International Trade

By Bianca Dela Pena

Key Trade Facts

Trade Deficit it is when imports

exceeds
exports.
Trade Surplus it is when exports

exceeds
imports.

THE ECONOMIC BASIS FOR

TRADE

Underlying facts
Distribution of natural, human and

capital resources are uneven.

Efficient production of various
goods requires different
technologies.
Products are differentiated as to
quality and other attributes.

Labor-Intensive Goods
Land-Intensive Goods
Capital-Intensive Goods

Absolute vs. Comparative

Absolute advantage

if it can produce more of a

product than the other producer
using the same amount of
resources.
Comparative advantage
if it can produce the
product at a lower opportunity
cost.

GRAPH

Principle of Total Comparative

The total output will be

greatest when each good is

produced by the nation that
has the lowest domestic
opportunity cost for producing
that good.

Beef

Vegetable

Mexico: Must give

up 2 tons of
vegetables to get 1
ton of beef.

Mexico: Must give

up ton of beef to
get 1 ton of
vegetable.

US: Must give up 1

ton of vegetable to
get 1 ton of beef.

US: Must give up 1

ton of beef to get 1
ton of vegetable.

Comparative
Advantage:

Comparative
Advantage:
Mexico

United States

Terms of Trade
Determines whether each country

can get a better deal by

specializing and trading than if it
opted instead of self-sufficiency.

Trade with Increasing Cost

The Case of Free Trade

Advantages:
It promotes competition
Deters monopoly
It compels them to be innovative
Gives consumer a wider range of choices
Links national interest
Breaks down national animosities

Supply and Demand

Analysis
of Exports and Imports

Supply and Demand Analysis of

Exports and Imports
World Price

Domestic Price

Domestic supply and demand

The interaction of world supply and

demand determines the equilibrium

world price.
It is the price that equates the

quantities supplied and demanded

globally.

determine the equilibrium domestic

price.
It is the price that would prevail in a

closed economy that does not engage

in international trade.
It equates quantity supplied and

quantity demanded domestically.

Trade Barriers and Export Subsidies

Tariffs are excise taxes or duties on the dollar values or

physical quantities of imported goods.

- they may be imposed to obtain revenue or to
protect
domestic firms.
Revenue tariff is usually applied to a product that is not
being produced domestically.
Protective tariff is implemented to shield domestic
producers from foreign competition.
Import quota is a limit on the quantities or total values of
specific items that are imported in some
period.

Nontariff barrier (NTB) includes

onerous licensing
requirements, unreasonable standards
pertaining to product quality, or simply
bureaucratic hurdles and delays in customs
procedures.
Voluntary export restriction (VER) is
a trade barrier by which foreign firms
voluntarily limit the amount of their exports
to a particular country.
Export Subsidy consists of a
government payment to a domestic
producer of export goods and is designed

Economic Impact on Tariffs

Direct effects:
1. Decline in Consumption
2. Increased domestic production
3. Decline in imports
4. Tariff Revenue
. Indirect effects

Kulangan pa ni atong mga agreements.

Ugma nlng ha? Nawala akong copy man

gud. Huhu.