International Trade Group 5(03)

INTERNATIONAL TRADE

GROUP 5

CONTENTSCONTENTS

The The Growth Growth & & Role Role

Protectionism vs.

Free Trade

Protectionism vs.

Free Trade

Banana Banana WarsWars

Trần Thị Phước KhánhĐặng Thị Thùy TrangTrần Thị Phước KhánhĐặng Thị Thùy Trang

Nghiêm Ngọc Trâm Trần Nguyễn Tường ViNghiêm Ngọc Trâm Trần Nguyễn Tường Vi

Phan Thị Trâm Anh Phan Thị Trâm Anh

* DEFINITION OF INTERNATIONAL TRADE

Exchange of capital, goods and services from country to country.

In most countries, it represents a significant share of GDP

Without international trade, nations would be limited to the goods and services produced nationwide, called Domestic trade.

* THE GROWTH OF INTERNATIONAL TRADE

In the past, people knew it as trading activities overseas or over long distances.

There used to be extensive trade between Romans and the Indians during the 19th century BC (exchanged goods, cultures and religions)

It was political problems that caused fundamentally this incapability of restoring a global system.

* THE GROWTH…(CONT.) The beginning of wars meant the end of the

economic collaboration among countries involved in the wars.

The general global situation has changed since 1914.

Nowadays, more and more trading organizations are established to develop the worldwide economy.

VIETNAM AND WTO

THE IMPORTANT ROLE OF INTERNATIONAL TRADE

1. Providing all kinds of goods and services for consumers in the world

GOODS Wine

Clothes

Food

Jewelry

ServiceServicess

BankingTourism

Consulting

Transportation

THE IMPORTANT ROLE…(CONT.)

2. Allowing countries to use their resources effectively, maximize their whole capacity

A country cannot provide a kind of goods well it can obtain by trading with another one.

The country should focus on what they can produce efficiently. That’s called specialization.

THE IMPORTANT ROLE…(CONT.)

3. Participating in global economy :

Taking opportunity from FDI

Receiving government : foreign currency and expertise a growth of GDP

Investors : higher revenues

PROTECTIONISM VERSUS FREE TRADE

PROTECTIONISM

FREE TRADE

PROTECTIONISM DEFINITION:

The economic policy of restraining trade between nations, through methods such as

tariffs on imported goods

restrictive quotas

Administrative barrier

Direct subsidies

Export subsidies

Exchange rate manipulation

RESTRICTIVE GOVERNMENT REGULATIONS

Ex. Rate manipulation

Export subsidies

Direct subsidies

Administrative barrier

Anti-dumping legislation

PROTECTIONISM

PURPOSE:

To discourage imports

To prevent foreign take-over of local markets and companies.

To "protect“ workers within a country

PROTECTIONISM

Who Gains?

Special-interest groups

some big corporations unions farmers' groups

NEGATIVE SIDES

LOST JOBS

Restrict the choice of consumer goods

Reduce consumer spending power

Contribute both to the cost of goods and to the cost of doing business.

Jobs destruction

HIGHER PRICES Consumers pay more times the world price

for imported products

Reason:

Tariffs are imposed on imported goods

Quotas reduce the quantity of imported goods

HIGHER TAXES

Force you to pay more taxes on imported goods and raise your general taxes.

Reason: Governments invariably expand their Customs Department bureaucracies to force compliance with their new rounds of trade restrictions

THE DEBT CRISIS

Western Banks are owed hundreds of billions of dollars by Eastern European and Third World countries.

Reason: Trade restrictions by Western governments have cut off Western markets for these countries impossible to repay their loans possibility of a collapse of the world banking system.

FREE TRADE DEFINITION:

• a type of trade policy that allows traders to act and transact without coercive interference from government.

• free trade means no taxes on manufacturing goods and no tariffs paid when goods cross a border.

FREE TRADE (CLIP)

FREE TRADE

POSITIVE SIDE

NEGATIVE SIDE

POSITIVE SIDE

"It is always beneficial," "for a nation to specialize in what it can produce best and then trade with others to acquire goods at costs lower than it would take to produce them at home." (French economist and statesman Frederic Bastiat)

POSITIVE SIDE (CONT.)

"Society thrives on trade simply because trade makes specialization possible, and specialization increases output, and increased output reduces the cost…”(Journalist Frank Chodorov)

POSITIVE SIDE (CONT.)

Consumers: spending less of their income on certain products, accrue a lot of money

increase their demand for other goods more employment opportunities…

NEGATIVE SIDE Free Trade Causes Massive

Unemployment

For the past 10 years, 164 Filipino workers lose their jobs daily

Between 1995, six firms a day closed for ‘economic reasons,’ displacing some 164 workers.

NEGATIVE SIDE(CONT.)

1995 to April 2001, 53 firms closed, displacing 80,319 workers

29 firms were forced to downsize their workforce

(FPI)

Cause: rapid tariff reduction and competition with imports and smuggled goods.

NEGATIVE SIDE(CONT.)

2004: 60% of the manufacturing firms among the country’s top 1000 corporations are foreign-owned transnational corporations, account for 73% of total gross revenues.

The increase in the number of contractual workers, who are without job security and rights to collective bargaining.

BANANA WARS

Since 1975, EU encouraged the Caribbean British and French colonies in Africa and Pacific islands to export banana to Europe

The US government supposed that EU made the wrong rules about “free trade”.

The multinationals in Latin America based on US have no chance to take their bananas to EU.

BANANA WARS (CONT.)

The US government complained to the WTO about Europe’s banana trade, and put a 100% import tariff on various European goods

EU and US have a huge argument, it is “banana wars”

BANANA WARS (CONT.)

This “war” has lasted for 6 years with the quarrel between the US and EU.

July 2001, after EU agreed to import more Latin American bananas from large US banana companies, the “banana wars” ended.

BANANA WARS (CLIP)

DO FOREIGN PRODUCTS CAUSE LOSS OF JOBS?

ANSWER:

Jobs in those sectors of the economy which directly compete against certain foreign products may be lost.

Other jobs are created to manufacture goods which foreigners are interested in purchasing from Americans.

DOES FREE TRADE MAKES THE WAGES IN POOR COUNTRIES

BECOME LOWER?

ANSWER:

Workers have painfully little capital to work with productivity is low free trade does not drive down the wages in poor countries.

Contrary: exporting low-wage countries’ products to high-wage countries will still have the effect of driving wages in down.