ôn tập kinh tế quốc tế

Trade Free Trade (definition) According to Smith, free trade expands the extent of the market and, thereby, allows greater division of labor Free trade also increases productivity by allowing countries to specialize in what they do well. What is International Trade? International trade is an exchange involving a good or service conducted between at least two different countries. The exchanges can be imports or exports. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer

Is An Interdependent Global Economy A Good Thing? (kt phụ thuộc nhau có tốt?) 8

What are the terms of trade? (điều khoản thương mại) 9What are the Consequences (Benefits and Costs) of International Trade? 9

The Mercantilist Views on Trade or The new contributions of Mercantilists views on Trade11

Arguments against Protectionism (support free trade): lập luận chống lại 12

The strong point of Mercantilists (benefit of neo Mercantilists countries: China, Japan 13Consequences of Mercantilism (Hậu quả của chủ nghĩa trọng thương) 13

Absolute Advantage (lợi thế tuyệt đối) 15

How could country that is the most (least)efficient producer of everything gain from trade?16

If a government restricts trade,what are the costs if foreign governments respond likewise 17

Main determinants of comparative advantages of H-O theory: 19

Implications of the New Trade Theory (hàm ý) - main new trade 20

Explain how tariff could affect me, you and other company? 21Welfare effects of one country reducing its tariff on a good from a partner country: 21

Reasons 22

Welfare Effects of a Tariff (ảnh hưởng phúc lợi của thuế quan) 22

Protectionist Policies: Tariff (chính sách bảo hộ thuế quan) 23

Explain why the use subsidies are on the rise in recent years and give some examples? 24

Explains the dumping argument against free trade? Lập luận ủng hộ bán phá giá 26

Explain why subsidy and dumping are harmful for free trade? 26What is anti-dumping in trade? (thuế chống bán phá giá) 26

Non-tariff barriers to trade can arise from (phát sinh từ) 27

Main arguments to use subsidy and non tariff measures: 28

Common Market 32

Why is it beneficial for countries to engage in free trade?(tham gia thương mại có lợi?) 34

Why do nations prefer to negotiate bilateral trade agreements than the WTO (multilateral

Which industries are expected to benefit the most in Vietnam from the RCEP? 35

Benefit of VietNam when participating in many trade agreements 38Less Globalization, More Multilateralism (bớt toàn cầu hóa, nhiều hơn về đa phương) 38

Impetus for Regionalism(positive impacts) động lực của CN khu vực 38Effects of a Regional Trading Arrangement (Ảnh hưởng của thỏa thuận) 39Static Effects of Economic Integration (ảnh hưởng tĩnh) 39Dynamic effects of economic integration (ảnh hưởng động) 39

The challenges for member countries of EU 40

WTO’s Two Basic Principles (Today) (hai nguyên tắc cơ bản) 42

How could a country that is the most (least) efficient producer of everything gain from trade?43

Definition

Globalization is a process toward a more integrated and interdependent world economy betweenpeople, companies, and governments of different nations, a process driven by international tradeand investment and aided by information technology This process has effects on theenvironment, on culture, on political systems, on economic development and prosperity, and onhuman physical well-being in societies around the world

Benefit

- Access to New cultures

- Develop about education

- Access to New Talent, New market , New technology and innovation

- Lower costs for products and transhipment

- Lower tariff help trade to easier and more than

- Improve standards of living

- When globalization, customer have more choice because the variety of products

Challenges

- Increase wealth gap

- Easier to loss of cultural identity

–Stock markets fall

–Factories shut down

–Supply chains interrupted

Free Trade (definition)

According to Smith, free trade expands the extent of the market and, thereby, allows greaterdivision of labor

Free trade also increases productivity by allowing countries to specialize in what they do well

What is International Trade?

International trade is an exchange involving a good or service conducted between at least twodifferent countries The exchanges can be imports or exports As a result of international trade,the market is more competitive This ultimately results in more competitive pricing and brings acheaper product home to the consumer

Pros and Cons of International Trade:

What is the trade war?

A trade war is an economic conflict between countries This results in both countries imposingtrade protectionist policies against one another in the form of trade barriers These barriers can

be imposed in a number of different ways, including but not limited to tariffs, import quotas,domestic subsidies, currency devaluation, and embargos

What are the negative sides of free trade?

Free trade does not create more jobs

There are more risks for currency manipulation

There can be fewer intellectual property protections because of free trade

Environmental can be polluted

There can be fewer revenue generation opportunities in free trade

It can stiffen international competition for domestic economies

What are the positive sides of free trade?

Free trade creates economic growth opportunities

There are more opportunities for foreign direct investment

It lowers the taxes that consumers and businesses pay

Fewer government expenditures occur because of free trade

It creates better goods

Free trade involves more than just consumer goods

It helps the people who have the least amount of money to spend

Free trade creates more opportunities to solicit workers with expertise

Experts get to have access to the most resources with free trade

Free theory support free trade:

Is An Interdependent Global Economy A Good Thing? (kt phụ thuộc nhau có tốt?)

Supporters believe that increased trade and cross-border

investment mean

– lower prices for goods and services

– greater economic growth

– higher consumer income, and more jobs

Critics worry that globalization will cause

– job losses

– environmental degradation

– the cultural imperialism of global media and MNEs

Anti-globalization protesters now regularly show up at

most major meetings of global institutions

Three most important of Trade Theories:

Trade patterns for Vietnam (Mô hình thương mại)

Strong outward-oriented (export-dependent) economy with trade in goods and servicesaccounting for more than 170% of GDP

Main exports: labour-intensive manufactures (clothing, shoes, electronics), seafood, crude oil,rice, coffee, wooden products, machinery

Main imports: Machinery and equipment, petroleum products, steel, raw materials forclothing/shoe industry, electronics, plastic, automotives

Services remain the strongest sector, accounting for about 43% of GDP (but only 30% ofemployment)

Major services sectors: trade, finance, real estate, tourism

What are the terms of trade? (điều khoản thương mại)

Definition: the price of export goods relative to import goods – relative prices

The terms of trade of a given country are a proxy for the benefits from trade to that countryOnce a country is engaged in trade, any change in world market prices affects its terms of trade,its real income and wealth

What are the Consequences (Benefits and Costs) of International Trade?

Benefits of International Trade

Individuals

▪ Consumption of better quality products with lower prices

▪ Consumption of diverse products

▪ Greater income disparity

▪ Possibility of environmental degradation in developing countries

▪Greater vulnerability to foreign shocks

Other sources of Gain from Trade

• Productivity (most productive firms expand and export)

• Returns to scale (small countries can support larger firms)

• Competition (monopolies in small countries lose market power)

• Variety (buyers can access more choices)

• Supply chains (firms source parts from cheapest sources)

• Technology (producers access foreign technologies)

Classical Trade Theory Contributions

Adam Smith—Division of Labor

– Industrial societies increase output using same labor-hours as pre-industrial society

David Ricardo—Comparative Advantage

– Countries with no obvious reason for trade can specialize in production, and trade for productsthey do not produce

Gains From Trade

– A nation can achieve consumption levels beyond what it could produce by itself

Why is free trade bad for developing countries?

Trade liberalization can pose a threat to developing nations or economies because they areforced to compete in the same market as stronger economies or nations This challenge can stifleestablished local industries or result in the failure of newly developed industries there

National can loss from trade:

Compare Comparative - absolute advantage:

Mercantilism / Protectionism

Definition

The mercantilists maintained that the way for a nation to become rich and powerful was toexport more than it imported Mercantilism advocates government intervention to encourageexports and restrict imports One nation gained only at the expense of another

It view trade as a zero- sum game - one in which a gain by one country results in a loss by

another

The Mercantilist Views on Trade or The new contributions of Mercantilists views on Trade

– Export surpluses brought an inflow of gold and silver

– Trade policy was to encourage exports and restrict imports

– One nation gained only at the expense of another

Arguments for Protectionism: lập luận ủng hộ

Arguments against Protectionism (support free trade): lập luận chống lại

The weak point

- It creates high levels of resentment

- It creates a preference for the mother nation to always be first

- There is always a risk of local raw materials and resources running out

- The system is ultimately quite inefficient

The strong point of Mercantilists (benefit of neo Mercantilists countries: China, Japan

- It encourages the complete development of all natural resources.

- It encourages trade deficits for foreign nations

- It naturally reduces unemployment rates

- Cultural exchanges are encouraged to promote trade

Example: China's Neo-mercantilist strategies include promoting export subsidies, increase

exports, limiting imports, striving for a favorable balance of payment via exchange rate

manipulation, tariff, and other trade protections.

Consequences of Mercantilism (Hậu quả của chủ nghĩa trọng thương)

Gain to privileged merchants

Greater government control and direction of the economy Colonialism

Corruption: merchants used bribes and similar means to gain subsidies, protection for theirspecific interests

Inefficient factor allocation leading to overall reduction in prosperity

Many policies self-defeating: you cannot permanently increase your exports without eventuallyhaving greater imports

Bullionism self-defeating (price-specie flow mechanism)

Colbert’s Mercantilist Policies

Colbert’s policies

–encouraged population growth,

–Encouraged immigration of skilled workers,

–Discouraged emigration, and

–Extended corvée or forced labor throughout France in 1738

A zero-sum game

one in which a gain by one country results in a loss by another

Arguments for and against

Protectionism

1/ The infant industry argument

2/ The dying industry argument

3/ National pride

4/ National defence

5/ Income distribution

Kristoffer J M Hansen, Institute for Economic Policy

Which Industries Are Protected?

Agriculture: in the U.S., Europe, and Japan farmers make up a small fraction of the electoratebut receive generous subsidies and trade protection

– Examples: European Union’s Common Agricultural Policy, Japan’s 1000% tariff on importedrice, America’s sugar quota

Clothing: textiles (fabrication of cloth) and apparel (assembly of

cloth into clothing)

– Until 2005, quotas licenses granted to textile and apparel exporters were specified in theMulti-Fiber Agreement between the U.S and many other nations

The Invisible Hand (bàn tay vô hình)

That the pursuit of individual self interest leads to an excellent social outcome

Consumer sovereignty ensures that consumer needs determine what gets produced Businesscompetition ensures that prices are driven down to unit cost Thus, without any governmentcontrol, the most beneficial goods get produced, and at the lowest possible price

Absolute Advantage (lợi thế tuyệt đối)

Definition (include example)

Adam smith argued that a country has an absolute advantage in the production of a productwhen it is more efficient than any other country in producing it

According to smith, countries should specialize in the production of goods for which they have

an absolute advantage and than trade these goods for the goods produced by other countries

Example: If the US uses 15 hours of labor to produce one unit of tomatoes and Mexico uses 10hours to produce the same amount of tomatoes, Mexico has an absolute advantage in theproduction of Tomatoes

Example: Source of Advantage

– Canada is efficient in growing wheat, inefficient in growing bananas

– Nicaragua is efficient in growing bananas, inefficient in growing wheat

- Canada has absolute advantage in wheat, Nicaragua has absolute advantage in bananas

– Mutually beneficial trade can take place if both

countries specialize in their absolute

advantage

Absolute Advantage View on Trade

Specialization and trade advantage both countries

Adam Smith and other classical economists advocated a policy of laissez-faire, or minimalgovernment interference with economic activity

Free trade would cause world resources to be utilized most efficiently, maximizing worldwelfare

Contribution of Adam Smith in trade theory

What are the gains from trade?

That there are gains from trade is probably the most important insight in internationaleconomics Countries selling goods and services to each other almost always generate mutualbenefits

➢Trade benefits countries by allowing them to export goods made with relatively abundantresources and import goods made with relatively scarce resources.

➢When countries specialize, they may be more efficient due to the larger scale of production

➢Countries may also gain by trading current resources for future resources(internationalborrowing and lending) and from international migration

Role of Government: Government should

– maintain law and order,

– ensure the defense of the nation from foreign enemies,

– erect and maintain public works that private citizens would not build

– Subsidize education for those who could not afford it, and

– Regulate international trade when free trade endangers ‘infant

industries’ or compromises national security

How could country that is the most (least)efficient producer of everything gain from trade?

Countries use finite resources to produce what they are most productive at (compared to theirother production choices), andthen trade those products for what they want to consume

Countries can specialize in production, while consuming a great diversity of goods and servicesthrough trade

What is the structure/pattern of trade?

The pattern of trade describes who sells what to whom

Differences in climate and resources explain why Brazil exports coffee and Saudi Arabia exportsoil

Why do some countries export certain products?

Why some countries export certain products can stem from differences in:

–Labor productivity

–Relative supplies of capital, labor and land and their use in the production of different goodsand services

Comparative Advantage (Lợi thế tương đối)

Definition (main theme)

David Ricardo asked what might happen when one country has an absolute advantage in theproduction of all goods

Ricardo's theory of comparative advantage suggests that countries should specialize in theproduction of those goods they produce most efficiently and buy goods that they produce lessefficiently from other countries, even if this means buying goods from other countries that theycould produce more efficiently at home

Sources of Comparative Advantage

Main determinant (yếu tố quyết định chính)

The Gains from Trade

Each country is able to consume at a point that lies beyond its ppc, reflecting the greaterproductivity under international division of labour

The gains from trade for each country depends on its terms of trade: the relative price of itsexports in terms of its imports

International trade affects production, as each country specializes

And it affects consumption, as the price of imported goods decline, resulting in higherconsumption of these (substitution effect)

It also increases real incomes, so consumers tend to buy more of each product (income effect)

Trade patterns for Vietnam

Strong outward-oriented (export-dependent) economy with trade

in goods and services accounting for more than 170% of GDP

Main exports: labour-intensive manufactures (clothing, shoes, electronics), seafood, crude oil,rice, coffee, wooden products, machinery

Main imports: Machinery and equipment, petroleum products, steel, raw materials forclothing/shoe industry, electronics, plastic, automotives

Services remain the strongest sector, accounting for about 43% of GDP (but only 30% ofemployment)

Major services sectors: trade, finance, real estate, tourism

If a government restricts trade,what are the costs if foreign governments respond likewise

Trade policies are often chosen to cater to special interest groups, rather than to maximizenational welfare

Governments tend to adopt tariffs, then negotiate them down in exchange for reduction in tradebarriers of other countries

Implications of comparative advantage (hàm ý)

Policy of Laissez-faire (law of free market) still holds

Gains need not be equal

Hours of work traded need not be equal but the advantage still exists

Trade is based on the existence of relative – not absolute – production advantages

Opportunity Cost Definition (include Example)

Is the cost of a commodity is the amount of a second commodity that must be given up torelease just enough resources to produce one additional unit of the first commodity

Example: If in the absence of trade the United States must give up two-thirds of a unit of cloth

to release just enough resources to produce one additional unit of wheat domestically, then theopportunity cost of wheat is two-thirds of a unit if cloth

National Competitive Advantage: Porter’s Diamond

Definition

– Countries have different relative abundance of factors of production

– Production processes use factors of production with different relative intensity

Michael Porter tried to explain why a nation achieves international success in a particular

industry and identified four attributes that promote or impede the creation of competitive

advantage:

● Factor endowments

● Demand conditions

● Relating and supporting industries

● Firm strategy, structure, and rivalry

Heckscher - Ohlin (H-O)

Definition (include example)

A nation will export the commodity whose production requires the intensive use of the nation'srelatively abundant and cheap factor and import the commodity whose production requires theintensive use of the nation's relatively scarce and expensive factor

Model based on two concepts:

1 Factor endowments—the quantities of productive resources possessed by a country

2 Factor intensity—the amount of labor per unit of capital used in production of a product

Example: This is why labor-abundant countries, such as India and China export footwear, rugs,textiles, and other labor intensive commodities; and land-abundant countries, such as Argentina,Australia, and Canada, export meat, wheat, wool, and other land- intensive commodities

Main determinants of comparative advantages of H-O theory:

Factor endowments

the quantities of productive resources possessed by a country

Factor endowments refer to a nation's position in factors of production necessary to compete in agiven industry

A nation's position in factors of production can lead to competitive advantage vd, Singapo, These factors can be either basic (natural resources, climate, location) or advanced (skilled labor,infrastructure, technological know-how)

Factor intensity

the amount of labor per unit of capital used in production of a product

The nations differ in that one is relatively labor abundant while the other is relatively capitalabundant Further, the commodities produced differ in factor intensity

Factor intensity is determined by the ratio of capital (K) to labor (L) required for the production

of the commodity

For example, the U.S has more of both labor and capital than Mexico, but the quantity of capitaladvantage in the U.S over Mexico is greater than the quantity of labor advantage in the U.S.over Mexico => The U.S., therefore, is capital abundant and Mexico is labor abundant

Heckscher-Ohlin Theorem with a Single Technique:

• The structure of trade, in general, can be traced back to differences in factor endowments,technology, and tastes

• Since Heckscher-Ohlin theory assumes that technology and tastes are similar betweencountries, it attributes the comparative

advantage to differences in factor endowments

In summary, the capital-abundant country exports the capital-intensive commodity, and thelabor-abundant country exports the labor intensive commodity

Determinants of comparative advantage ?

o Differences in factor endowments not on differences in productivity determine patterns oftrade (comparative advantage)

o Absolute amounts of factor endowments matter.

oFactor endowments vary among countries

o Products differ according to the types of factors that they need as inputs

o A country has a comparative advantage in producing products that intensively use factors ofproduction (resources) it has in abundance

o Factors of production: labor, capital, land, human resources, technology

New trade theory

Definition

New trade theory suggests that the ability of firms to gain economies of scale (unit costreductions associated with a large scale of output) can have important implications forinternational trade

New trade theory suggests that:

through its impact on economies of scale, trade can increase the variety of goods available toconsumers and decrease the average cost of those goods

in those industries when output required to attain economies of scale represents a significantproportion of total world demand, the global market may only be able to support a small number

of enterprises

Implications of the New Trade Theory (hàm ý) - main new trade

1 Countries may export the same good to each other

2 Countries may lose from trade

3 More and broader reasons for countries to gain from trade

4 New rationales for using policy to affect trade

…

Intra - Industry Trade:

Intra-industry trade refers to the exchange of similar products belonging to the same industry.The term is usually applied to international trade, where the same types of goods or services areboth imported and exported

Common trade Barriers:

Most Common Trade Barriers:

1 Tariffs: A tariff is simply a tax on imports (import tariff) or exports (export tariff) Tariffs arethe most common type of trade restriction

2 Export and Production Subsidies:

Government payments made to domestic firms encourage exports or production in general

3 Dumping takes place when a firm or an industry sells products on the world market at pricebelow the cost of production

4.Customs Procedures All countries have customs procedures for maintaining border securityand collecting tariffs

5 Local Content Requirement

A local content requirement is a regulation that requires a specified fraction of a final good to beproduced domestically

Purpose about barrier:(mục đích)

Governments offer barriers to encourage domestic production, encourage import and export andstabilize their economies

It also creates favorable conditions for business organizations to participate in international labordivision, expand import, export activities and protect the domestic market

Especially due to uneven economic development, countries maintain trade barriers to protectdomestic production

Explain how tariff could affect me, you and other company?

Tariffs hurt consumers because it increases the price of imported goods Because an importer has

to pay a tax in the form of tariffs on the goods that they are importing, they pass this increasedcost onto consumers in the form of higher prices

Welfare effects of one country reducing its tariffon a good from a partner country:

– Importing country

Gains from trade creation

Loses from trade diversion (we’ll see why

shortly)

– Partner country gains regardless

– Rest of world

Loses from trade diversion

Not much affected by trade creation

Reasons

– Trade creation is much like true free trade

At zero tariff, import from partner only if its cost is lower Thus resources are used moreefficiently

– Trade diversion is not like true free trade

What was imported from 3rd country, not partner, when both paid the same tariff, must

have cost more in the partner than in the 3rd country

Switching to the partner is a switch to a higher cost source for the good

Economic of Tariffs:

Tariffs are the most common type of trade restriction

A tariff requires the importer of a good to pay a specified fraction of the world price to thegovernment

By raising the domestic price of imports, a tariff helps domestic producers but hurts domesticconsumers

Consumption effect (hiệu quả tiêu dùng)

– Domestic consumers reduce their consumption

Production effect (hiệu quả sản xuất)

– Higher prices make it profitable for domestic producers to increase their output

– Thus the tariff attracts resources into the protected industry from other sectors of the economy

– The tariff redistributes income from consumers to producers

Welfare Effects of a Tariff (ảnh hưởng phúc lợi của thuế quan)

Consumers of the imported good are worse off (compared to free trade)

Producers of the imported good are better off