international trade mk u 27 rb pp 20-25. reading protectionism and free trade rb, pp 20-21 read...
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International trade
MK U 27
RB pp 20-25
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READINGPROTECTIONISM AND FREE TRADE
RB, pp 20-21
Read paragraphs 1 & 2 to explain:
THE COMPARATIVE COST PRINCIPLE
ABSOLUTE / COMPARATIVE ADVANTAGE
(REASONS & EXAMPLES)
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COMPARATIVE ADVANTAGEThe 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
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Collocations from pgs 1 & 2
rai______ living standard
spe______ in the production
c________ advantage ___ producing...
fac______ of production
div_______ of labour
ec_______ of scale
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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
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Read paragraphs 3 & 4 to explain:
PROTECTIONISM AND REASONS FOR PROTECTIONISM
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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
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Reasons for TRADE LIBERALIZATION
• absolute/comparative advantage• specialization• access to markets • intern. competition & efficiency• efficient market mechanism• freer movement of resources• freedom to choose
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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
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• 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
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Protectionism: imports restriction methods
Barriers to trade
Read pg. 5 to learn about barriers to trade
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Protectionism: imports restriction methods
RulesRegulationsLegislationVoluntary Exports RestrictionsExacting standars or Specifications
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Collocations from paragraphs 3, 4 & 5 – which verbs are missing?
i________ tariffs & quotas / restrictionsp________ strategic / infant industriesa_________ sectorsl____ to structural unemploymentr________ a balance of payment deficitp_________ against dumpingd_______ or w______ competitorsr________ against restrictionsa_________ economies of scales____ a limit to importsp______ revenue for the government
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Collocations from paragraphs 3, 4 & 5 impose tariffs & quotas / restrictionsprotect strategic / infant industriesabandon a sectorlead to structural unemploymentreduce a balance of payment deficitprotect against dumpingdestroy or weaken competitorsretaliate against restrictionsachieve economies of scaleset a limit to importsprovide revenue for the government
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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
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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
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Read paragraphs 6 & 7 and explain:
ORGANISATIONS PROMOTING FREE TRADE & THEIR FUNCTION
OPPOSITION TO FREE TRADE
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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
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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
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Collocations from paragraphs 6 & 7
g____ favourable conditions
o_____ free trade
c_________ a fall in prices
p________ import substitution
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Collocations from paragraphs 6 & 7
grant favourable conditions
oppose free trade
counteract a fall in prices
practice import substitution
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Read paragraphs 8 & 9 and explain:
PROBLEMS & FEARS OF DEVELOPING COUNTRIES (IMF)
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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
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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)
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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)
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Collocations:
p_____ the interest r______ the principalr______ (renew) a loanr _________ (postpone) repaymentsi________ severe conditionst_______ blocksl_______the economyl_______trade barriers
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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
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RB, p 21, III – write questions
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RB, p 21, III – write questionsWhat 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?
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MK, Unit 27, p 132: Free trade & Exceptions to free trade
→ VocabularyListening 1: Free trade1 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
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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
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Listening 2: Exceptions to free trade1 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 _ _ _ _ _ _ _ _ _ _
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Listening 2: Exceptions to free trade1 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.
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For and against free trade
→ MK, p 134
Vocabulary
Reading
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Discussion: For and against free trade
1. Pick a side (for or against)2. Get together with your team3. Pick 3 most convincing arguments4. Get ready to present your opinion5. Organize your talk with phrases →6. Be prepared to argue in favour free trade
and against free trade!
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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,...
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Hw: Reading – Education and protection, MK p 133 + questions 1 & 2