ - financial help given by the government to domestic producers, which helps them reduce their prices and so make imports less competitive, or to be sold at lower prices abroad (EU subsidies for agricultural products)

24. RESTRICTIONS TO FREE TRADE SUMMARY
INSERT THE RIGHT WORDS:
QUOTAS – physical limits on the quantity of a product that it can be imported during a year
TARIFFS – taxes or customs duties imposed on imported goods to increase the price of foreign goods, making them less competitive
EMBARGO - an outright ban on imports
EXCHANGE CONTROLS - restricting the availability of a foreign currency to importers thus restricting their ability to pay for imports
SUBSIDIES - financial help given by the government to domestic producers, which helps them reduce their prices and so make imports less competitive, or to be sold at lower prices abroad (EU subsidies for agricultural products)

25. READING – OH, SWEET REASON – RB, p 49
I Discuss the following questions.
1 What are subsidies?
2 How do sugar producers profit from receiving subsidies?
3 What do you know about the European Union's Common
Agricultural Policy (CAP)?
II Read the article and do the TASK II (True/False), p. 50.
III Answer the following questions.
1 What does the EU do when it subsidizes sugar?
2 What are the main arguments against subsidies?
3 How are sugar subsidies a barrier to trade?
4 What do you think the WTO should do in the situation outlined
in the article?
5 Which products does Croatia subsidize?

26. SUMMARY – OH, SWEET REASON – RB, p. 50
1 ABSURDITIES OF AGRICULTURAL SUBSIDIES
EU’s Common Agricultural Policy enriches a few farmers and
refiners at the expense of the world’s poorest
world’s 2nd exporter with the wrong climate
cost of production: EU = 6 X Brazil!!!
2 GLOBAL IMPACTS
subsidies – too much sugar- exports
hurting other exporters hurting foreign farmers
LOSERS: WINNERS:
Brazil $ 500m the most efficient producers France $ 236m (Berghin Say)
Thailand $151m in the world Germany $201m (Sudzucker)
Mozambique $38m Britain $158m (Tate & Lyle)
Ethiopia $ = AIDS programmes!
- Doha negotiations depend also on the large EU companies

27. GLOBALIZATION REASONS
decline in trade barriers since WWII – the free flow of goods, services and capital
technological change – dramatic developments in communications (computers,e-commerce), information processing and transportation (shipping the goods around the globe simpler and more economical)
UNEVEN INTEGRATION INTO
GLOBAL ECONOMY
a few developing countries have increased their trade a lot and attracted foreign investment (China, Brazil, Argentina, India, Philippines)
in some countries (Africa) trade has diminished, economic growth stagnant and income per head has fallen

28. GLOBALIZATION ECONOMIES OF SCALE LEAD TO INTEGRATION
some industries (car, telecommunications) have huge fixed costs
very few firms can afford this – trend towards mergers and alliances to create a small number of very large firms which have the resources to compete in a single global market
MORE INTERNATIONAL
TRADE IS CREATING
A GLOBAL MARKET
fewer and fewer trade barriers result – the world as one big market place
only the largest firms can afford the costs of marketing on this scale – trend towards fewer, larger firms

29. GLOBALIZATION TECHNOLOGY IS MAKING GLOBAL COMMUNICATIONS POSSIBLE
new information technologies –
a single advertising campaign can
reach a global audience
consumers are starting to buy
the same things all around the world
some brand names are changing – firms start to use a single brand name that can be remembered and understood all over the world

30. GLOBALIZATION NEW MARKETS ARE OPENING UP ALL AROUND THE WORLD
in the last 25 years lots of countries have moved from being command economies to having market-based economies (Eastern Europe, Russia, even China)
more opportunities for firms to sell into, but also more competition
Western firms lose out in competition with the ‘tiger’ economies in South-East Asia, which now start to lose out to places like China, where labour is even cheaper

31. GLOBALIZATION – GOOD OR BAD?
large global firms can produce
more efficiently and at a lower
cost
they become much more powerful
than governments
economic growth which
globalisation brings will benefit everyone – more jobs
some argue that it will benefit the rich at the expense of the poor and the environment

32. DISCUSS ARGUMENTS IN FAVOUR/AGAINST FREE TRADE AND PROTECTIONISM
DISCUSS ARGUMENTS IN FAVOUR/AGAINST FREE TRADE AND PROTECTIONISM. YOU MAY NEED THE FOLLOWING VOCABULARY:
liberalise the economy
reducing imports (quotas) – improve balance of payments
increase profits for domestic producers and protect domestic jobs
impose/lift trade barriers
protect inefficient domestic producers and restrict efficient foreign competitors – higher prices for consumers
WTO/IMF pressure
protect strategic/ infant industries
protect against dumping
home-produced substitutes
retaliate against restrictions imposed by other countries

33. HOW DO THE FOLLOWING CARTOONS AND PICTURES COMMENT ON FREE TRADE AND PROTECTIONISM?

34. THE EUROPEAN UNION QUIZ
Do the quiz and find out how much you know about the EU.

35. LISTENING – SENTENCE COMPLETION – A BRIEF SUMMARY OF THE HISTORY OF EUROPEAN UNION ENLARGEMENT (2010) – RB, p. 54
Read the gapped text and think about what words and expressions might be missing. Then, fill in the gaps as you watch the video:
Do the tasks II, III & IV, p. 55.

36. READING – FIT AT 50? – RB, pp. 52 & 53
I Read the text and decide which paragraphs are covered
by the following headings.
1 Recent achievements
2 ECSC, EDC, EEC
3 Objection
4 EU responsibilities
5 The importance of the economy
6 Birth
7 Enlargement
II Do the tasks III, IV & V, p 53.
III PROJECT - Discuss Croatia’s path to the European Union using appropriate terminology. Visit the official web-pages of the EU to get reliable information.

37. HOMEWORK – ARGUMENTS IN FAVOUR OF AND AGAINST FREE TRADE - MK, pp
WRITING TASK – Classify the statements on page 135: which are
in favour of and which against free trade and the policies of
the WTO?
Then write a brief essay summarizing the most important
arguments in favour of free trade, and those against.