International Trade 3.1
Part 1: Intro to Trade!
This semester we will be talking about trade. So to start, what do you think about trade? Who do you think benefits from trade? Who might be hurt from trade?
Discuss!
Stand up and move to one side of the room if you think that Trump tarrifs should remain in place as they are more beneficial than harmful
Move to the other side if you think that tarrifs should end.
Explain why you feel the way you do with reference to specific groups of people like workers, consumers, government etc.
For the rest of the unit you will get more information about international trade, how it works and some pros and cons of trade.
Part 2: The Benefits of trade and the WTO
Goals for the day:
The benefits of trade
• Explain that gains from trade include lower prices for consumers, greater choice for consumers, the ability of producers to benefit from economies of scale, the ability to acquire needed resources, a more efficient allocation of resources, increased competition, and a source of foreign exchange.
The World Trade Organization (WTO)
• Describe the objectives and functions of the WTO.
![](https://www.google.com/images/icons/product/drive-32.png)
Functions of the WTO (Note: This has been a paper 2 question!!)
Provide a forum for trade negotiations
execute WTO agreements
evaluate and rule on trade complaints by member countries.
provide technical assistance to developing countries on trade issues
track changes in member trade policies.
Econ Plus Dal Review of the WTO:
Why does President Trump want to leave/disband the WTO?
HL Requirements:
Absolute and Comparative Advantage
Explain the theory of absolute advantage.
Explain, using a diagram, the gains from trade arising from a country’s absolute advantage in the production of a good.
Explain the theory of comparative advantage.
Describe the sources of comparative advantage, including the differences between countries in factor endowments and the levels of technology.
Draw a diagram to show comparative advantage.
Calculate opportunity costs from a set of data in order to identify comparative advantage.
Draw a diagram to illustrate comparative advantage from a set of data.
Discuss the real-world relevance and limitations of the theory
of comparative advantage, considering factors including the assumptions on which it rests, and the costs and benefits of specialization (a full discussion must take into account arguments in favor and against free trade and protection—Next class
The benefits of international trade with absolute and comparative advantage and a PPC with Consumption Possibilities Curve including trade:
HW: Read pp 414-430
Part 2: Types of Trade Protection
Goals for the day:
Types of trade protection
• Explain, using a tariff diagram, the effects of imposing a tariff on imported goods on different stakeholders, including domestic producers, foreign producers, consumers and the government.
• Explain, using a diagram, the effects of setting a quota on foreign producers on different stakeholders, including domestic producers, foreign producers, consumers and the
government.
• Explain, using a diagram, the effects of giving a subsidy to domestic producers on different stakeholders, including domestic producers, foreign producers, consumers and the government.
• Describe administrative barriers that may be used as a means of protection.
• Evaluate the effect of different types of trade protection.
Review:
1. Draw a diagram for the market for steel in India WITH free trade included. Label axis and explain the changes that would take place for producers and consumers (domestic) based on the introduction of imported steel to India.
2. List 2 functions of the WTO
3. What is the difference between Absolute and Comparative Advantage
4. Based solely on the diagram below, which country has the comparative advantage for producing T-shirts? Airplanes?
5. Calculate the opportunity cost for producing 1 t-shirt and 1 airplane for the U.S. and China
Option 2: Do tariffs on washing machines imported to the U.S. actually help U.S. producers?
Part 1 – Types of Protectionism graphing and explanation review
Import Quota:
Part 4 –Read together
Complete “3.1B – India’s Dangerous Food Subsidies”. OR
Wall Street Journal Article about Food subsidies in India:
- What are some major pros and cons of food subsidies in terms of their impact on Indian producers, consumers, the government and foreign producers and consumers? (All stakeholders)
Most Important
Choose the single most important reason against trade and the single most important reason for trade and explain why you chose those reasons.
HW: Read pp 431-452
GO through all of the Econ plus Dal review videos and get comfortable graphing each of the three protectionist policies:
Tariffs
Quotas
Subsidies
Part 3: Arguments for and Against Trade Protection
Do Now: Practice those graphs again!
Tariffs
Quotas
Subsidies
Goals for the Day:
Arguments for and against trade protection (arguments against and for free trade)
• Discuss the arguments in favour of trade protection, including the protection of domestic jobs, national security, protection of infant industries, the maintenance of health, safety and environmental standards, anti-dumping and unfair competition, a means of overcoming a balance of payments deficit and a source of government revenue.
Will Tariffs From the US lead to a Trade War? (this article discusses dumping and retaliation, a good connection to this course!)
Econ Plus Dal Arguments For and Against Protectionism: