1. INTERNATIONAL TRADE
MK, UNIT 27
RB, p.20-25

2. INTERNATIONAL TRADE
Lead-in
(Key concepts, vocabulary SB p. 132, RB p. 20)
Reading
(RB, p. 20, 21)
Listening
(Mk, p. 132, 133)
Discussion
(MK, p.134, 135)
Additional reading
Balance of Trade and Balance of Payments (RB, p. 22)
Sugar subsidies (Oh Sweet Reason, RB, p. 23)

3. CROATIA’S IMPORTS OR EXPORTS?
transport equipment, machinery, textiles, chemicals, foodstuffs, fuels
Bosnia and Herzegovina
Germany Slovenia Austria Serbia Italy
machinery, transport and electrical equipment; chemicals, fuels and lubricants; foodstuffs
Italy Germany Russia China Slovenia Austria

4. HOW MUCH DO YOU ALREADY KNOW?
Why do some people say that free trade is not fair trade?
Which measures can governments impose to protect the national economy from competing foreign products?
Which countries have trade deficit/surplus?
What is autarky?
What are dumping prices?
What happens in a typical barter?
What does comparative cost principle propose?
What does a balance of payments include?
What is exchanged in (in)visible trade?
How can governments liberalize imports?
What is the purpose of WTO agreements?
What is the purpose of IMF?

5. Key concepts Free trade Protectionism Trade barriers Tariffs Quotas
Subsidies
Exports/Imports
Autarky
Dumping
Barter
Absolute advantage
Comparative advantage
Infant industry
Strategic industry
Trade surplus
Trade deficit
Balance of trade
Balance of payments
(In)visible trade
SB p. 132, RB p. 20

6. FREE TRADE PROTECTIONISM
international trading without government interference
trade of goods without trade barriers
policy of protecting domestic industries against foreign competition
restrictions placed on the imports of foreign competitors by means of:
tariffs,
subsidies,
import quotas,
non-tariff barriers,
embargo etc.

7. FREE TRADE or PROTECTIONISM?
It protects jobs (votes).
It allows specialization.
It strengthens absolute/comparative advantage.
It strengthens political interest.
It provides access to more markets.
It prevents dumping.
It fosters efficient market mechanism.
It protects domestic industries (esp. strategic / infant industries).
It allows freer movement of resources.
It adds costs to consumers.
It protects national culture.
It increases international competition and efficiency.

8. COMPARATIVE COST
A situation in which a country, individual, company or region can produce a good at a lower opportunity cost than a competitor.
Countries should specialize in the goods they can produce most efficiently.
Source: Investopedia

9. EXAMPLE (http://www.econlib.org/library/Enc/FreeTrade.html)
Some lawyers are better typists than their secretaries. Should such a lawyer fire his secretary and do his own typing? Not likely. Though the lawyer may be better than the secretary at both arguing cases and typing, he will fare better by concentrating his energies on the practice of law and leaving the typing to a secretary. Such specialization not only makes the economy more efficient but also gives both lawyer and secretary productive work to do.

10. WTO & IMF
organization which tries to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
international organization which deals with the rules of trade between nations to help producers of goods and services, exporters and importers conduct their business

11. READING RB P.20, 21 PROTECTIONISM AND FREE TRADE
THE COMPARATIVE COST PRINCIPLE
REASONS FOR COMPARATIVE/ABSOLUTE ADVANTAGE
EXAMPLES
PROTECTIONISM (POLITICAL REASONS)
TYPES OF TRADE BARRIERS (QUOTAS V. TARIFFS)
FREE TRADE: GATT AND WTO
OPPOSITION TO FREE TRADE
PROBLEMS OF DEVELOPING COUNTRIES (IMF)
TRADING BLOCKS
Comprehension tasks: II (p.20), III (p.21)

12. TEXT SUMMARY: WHICH VERB IS MISSING?
The comparative cost principle proposes that countries will r_______ the living standard if they s_______ in the production of the goods and services in which they are efficient.
Politicians p______ strategic industries because if we a_______ all sectors in which we don’t have a comparative advantage, this might l_______ to structural unemployment.

13. Governments i_________ tariffs to d________ or w________ competitors, and r________ against restrictions imposed by other countries.
Infant industries are protected until they a_________ economies of scale.
Tariffs p______ revenue for the government.
Developing countries wanted to c______ a fall in commodity prices so they started to p_______ import substitution.

14. Developing countries have debts because they can’t p_____ the interest, let alone r______ the principal, so they have to r______ (renew) a loan, or r _________ (postpone) repayments.
Still, for fear of being excluded from international trade, third world countries have to l_______ their economies and l_______ trade barriers.
Listening (MK, p. 132, 133)
Discussion (MK, p.134, 135)

15. DISCUSS FREE TRADE AND … SB. P. 135
peace and stability
size of markets available to exporters
prices
political and cultural barriers
economic growth
infant industries in developing countries
pollution/environment
labour standards

16. FREE TRADE… promotes guarantees breaks down fosters prohibits pollutes
allows
favours

17. FREE TRADE SB. P. 135
prohibits developing countries from protecting their infant industries
pollutes the environment bcs of increased transport of goods
allows rich countries to dump subsidized, industrially produced food in poor countries
favours commercial values (not labour and environmental issues)
promotes peace and stability
guarantees producers (exporters) bigger markets
guarantees consumers the lowest prices
breaks down barriers bretween nations
fosters economic growth

18. READING OH, SWEET REASON (RB p 23)
TRUE OR FALSE?
Sugar is produced from sugarcane only.
The production of sugar in the EU is more efficient than production in Brasil.
The EU subsidizes European sugar producers.
European sugar is exported to developing countries.
It is economically justified to buy sugar from the most efficient producers.