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1、1.The three gains from trading internationally are as follow:First, reduce the costs of production. International exchange can allow countries to source their raw materials and component parts from where they are produced more cheaply.Second, the competition can let customers to gain the products wi
2、th lower price. Consumers of the product should be able to purchase their goods and services more cheaply because there is likely to be competition between countries.Third, provide consumers more choices on consumption. Trading internationally allows countries to exchange their range of goods with o
3、ther countries producing a different range. This gives the population of each country a greater choice. 2. We live today in a world in which trade is said to be Global. This means that countries can trade with one another where ever they are in the world and while goods still require to be transport
4、ed. Services are now very often delivered electronically. In this process, free trade appeared. And what is the free trade? Now, I will use an example to instruct it. Common markets, which are customs unions which in addition to free trade in goods and services allow the free movement of factors of
5、production such as labour and capital, between member states. The former EEC, now the European Union, was an example. From this example, we can see that the Free Trade, now sometimes termed International Trade, had the original intention that goods and services could be exchanged freely between coun
6、tries with no barriers to this exchange. 3.We first see what absolute advantage is. Absolute advantage exists when one country is obviously more efficient than another at producing a commodity. For example, the UK may be able to produce cars more cheaply than say Indonesia. But Indonesia can produce
7、 excellent coffee far more efficiently than the UK. Each country is said to have an Absolute Advantage in producing these single commodities. Comparative advantage exists when although one country has absolute advantage over another in producing several commodities both countries can benefit from sp
8、ecialization and trade. The more effective country specializes in those commodities where it has the greatest advantage and the other country specializes in those commodities where it comparatively gets closest to the production possibilities of the more effective country. This system is regarded as
9、 the basis for international trade and may lead to increases in output for all commodities. For example, Country Labour input (days) Output- Wine/ Olive OilUK 5 200 160Greece 5 100 130 From this example, we can see that these two countries are all have comparative advantage. UK would have a greater
10、advantage in wine and should specialize in wine, while Greece is much closer in olive oil production and would have comparative advantage therefore in olive oil.4 The protectionism is the government of country adopts a set of policy to protect their own trade. The cases for protectionism are raising
11、 revenue from tariffs and quotas, protecting employment, against dumping and over socialization, and curing persistent balance of payments deficit, and so on.The first example is protecting industries. If a new industry is showing promise of growth and to become a major player, countries may feel a
12、need to nurture this industry while it grows to become large enough and competitive enough to match foreign firms which are already enjoying economies of scale. These new industries are sometimes termed infant or “sunrise” industries. Equally some industries may be in a state of decline. It is clear
13、 in the UK that manufacturing has very much declined as a percentage share of the whole UK economy. Heavy engineering and shipbuilding have declined dramatically. Mining too has slumped to an all time low. Yet demands were made to protect these industries despite the fact that the opportunity cost o
14、f doing so was extremely high. These were and often termed sunset industries and there is very often a feeling that they have generated wealth for many years and perhaps should have some form of protection. Most economists argue that at least they should be allowed to decline gradually through natur
15、al wastage or to scale down over an extended period.The second is strategic industries. Some industries are regarded as so important that countries feel they must be protected in certain situation, e.g. war. Examples might be Agriculture and Defence. If war broke out, for instance, food supply lines
16、 could be threatened and if a country had relied on purchasing its defence equipment from abroad these import could also be threatened or even stopped. Usually tariffs or quotas are the means by which these industries are protected.5.Barriers of trade include tariffs and non-tariffs.The first tariff
17、 is voluntary export restraints. When a country feels that it is perhaps being very successful in exporting goods to other countries and feels they may be about to impose restrictions it may agree with them to use this method of Voluntary Restraint, which means that they voluntarily restrict the vol
18、ume of their exports to those countries . Japan has entered into this format with the USA and some EU countries, particularly with regard to cars.The second tariff is Embargoes. These are an extreme form of barrier. In effect a country which imposes an embargo is saying we will not allow you to impo
19、rt any quantity at all. These tend to be only used when there are very serious disputes between countries or in even more extreme situations such as war e.g. Gulf Wars, Kosovo etc.6.The World Trade Organisation (WTO) is the body established in 1995 to regulate world trade. This covers goods, service
20、s and intellectual property rights. Now, I will use an example to introduce the role of The World Trade Organisation (WTO). The Beef Dispute. The WTO ruled that the EU must end its ban (embargo) on US hormone treated beef. The US said it would apply sanctions to EU foodstuffs and motorcycles if the
21、EU did not comply. The EU came back with a report that the hormones could cause cancer and that they had discovered hormones in supposedly hormone free American Beef. Therefore, we can see that the role of The World Trade Organisation (WTO) is it seeks to encourage the lowering of trade restrictions
22、 and to settle disputes with a common dispute procedure. It meets every so often and the last was in July 2004.7.The initiations of European Union are as follow: Elimination of customs duties and quotas on imports and export of goods between member states. Establishment of a common customs tariff an
23、d commercial policy towards non member states. Abolition of obstacles to the free movement of persons, services and capital between member states. Establishment for common policies for agriculture and transport. The prohibition of business practices which restrict or distort competition within the c
24、ommon market. The association of overseas countries and territories to increase trade and development. The development of a common foreign security and defence policyThe EU Common Commercial Policy (CCP) establishes uniform principle covering trade between all Member States. These include changes in tariff rates, the conclusion of tariff and trade agreements with non-member countries, uniformity in trade liberalization measures, exports policy, and instruments to protect trade such as anti-dumping measures and subsidies.3