READING PROTECTIONISM AND FREE TRADE RB, pp 20-21 Read paragraphs 1 & 2 to explain: THE COMPARATIVE COST PRINCIPLE ABSOLUTE / COMPARATIVE ADVANTAGE (REASONS & EXAMPLES)
COMPARATIVE ADVANTAGE The idea that countries should specialize in making the products that they are particularly good at making, and should import products that other countries are better at making. Longman Business English Dictionary Comparative advantage is a situation in which a country, individual, company or region can produce a good at a lower opportunity cost than a competitor. Lower opportunity cost is the ability to produce a product most efficiently given all the other products that could be produced. –Opportunity cost – the cost of an alternative that must be foregone (sacrificed; either-or). Absolute advantage is the ability of a person or a country to produce a particular good at a lower absolute cost than another. http://www.investopedia.com
Collocations from pgs 1 & 2 rai______ living standard spe______ in the production c________ advantage ___ producing... fac______ of production div_______ of labour ec_______ of scale
Collocations from pgs 1 & 2 raise living standard specialize in the production comparative advantage in producing... factors of production division of labour economies of scale
Read paragraphs 3 & 4 to explain: PROTECTIONISM AND REASONS FOR PROTECTIONISM
Reasons for TRADE LIBERALIZATION (Free trade) a______e/c________e advantage spe_______n a_____s to foreign markets intern. c________n & efficiency efficient market m_________m freer m________t of resources f______m to choose
Reasons for TRADE LIBERALIZATION absolute/comparative advantage specialization access to markets intern. competition & efficiency efficient market mechanism freer movement of resources freedom to choose
Reasons for Reasons for TRADE LIBERALIZATION PROTECTIONISM absolute/comparative advantage specialization access to markets intern. competition & efficiency efficient market mechanism freer movement of resources freedom to choose protect jobs (v____s) protect d_______c ind. strategic reasons –i_____t industries prevent s_______l unemployment apply political p______e protect culture (?) raise r______e prevent d________g
absolute/comparative advantage specialization access to markets intern. competition & efficiency efficient market mechanism freer movement of resources freedom to choose Reasons for Reasons for TRADE LIBERALIZATION PROTECTIONISM protect jobs (votes) protect domestic ind. strategic reasons –infant industries prevent structural unemployment apply political pressure protect culture (?) raise revenue prevent dumping
Collocations from paragraphs 3, 4 & 5 – which verbs are missing? i________ tariffs & quotas / restrictions p________ strategic / infant industries a_________ sectors l____ to structural unemployment r________ a balance of payment deficit p_________ against dumping d_______ or w______ competitors r________ against restrictions a_________ economies of scale s____ a limit to imports p______ revenue for the government
Collocations from paragraphs 3, 4 & 5 impose tariffs & quotas / restrictions protect strategic / infant industries abandon a sector lead to structural unemployment reduce a balance of payment deficit protect against dumping destroy or weaken competitors retaliate against restrictions achieve economies of scale set a limit to imports provide revenue for the government
Barriers to free trade: tariffs, quotas, subsidies, customs duty, import licence, complicated regulations for documents TARIFFS to impose / set a tariff to place a tariff on sth to eliminate / lift a tariff high/low tariffs QUOTAS to impose / introduce / lift / set quotas to increase / raise / reduce a quota to comply with / exceed quotas
Barriers to free trade: tariffs, quotas, subsidies, customs duty, import licence, complicated regulations for documents SUBSIDY government/state subsidies to get/qualify for/receive a subsidy to give/grant/pay/provide a subsidy CUSTOMS DUTY the customs duties on foreign cars
Read paragraphs 6 & 7 and explain: ORGANISATIONS PROMOTING FREE TRADE & THEIR FUNCTION OPPOSITION TO FREE TRADE
Removing trade barriers Organisations set up to encourage the removal of barriers to free global trade: –WTO (GATT) –IMF –World Bank Countries join or face exclusion from benefits of free world trade
GATT WTO GATT stands for... General Agreement on Tariffs and Trade. It is an... international organization set.... up in 1947 with the objectives of.... encouraging international trade, of... making tariffs the only form of... protectionism, and of... reducing these as much as possible. The final GATT agreement includes trade in goods, services... copyright and investment. Explain: most favoured nation (MFN) clause
Collocations from paragraphs 6 & 7 g____ favourable conditions o_____ free trade c_________ a fall in prices p________ import substitution
Collocations from paragraphs 6 & 7 grant favourable conditions oppose free trade counteract a fall in prices practice import substitution
Read paragraphs 8 & 9 and explain: PROBLEMS & FEARS OF DEVELOPING COUNTRIES (IMF)
IMF: - lends to countries with balance of payment problems - pushes for economic reforms (?) - reports on policies in member states Criticisms: IMF lends money if countries agree to: - sell their resources cheaply - cut public spending increases problems of poverty
PROBLEMS & FEARS OF DEVELOPING COUNTRIES (IMF) 1 need to repay huge d____ - IMF imposed obligation to export 2 s_______ of the East Asian Tiger economies 3 c_______ of the Soviet Union 4 potential ex________ from the t______ blocks (the EU, NAFTA)
Read paragraphs 8 & 9 to explain: PROBLEMS & FEARS OF DEVELOPING COUNTRIES (IMF) 1 need to repay huge debts - IMF imposed obligation to export 2 success of the East Asian Tiger economies 3 collapse of the Soviet Union 4 potential exclusion from the trading blocks (the EU, NAFTA)
Collocations: p_____ the interest r______ the principal r______ (renew) a loan r _________ (postpone) repayments i________ severe conditions t_______ blocks l_______the economy l_______trade barriers
Collocations: pay the interest repay the principal rollover (renew) a loan reschedule (postpone) repayments impose severe conditions trading blocks liberalize the economy lower trade barriers
What can give a country an absolute or comparative advantage in goods or services over other producers? Why does the theory of comparative advantage seem inadequate to explain international trade? What is an infant industry? What is the advantage of tarrifs for the govt.? What is the advantage of quotas over tariffs?
MK, Unit 27, p 132: Free trade & Exceptions to free trade Vocabulary Listening 1: Free trade 1 They are s _ _ _ _ _ _ _ _ _, cannot always e _ _ _ _ _ _ how the real world works & there are e _ _ _ _ _ _ _ _ _ 2 It increases e _ _ _ _ _ _ _ _ - we can all c _ _ _ _ _ _ more. ( Remember: The function of an economy is to allocate resources amongst unlimited wants.) 3 Developed and d _ _ _ _ _ _ _ _ _ countries producing computers and c _ _ _ _ 4 Workers in a developed country – cannot find a job: w _ _ _ _ part of the country or no s _ _ _ _ _ 5 T _ _ _ _ _ _ _ _ _ process
MK, Unit 27, p 132: Free trade & Exceptions to free trade Vocabulary Listening 1: Free trade 1 They are simplified, cannot always explain how the real world works & there are exceptions 2 It increases efficiency - we can all consume more. ( Remember: The function of an economy is to allocate limited resources amongst unlimited wants.) 3 Developed and developing countries producing computers and cloth 4 Workers in a developed country – cannot find a job: wrong part of the country or no skills 5 Transition process
Listening 2: Exceptions to free trade 1 Other goods and services have a h _ _ _ _ _ v _ _ _ _ a _ _ _ _ generate higher w _ _ _ _ and economic g _ _ _ _ _ 2 P _ _ _ _ _ _ _ _ _ the new sectors, letting them d _ _ _ _ _ _ and grow until they have a c _ _ _ _ _ _ _ _ _ _ a _ _ _ _ _ _ _ _ and can c _ _ _ _ _ _ with other countries 3 They may g _ _ _ _ _ _ _ economies of s _ _ _ _ and b _ _ _ _ _ _ other parts of the e _ _ _ _ _ by way of p _ _ _ _ _ _ _ e _ _ _ _ _ _ _ _ _ _ _ _ 4 A _ _ _ _ _ _ _ _ - generates knowledge that goes into the a _ _ _ _ _ _ _ _ _ industry, electrical e _ _ _ _ _ _ _ _ _ _
Listening 2: Exceptions to free trade 1 Other goods and services have a higher value added generate higher wages and economic growth. 2 Protecting the new sectors, letting them develop and grow until they have a comparative advantage and can compete with other countries. 3 They may generate economies of scale and benefit other parts of the economy by way of positive externalities. 4 Aerospace - generates knowledge that goes into the automobile industry, electrical engineering.
For and against free trade MK, p 134 Vocabulary Reading
Discussion: For and against free trade 1.Pick a side (for or against) 2.Get together with your team 3.Pick 3 most convincing arguments 4.Get ready to present your opinion 5.Organize your talk with phrases 6.Be prepared to argue in favour free trade and against free trade!
Need the following phrases? I am sure that... In my opinion... / I believe / From my point of view It is only fair / right to admit... It is difficult to take a firm stand on this, but... Let me give you an example... / If I may illustrate... As / because of / since / consequently / therefore Firstly... Secondly... Thirdly... I am afraid that... Although...., I have to say... Furthermore,..../ Moreover,.... However,...
Hw: Reading – Education and protection, MK p 133 + questions 1 & 2