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International Trade Group 5(03)


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International Trade Group 5(03)

  2. 2. CONTENTS The Growth & Role Protectionism vs. Free Trade Banana Wars Trần Thị Phước Khánh Đặng Thị Thùy Trang Nghiêm Ngọc Trâm Trần Nguyễn Tường Vi Phan Thị Trâm Anh
  3. 3. * DEFINITION OF INTERNATIONAL TRADE <ul><li>Exchange of capital, goods and services from country to country. </li></ul><ul><li>In most countries, it represents a significant share of GDP </li></ul><ul><li>Without international trade, nations would be limited to the goods and services produced nationwide, called Domestic trade. </li></ul>
  4. 5. * THE GROWTH OF INTERNATIONAL TRADE <ul><li>In the past, people knew it as trading activities overseas or over long distances. </li></ul><ul><li>There used to be extensive trade between Romans and the Indians during the 19 th century BC (exchanged goods, cultures and religions) </li></ul><ul><li>It was political problems that caused fundamentally this incapability of restoring a global system. </li></ul>
  5. 6. * THE GROWTH…(CONT.) <ul><li>The beginning of wars meant the end of the economic collaboration among countries involved in the wars. </li></ul><ul><li>The general global situation has changed since 1914. </li></ul><ul><li>Nowadays, more and more trading organizations are established to develop the worldwide economy. </li></ul>
  7. 8. THE IMPORTANT ROLE OF INTERNATIONAL TRADE <ul><li>1. Providing all kinds of goods and services for consumers in the world </li></ul>
  8. 9. GOODS Wine Food Clothes Jewelry
  9. 10. Services Banking Tourism Consulting Transportation
  10. 11. GOODS
  11. 13. THE IMPORTANT ROLE…(CONT.) <ul><li>2. Allowing countries to use their resources effectively, maximize their whole capacity </li></ul><ul><ul><li>A country cannot provide a kind of goods well  it can o btain by trading with another one. </li></ul></ul><ul><ul><li>The country should focus on what they can produce efficiently. That’s called specialization. </li></ul></ul>
  12. 14. THE IMPORTANT ROLE…(CONT.) <ul><li>3. Participating in global economy : </li></ul><ul><ul><li>Taking opportunity from FDI </li></ul></ul><ul><ul><li>Receiving government : foreign currency and expertise  a growth of GDP </li></ul></ul><ul><ul><li>Investors : higher revenues </li></ul></ul>
  14. 16. PROTECTIONISM <ul><li>DEFINITION: </li></ul><ul><li>The economic policy of restraining trade between nations, through methods such as </li></ul><ul><ul><ul><li>tariffs on imported goods </li></ul></ul></ul><ul><ul><ul><li>restrictive quotas </li></ul></ul></ul>
  15. 17. <ul><ul><ul><ul><ul><li>Administrative barrier </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Direct subsidies </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Export subsidies </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Exchange rate manipulation </li></ul></ul></ul></ul></ul>
  16. 18. RESTRICTIVE GOVERNMENT REGULATIONS Ex. Rate manipulation Export subsidies Direct subsidies Administrative barrier Anti-dumping legislation
  17. 19. PROTECTIONISM <ul><li>PURPOSE: </li></ul><ul><ul><ul><li>To discourage imports </li></ul></ul></ul><ul><ul><ul><li>To prevent foreign take-over of local markets and companies. </li></ul></ul></ul><ul><ul><ul><li>To &quot;protect“ workers within a country </li></ul></ul></ul>
  18. 20. PROTECTIONISM <ul><li>Who Gains? </li></ul><ul><li>Special-interest groups </li></ul><ul><ul><ul><li>some big corporations </li></ul></ul></ul><ul><ul><ul><li>unions </li></ul></ul></ul><ul><ul><ul><li>farmers' groups </li></ul></ul></ul>
  20. 22. <ul><li>LOST JOBS </li></ul><ul><li>Restrict the choice of consumer goods </li></ul><ul><li>Reduce consumer spending power </li></ul><ul><li>Contribute both to the cost of goods and to the cost of doing business. </li></ul><ul><li> Jobs destruction </li></ul>
  21. 23. <ul><li>HIGHER PRICES </li></ul><ul><li>Consumers pay more times the world price for imported products </li></ul><ul><li>Reason: </li></ul><ul><ul><ul><li>Tariffs are imposed on imported goods </li></ul></ul></ul><ul><ul><ul><li>Quotas reduce the quantity of imported goods </li></ul></ul></ul>
  22. 24. <ul><li>HIGHER TAXES </li></ul><ul><li>Force you to pay more taxes on imported goods and raise your general taxes. </li></ul><ul><li>Reason: Governments invariably expand their Customs Department bureaucracies to force compliance with their new rounds of trade restrictions </li></ul>
  23. 25. <ul><li>THE DEBT CRISIS </li></ul><ul><li>Western Banks are owed hundreds of billions of dollars by Eastern European and Third World countries. </li></ul><ul><li>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. </li></ul><ul><li> </li></ul>
  24. 26. FREE TRADE <ul><li>DEFINITION: </li></ul><ul><ul><li>a type of trade policy that allows traders to act and transact without coercive interference from government. </li></ul></ul><ul><ul><li>free trade means no taxes on manufacturing goods and no tariffs paid when goods cross a border. </li></ul></ul>
  25. 27. FREE TRADE (CLIP)
  26. 28. FREE TRADE <ul><li>POSITIVE SIDE </li></ul><ul><li>NEGATIVE SIDE </li></ul>
  27. 29. POSITIVE SIDE <ul><li>&quot;It is always beneficial,&quot; &quot;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.&quot; (French economist and statesman Frederic Bastiat) </li></ul>
  28. 30. POSITIVE SIDE (CONT.) <ul><li>&quot;Society thrives on trade simply because trade makes specialization possible, and specialization increases output, and increased output reduces the cost…”(Journalist Frank Chodorov) </li></ul>
  29. 31. POSITIVE SIDE (CONT.) <ul><li>Consumers: spending less of their income </li></ul><ul><li>on certain products, accrue a lot of money </li></ul><ul><li> increase their demand for other goods </li></ul><ul><li> more employment opportunities… </li></ul>
  30. 32. NEGATIVE SIDE <ul><li>Free Trade Causes Massive Unemployment </li></ul><ul><li>For the past 10 years, 164 Filipino workers lose their jobs daily </li></ul><ul><li>Between 1995, six firms a day closed for ‘economic reasons,’ displacing some 164 workers. </li></ul>
  31. 33. NEGATIVE SIDE(CONT.) <ul><li>1995 to April 2001, 53 firms closed, displacing 80,319 workers </li></ul><ul><li>29 firms were forced to downsize their workforce (FPI) </li></ul><ul><li>Cause: rapid tariff reduction and competition with imports and smuggled goods. </li></ul>
  32. 34. NEGATIVE SIDE(CONT.) <ul><li>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. </li></ul><ul><li>The increase in the number of contractual workers, who are without job security and rights to collective bargaining. </li></ul><ul><li> </li></ul>
  33. 35. BANANA WARS <ul><li>Since 1975, EU encouraged the Caribbean British and French colonies in Africa and Pacific islands to export banana to Europe </li></ul><ul><li>The US government supposed that EU made the wrong rules about “free trade”. </li></ul><ul><li>The multinationals in Latin America based on US have no chance to take their bananas to EU. </li></ul>
  34. 36. BANANA WARS (CONT.) <ul><li>The US government complained to the WTO about Europe’s banana trade, and put a 100% import tariff on various European goods </li></ul><ul><li>EU and US have a huge argument, it is “banana wars” </li></ul>
  35. 37. BANANA WARS (CONT.) <ul><li>This “war” has lasted for 6 years with the quarrel between the US and EU. </li></ul><ul><li>July 2001, after EU agreed to import more Latin American bananas from large US banana companies, the “banana wars” ended. </li></ul>
  36. 38. BANANA WARS (CLIP)
  37. 40. <ul><li>DO FOREIGN PRODUCTS CAUSE LOSS OF JOBS? </li></ul><ul><li>ANSWER: </li></ul><ul><li>Jobs in those sectors of the economy which directly compete against certain foreign products may be lost. </li></ul><ul><li>Other jobs are created to manufacture goods which foreigners are interested in purchasing from Americans. </li></ul>
  38. 41. <ul><li>DOES FREE TRADE MAKES THE WAGES IN POOR COUNTRIES BECOME LOWER? </li></ul><ul><li>ANSWER : </li></ul><ul><li>Workers have painfully little capital to work with  productivity is low  free trade does not drive down the wages in poor countries. </li></ul><ul><li>Contrary: exporting low-wage countries’ products to high-wage countries will still have the effect of driving wages in down. </li></ul>