Match up these words and expressions with the definitions below

1. trade in goods A. autarky

2. trade in services (banking, insurance, tourism, and B. deficit
so on) C. quotas
3. direct exchanges of goods, without the use of D. balance of payments
money
E. dumping: PHÁ GIÁ
4. the difference between what a country receives
and pays for its exports and imports of goods F. surplus

5. the difference between a country’s total earnings G. balance of trade

from exports and its total expenditure on imports H. invisible imports
6. the (impossible) situation in which a country is and exports
completely self –sufficient and has no foreign I. tariffs
trade
K. visible trade (GB)
7. a positive balance of trade or payments or merchandise
8. a negative balance of trade or payments trade (US)

9. selling goods abroad at (or below) cost price L. barter or counter-

trade
10. imposing trade barriers in order to restrict imports
M. protectionism
11. taxes charged on imports
12. quantitative limits on the import of particular
products or commodities

PROTECTIONISM AND FREE TRADE

The majority of economists believe in the comparative cost principle, which

proposes that all nations will raise their living standards and real income if they specialize
in the production of those goods and services in which they have the highest relative
productivity. Nations may have an absolute or a comparative advantage in producing
goods and services because of factors of production (notably raw materials), climate,
division of labour, economies of scale, and so forth.
This theory explains why there is international trade between North and South, e.g.
semiconductors going from the USA to Brazil, and coffee going in the opposite direction.
But it does not explain the fact that over 75% of the exports of the advanced industrial
countries go to other similar advanced nations, with similar resources, wage rates, and
levels of technology, education, and capital. It is more a historical accident than a result
of natural resources that the US leads in building aircraft, semiconductors, computers and
software, while Germany makes luxury automobiles, machine tools and cameras.
However, the economists who recommend free trade do not face elections every four
or five years. Democratic governments do, which often encourages them to impose tariffs
and quotas in order to protect what they see as strategic industries- notably agriculture-
without which the country would be in danger if there was a war, as well as other jobs.
Abandoning all sectors in which a country does not have a comparative advantage is
likely to lead to structural unemployment in the short (and sometimes medium and long)
term.
Other reasons for imposing tariffs include the following:
 to make imports more expensive than home-produced substitutes, and thereby
reduce a balance of payments deficit;
 as a protection against dumping (the selling of goods abroad at below cost price in
order to destroy or weaken competitors or to earn foreign currency to pay for necessary
imports);
 to retaliate against restrictions imposed by other countries;
 to protect ‘infant industries’ until they are large enough to achieve economies of
scale and strong enough to compete internationally.
 with tariffs, it is impossible to know the quantity that will be imported, because
prices might be elastic. With quotas, governments can set a limit to imports. Yet unlike
tariffs, quotas provide no revenue for the government. Other non tariff barriers that some
countries use include so-called safety norms, and the deliberate creation of customs,
difficulties and delays.
The General Agreement on Tariffs and Trade (GATT), an international organization
set up in 1947, had the objectives of encouraging international trade, of making tariffs the
only form of protectionism, and of reducing these as much as possible. The most favored
nation clause of the Gatt agreement specified that countries could not have favored
trading partners, but had to grant equally favorable conditions to all trading partners. The
final Gatt agreement- including services, copyright, and investment, as well as trade in
goods- was signed in Marrakech in 1994, and the organization was superseded by the
World Trade Organization.
 It took nearly 50 years to arrive at the final Gatt agreement because until the 1980s,
most developing countries opposed free trade. They wanted to industrialize in order to
counteract what they rightly saw as an inevitable fall in commodity prices. They practised
import substitution (producing and protecting goods that cost more than those made
abroad), and imposed high tariff barriers to protect their infant industries.
Nowadays, however, many developing countries have huge debts with Western
commercial banks on which they are unable to pay the interest, let alone repay the
principal. Thus they need to rollover (or renew) the loans, to reschedule (or postpone)
repayments, or to borrow further money from the International Monetary Fund, often just
to pay the interest on existing loans. Under these circumstances, the IMF imposes severe
conditions, usually including the obligation to export as much as possible.
Quite apart from IMF pressure, Third World governments are aware of the export
successes of the East Asian ‘ Tiger’ economies ( Hong Kong, Singapore, South Korea
and Taiwan), and of the collapse of the Soviet economic model. They were afraid of
being excluded from the work trading system by the development of trading blocks such
as the European Union, finalized by the Maastricht Treaty, and the North American Free
Trade Agreement (NAFTA), both signed in the early 1990s. So they tended to liberalize
their economies, lowering trade barriers and opening up to international trade.
Reading comprehension tasks
Write questions, relating to the text, to which these could be the answer.
1.
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
Factors of production, most importantly raw materials, but also labor and capital,
climate, economies of scale, and so on.
2.
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
Because it doesn’t explain why the majority of the exports of advanced industrialized
country go to other very similar countries.
3.
…………………………………………………………………………………………
 …………………………………………………………………………………………
…………………………………………………………………
A recently developed one that has not yet grown to the point where it benefits from
economies of scale, and can be internationally completive.
4.
…………………………………………………………………………………………
…………………………………………………………………………………………
……………………………………………………………
Unlike quotas, they produce revenue.
5.
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………
Unlike tariffs, you know the maximum quantity of goods that will be imported.

Reading 2:

Translate into Vietnamese

TRADE AND DEVELOPMENT
With political independence, the Less Developed Countries (LDCs) inherited a
structure of production and international trade that had largely been designed to serve the
interests of the metropolitan powers, rather than those of the LDCs themselves.
They were heavily dependent on the production and export of a limited range of
primary commodities (foodstuffs, fuels and industrial raw materials) going mainly to the
developed capitalist economy. In many cases, that dependence has not yet been broken.
At the present time, for example, coffee still represents approximately 90 per cent of
Burundi’s recorded export and 50 per cent of Columbia’s; copper accounts for more than
70 per cent of Zambia’s export; cocoa represents more than 70 percent of Ghana’s
exports. Many other examples could be given.
The import structures of the LDCs were dominated by the importation of
manufactured goods and intermediate inputs – durable consumer goods, machinery, and
transport equipment, chemicals, petroleum and so on. At independence most trade was
with the colonial “mother country”.
Orthodox economists tended to argue that this structure of production and trade
was consistent with the LDCs’ comparative advantage and that they enjoy
significant gains from trade. The critics of this view, however, maintain that the gain
from trade were more likely, for variety of reasons, to be appropriated by the developed
capitalist economies. The unequal exchange thesis espoused by some neo-Marxists, went
further and suggested that trade was actually carried out at the expense of the LDCs
, producing the condition of under development and poverty.
At the center of the relationship between trade and development remains the
controversy concerning the long-term behavior of the terms of trade of the LDCs.
The commodity, or net barter, terms of trade are the ratio of the unit price of export to the
unit price of import and the deterioration in the index implies that a given volume of
exports is exchanged for a smaller volume of imports.
The secular deterioration hypothesis is associated with the work of Hans Singer and
Raul Prebisch. In its original form, it was based on the argument that in the developed
countries strong trade unions could ensure that workers, rather than consumers, benefited
from productive gains, whereas in the LDCs, higher productivity led to lower prices, thus
benefiting consumers in the developed economies. Associated with, although formally
separated from, such argument was the view that primary commodity export prices were
highly unstable and prone violent fluctuations, thus damaging the development of the
LDCs.
Exercise 1: Replace the underlined words and expressions in the text with the
words and expressions below

A. balance of payments B. balance of trade C. barter or counter-trade

D. climate E. commodities F. division of labour
G. economies of scale H. factors of production I. nations
K. protectionism L. quotas M. tariffs

(1) Countries import some goods and services from abroad, and export others to the
rest of the world. Trade in (2) raw materials and goods is called visible trade in Britain
and merchandise trade in the US. Services, such as banking, insurance, tourism, and
technical expertise, are invisible imports and exports. A country can have a surplus or a
deficit in its (3) difference between total earnings from visible exports and total
expenditure on visible imports, and in its (4) difference between total earnings from all
exports and total expenditure on all imports. Most countries have to pay their deficits
with foreign currencies from their reserves, although of course the USA can usually pay
in dollars, the unofficial world trading currency. Countries without the currency reserves
can attempt to do international trade by way of (5) direct exchanges of goods without the
use of money. The (imaginary) situation which a country is completely self sufficient and
has no foreign trade is called autarky
The General Agreement on Tariffs and Trade (GATT), concluded in 1940, aims to
maximize international trade and to minimize (6) the favouring of domestic industries.
GATT is based on the comparative cost principle, which is that all nations will raise their
income if they specialize in producing the commodities in which they have the highest
relative productivity. Countries may have an absolute or a comparative advantage in
producing particular goods or services, because of (7) inputs (raw materials, cheap or
skilled labour, capital, etc), (8) weather conditions, (9) specialization of work into
different jobs, (10) savings in unit costs arising from large-scale production, and so forth.
Yet most governments still pursue protectionist policies, establishing trade barriers such
as (11) taxes charged on imports, (12) restrictions on the quantity of imports,
administrative difficulties, and so on.
Write your answer here:
1. 7.
2. 8.
3. 9.
4. 10.
5. 11.
6. 12.

Exercise 2: There is a logical connection among three of the four words in each of
the following groups. Which is the odd one out, circle it and explain why?
1. absolute advantage- barriers- comparative advantage- free trade
2. autarky- counter trade- invisible trade- visible trade
3. balance- deficit- dumping- surplus
4. banking- insurance- merchandise- tourism
5. comparative advantage- protectionism- quotas- tariffs
6. non tariff barriers - norms- quotas- taxes
 7. barter- import substitution- infant industries- tariff barriers
8. debt-reschedule - protect- subsidize- substitute
9. liberalize- protect- subsidize- substitute

Exercise 3: Answer the following questions and make a presentation about

Vietnam’s trade in 2022
1. Does your country have a trade surplus?
2. Does it have a balance of payments surplus or deficit?
3. What are its chief exports?
4. Which industries or sectors are protected?
5. Which do you think should be protected?
6. Give example of Vietnam, which can apply the theory of comparative advantage
in importing and exporting?
7. Does Vietnam gain or loss from trade? Give your explanation.
Intro, cơ cấu xuất nhập khẩu, có comparative advantage hay k, có được chính phủ
subsidy k,