QUESTION 1:

Which trade theories support free trade? What are The main functions of the Government in Trade
policy according to Adam Smith? What is the contribution of Adam Smith in trade theory? What are
the main ideas of the Diamond Model?
- Trade theories support Free Trade: Adam Smith, David Ricardo “comparative advantage”, and
Heckscher Ohlin theory
- The main function of the Government in Trade policy according to Adam Smith. The government
should:
+ Maintain law and order.
+ Ensure the defense of the nation from foreign enemies.
+ Erect and maintain public works that private citizens would not build.
+ Subsidize education for those who could not afford it.
+ Regulate international trade when free trade endangers “infant industries” or compromises national
security.
- Contribution of Adam Smith in trade theory:

Specialization and trade among regions and countries are based upon the same principle as among
individuals. According to Smith, free trade expands the extent of the market and, thereby, allows greater
division of labor. Free trade also increases productivity by allowing countries to specialize in what they do
well. Business competition ensures that prices are driven down to unit cost.

- The Porter’s Diamond of National Advantage:

Extends and adapts traditional theory of comparative advantage to take account of three factors:
+ International competitive advantage is about companies not countries - the role of the national
environment is providing a home base for the company.
+ Sustained competitive advantage depends upon dynamic factors - innovation and the upgrading of
resources and capabilities
+ The critical role of the national environment is it’s impact upon the dynamics of innovation and upgrading

QUESTION 2
What are the characteristics of Free trade agreement? Give some examples of FTAs that Vietnam
have signed in recent years? What are the benefits for members’ countries of European Union?

- The characteristic of Free Trade Area: eliminates all barriers to trade of goods and services among, but
members determine their own trade policy for non-members.
- Example of FTA: NAFTA, ASEAN FTA, ( AFTA)
- The benefits of Trade Area for members countries:
+ Increase volume of trade
+ Bring more choice for consumerS
+ More jobs opportunities
+ More investment.

QUESTION 3
Explain why subsidy and Dumping are harmful to free trade. What is the main function of subsidy in
trade policy? What are the main arguments for the use of non-tariff measures in trade policy? Give
some examples.

- Explain why subsidy and Dumping are harmful to free trade.

Dumping is often condemned as an “ unfair trade practice” which accords exporters a competitive advantage
over producers of similar goods in the market of importation. The second disadvantage is retaliation by the
trade partner. Countries may impose trade restrictions and tariffs to counteract dumping. That could lead to a
trade war. The third is censure by international trade organizations. These include the WTO and the
European Union The cost of subsidies can add to the export country's sovereign debt.
 - Function subsidy in trade policy:
+ To support/protect the infant industry,
+ To protect jobs for domestic production of selected industries, to develop new potential sectors/industrial
for future trade advantage.
+ To help improve their market position
+ Provide domestic firms a cost advantage
- Example: China supports Solar panel producers OR Steel sectors to gain foreign market share
(Example nằm sau câu hỏi nào thì cứ ghi y chang cái China support … nha.)
- Main arguments of subsidy and non-tariff measures in trade policy:
+ To help improve their market position
+ Provide domestic firms a cost advantage
+ To gain trade advantage in the new foreign market
+ To protect local industries and rise the new trade
+ Barriers for foreign firms.

QUESTION 4
How can International trade be based on Product differentiation? Give some examples in international trade.
Suppose that: Airplane is a Capital-intensive commodity and Coffee is labor- intensive commodity, and we
have two nations: France is a rich and capital- abundant nation; Ethiopia is a labor-abundant country.
What can we say from the trade pattern between two countries?

- International trade based on Product differentiation ?

Product differentiation is Intra-industry trade arises in order to take advantage of important economies of
scale in production. That is, international competition forces each firm or plant in industrial countries to
produce only one, or at most a few, varieties and styles of the same product rather than many different
varieties and styles. This is crucial in keeping unit costs low. With few varieties and styles, more specialized
and faster machinery can be developed for a continuous operation and a longer production run. The nation
then imports other varieties and styles from other nations. Intra-industry trade benefits consumers because of
the wider range of choices (i.e., the greater variety of differentiated products) available at the lower prices
made possible by economies of scale in production.

- EX: Zara, Nike... Fast Fashion industry... Benefit the global supply chain.. economies of scale..

- Suppose that: Airplane is Capital-intensive commodity and Coffee is labor- intensive commodity, and
we have two nations: France is a rich and capital- abundant nation; Ethiopia is a labor abundant
country. What can we say from the trade pattern between two countries?

According to Hecsher Olin theory, A country has comparative advantage in those commodities that use its
abundant factors intensively. Particularly The capital-abundant country exports the capital - intensive
commodity , and the labor -abundant country exports the labor - intensive commodity.

→ In summary, France, the capital-abundant country exports Airplane - the capital-intensive Product (i.e
imports coffee, labor-intensive commodity) AND Somali, the labor-abundant country exports Rice, the
labor-intensive commodity.

QUESTION 5
What are the benefits of Protectionism? Explain why trade protectionism is on the rise in recent
years. Give some examples that many countries use the trade policy to protect their economy.

The Benefits of Protectionism (against Free trade)

- Governments do restrict free international trade in order to protect domestic industries from foreign
competition. The restriction of international trade is called protectionism.
- Supporters of "protectionist" laws claim that keeping out foreign goods will:
+ Save jobs for domestic workers. The protection of tariffs, quotas, or subsidies allows domestic companies
to hire locally.
+ Reduce the trade deficits.
+ Protect infant (sunrise) industry from foreign competitors (by using tariffs). Gives the new industry’s
companies time to develop their competitive advantages.
+ Help domestic industries have a chance to recover and prosper.
+ Trade Protection reduces the competitiveness of imported goods, it helps local producers improve their
competitiveness, and has conditions to expand production.
+ Prevent dumping, this happens when foreign and bigger economies enter an economy and sell their goods
at a price lower than the costs of production. Protectionism helps create a more equitable and healthy
international trade environment.

The Disadvantage OR Arguments against Protectionism (support Free trade):

- All countries can benefit if each country specializes in production those goods it can produce best and
satisfy their other wants and needs by trading for them.
+ Free trade can raise aggregate economic efficiency and economic welfare, foster economic growth, AND
increase the living standard of the citizen
+ Free trade will benefit a country even if it is less efficient than all other countries in every industry
+ Free trade would cause world resources to be utilized most efficiently, maximizing world welfare.
+ Import products can be produced more efficiently in other countries.

- A nation can achieve consumption levels beyond what it could produce by itself.
- Due to higher import duties, consumers are forced to buy household goods, often with lower quality
and higher prices.
- Higher prices from tariffs tend to hit those on lower incomes hardest, lead to a rise in relative poverty,
because the tariffs (e.g. on foods, tobacco, and clothing) fall on products that lower income families
spend a higher share of their income

➽Explain why trade protectionism is on the rise in recent year.

- An economy usually adopts protectionist policies to encourage domestic investment in a specific

industry. For instance, tariffs on the foreign import of shoes would encourage domestic producers to
invest more resources in shoe production.
- In addition, nascent domestic shoe producers would not be at risk from established foreign shoe
producers. Although domestic producers are better off, domestic consumers are worse off as a result of
protectionist policies, as they may have to pay higher prices for somewhat inferior goods or services.
Protectionist policies, therefore, tend to be very popular with businesses and very unpopular with
consumers.
- One of the disadvantages of free trade is creating a big gap in the trade deficit, for example the gap
between imports to China and export to China of the USA is very large. This affects the US market
and one of the main reasons why Trump imposed protectionist actions.

➽ Give some examples that many countries use the trade policy to protect their economy.
- The Trump Administration's tariffs on steel and aluminum in 2018

- China imposed anti-dumping duties and state subsidies of up to 80.5% on

- Australian barley, and started two anti-dumping investigations into the wine of the country to protect
their domestic producers.

QUESTION 6
What is the economic integration? Name the different levels of Economic Integration? What are the
main benefits of EVFTA (EU- Vietnam Free Trade Agreement) for Vietnam?

➽What is the economic integration?

- Economic Integration:
+ A process of eliminating restrictions on international trade, payments, and factor mobility
+ Results in the uniting of two or more national economies in a regional trading arrangement. Thus,
boosting the free movement of trade, investment, and services across national boundaries
➽ NAME Different levels of Economic Integration (& The characteristics of Each Stage)
( nếu mà đề kêu nêu tên thì mình chỉ ghi tên thôi, còn có bảo ghi đặc điểm thì mình ghi nha, Đừng
chép hết).
1. Free Trade Agreement (FTA): Trading block with no trade barriers:
- Members agree to Eliminate tariffs & other barriers to the trade of goods and services among
themselves
- Each member maintains its own trade policies (restrictions) against nonmembers
Eg. North American Free Trade Agreement (NAFTA); ASEAN Free Trade Agreement (AFTA).

2. Customs Union (CU): Agreement among two or more trading partners. Common trade policy
regarding members form a tariff on imports against nonmembers:
- Members agree to Eliminate tariff and nontariff trade barriers between members
- All members adopts a common external trade policies (restrictions) against nonparticipants
Eg. The Benelux Union: Belgium, The Netherlands, and Luxembourg

3. Common Market: Allows free movement of factors of production and Group of trading nations:
- Free movement of goods and services among member nations
- Initiation of common external trade restrictions against nonmembers
- Free movement of factors of production across national borders within the economic bloc
Eg. European Union (EU), 1992

4. Economic Union: Coordination of economic policies among members. Unification of monetary and
fiscal policies, harmonization of tax rates
- National, social, taxation, and fiscal policies are harmonized and administered by a supranational
institution
- Requires an agreement to transfer economic sovereignty to a supranational authority

5. Political Union: Political unification, formation of a single nation. It’s a Ultimate degree of
economic union
- Unification of national monetary policies
- Acceptance of a common currency administered by a supranational monetary authority

What are the main benefits of EVFTA (EU-Vietnam Free Trade Agreement) for Vietnam?

- The EU-Vietnam agreement offers more opportunities for companies on both sides. This will happen
through:
+ removing tariffs
+ Reducing non-tariff barriers
+ reducing regulatory barriers and overlapping red tape
+ ensuring protection of geographical indications
+ opening up services and public procurement markets
+ making sure the agreed rules are enforceable: Committed to open up to investments in manufacturing in a
number of key sectors such as food products and beverages, tyres and tubes, ceramics and construction
materials.

QUESTION 7
What are the characteristics of an Economic union? Give some examples? What are the benefits for
members countries of AEC (ASEAN Economic Community)?

The characteristics of Economic Union:

Coordination of economic policies among members. Unification of monetary and fiscal policies,
harmonization of tax rates, National, social, taxation, and fiscal policies are harmonized and administered by
a supranational institution. Requires an agreement to transfer economic sovereignty to a supranational
authority
Example: chọn hai ba cái Ghi thôi
- CSME - CARICOM Single Market and Economy
- SICA - Central American Common Market
- EAEU-Eurasian Economic Union
- EU - European Union
- GCC-Gulf Cooperation Council
- MERCOSUR - Southern Common Market

The characteristics of Custom Union:(có hỏi thì ms ghi cái này vô nha)
- Agreement among two or more trading partners. Common trade policy regarding members form a
tariff on imports against nonmembers:
+ Members agree to Eliminate tariff and nontariff trade barriers between members
+ All members adopts a common external trade policies (restrictions) against nonparticipants
- Example: chọn hai ba cái Ghi thôi
+ Benelux: Belgium, the Netherlands, and Luxembourg.
+ Mercosur: Argentina, Brazil and Uruguay
+ The Andean Community (CAN): Bolivia, Colombia, Ecuador, and Peru
+ The East African Community (EAC): Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda.
+ The European Union Customs Union (EUCU): the EU is in customs unions with Andorra, San Marino and
+ Turkey (with the exceptions of certain goods)
+ The Southern African Customs Union (SACU): Botswana, Eswatini (formerly Swaziland), Lesotho,
Namibia and South Africa.

The benefits for member’s countries of the ASEAN Economic Community

- Increased competition : Lowers prices and increases quantity.

- Cost of production declines: Easier access to natural resources and technology.
- Increased access to technology and knowledge.
- Increased specialization.
- Greater opportunity for economies of scale.
- Increased employed opportunities.
- Increased income and higher economic growth.

QUESTION 8
What is the function of import tariffs in developing countries? Give one example of import tariffs for
the case of Vietnam? What are the main arguments of the use of non-tariff measures in trade
policy?What are Main arguments of subsidy and non-tariff measures in trade policy ?

The function of import tariffs in developing countries:

- Import tariffs have primarily been used to increase revenue, the revenue function comes from the fact
that the income from tariffs provides governments with a source of funding.
- Import tariffs are also a policy tool to protect domestic industries by changing the conditions under
which goods compete in such a way that competitive imports are placed at a disadvantage. In detail, it
reduces imports by making them more expensive than domestic substitutes and this reduces the deficit
in the balance of trade. For example: the Vietnamese government imposes tariffs on imported cars to
protect domestic car industries and restrict trade deficit.
- Import tariffs also can combat dumping and protect infant industries

Example of import tariff for case of Vietnam:

- Most goods imported to Vietnam are subject to duty. Imported products are subject to import tax and
value-added tax (0%, 5%, or 10%). Tax rates vary depending on the type of product.
- For example, consumer goods, especially luxury goods are usually subject to higher tax rates than
machinery, raw materials or equipment used in production.
 - However, Vietnam is a member of the ASEAN Free Trade Area and intraregional import taxes for
certain products range from 0-5%, including products such as: Livestock, meat and fish, fruit and
vegetables, medicaments and pharmaceutical goods, agricultural machinery.

What are the main arguments of the use of non-tariff measures in trade policy?

- As against the tariff barriers, non-tariff barriers are government policies and administrative practices
that regulate or restrict the foreign trade. Non-tariff barriers are quantitative restrictions which
influence the volume of trade unlike tariff barriers, non-tariff barriers impose absolute limitations upon
foreign trade and inhibit market responses. The non-tariff barriers are numerous. Following are some
common excuses offered by a country to impose non-tariff barriers:
+ Human rights.
+ Damage to the environment.
+ Health considerations.
+ Injury to domestic industries.

Main arguments of subsidy and non-tariff measures in trade policy:

- To help improve their market position
- Provide domestic firms a cost advantage
- To gain trade advantage in new foreign market
- To protect local industries and rise the new trade
- Barriers for foreign firms.

QUESTION 9
What is a trade war? What's protectionism? Explain how tariffs could affect me, you and other
companies?

➽ Trade war :
- A trade war happens when one country retaliates against another by raising import tariffs or placing
other restrictions on the other country's imports.
- Trade wars can commence if one country perceives that a competitor nation has unfair trading
practices. Domestic trade unions or industry lobbyists can pressure politicians to make imported goods
less attractive to consumers, pushing international policy toward a trade war.
- Trade wars are often a result of a misunderstanding of the widespread benefits of free trade.
➽ Protectionisms:
- Protectionism refers to government actions and policies that restrict international trade. A country will
generally undertake protectionist actions to shield domestic businesses and jobs from foreign
competition. Protectionism is also a method used to balance trade deficits which occurs when a
country's imports exceed the amounts of its exports.
➽ Explain how tariffs could affect me, you, and other companies?
- Consumption Effect: Imposition of tariff raises the price, and as a result, the demand for the
commodity falls. The total outlay on the consumption of the commodity is larger or smaller depending
upon whether demand is inelastic or elastic. This increases the prices, thus affecting us - the consumers
- directly as we have to pay a higher price for the products.
- Production Effect: When a tariff or other price-increasing policy is put in place, the effect is to
increase prices and limit the volume of imports. Producers are better off.
- Revenue Effect: Tariff brings revenue to the government. The revenue to the government is equal to
the amount of the import duty multiplied by the quantity of imports.
- Redistribution Effect: refers to the transfer of real income from the consumers to the producers as a
result of tariff.
- Trade Effect: The tariff reduces the country’s offer of exports for imports. This increases the
country’s terms of trade or the rate at which exports are exchanged for imports.
QUESTION 10
List the main type of Economic Integration? Why do nations prefer to negotiate the bilateral trade
agreement than the WTO (multilateral systems)? Give some examples of Common markets in the
world.
➽ List the main type of Economic Integration:
- Free Trade Agreement (FTA)
- Customs Union
- Common Market
- Economic Union
- Political Union

➽ The Nations prefer to negotiate the bilateral trade agreement than the WTO (multilateral systems)

The advantages of a bilateral agreement is that it is easier to negotiate since it involves only two countries;
goes into effect faster, reaping trade benefits more quickly. They are easier to enforce, particularly if
arbitration is the specified means to resolve a dispute. Bilateral agreements increase trade between the two
countries. They open markets to successful industries. As companies benefit, they add jobs. The country's
consumers also benefit from lower costs.

While the WTO ( multilateral agreements) is more complex, that makes them difficult and time consuming
to negotiate. A multilateral agreement gives a competitive advantage to giant multi-nationals. the small
firms can't compete. They lay off workers to cut costs. Others move their factories to countries with a lower
standard of living, which can increase unemployment rate. That makes multilateral agreements unpopular.

➽ Give some examples of Common markets in the world.

- The European Economic Community (EEC) (also known as the Common Market in the English-
speaking world and sometimes referred to as the European Community even before it was renamed as
such in 1993) was an international organization created by the 1957 Treaty of Rome. Its aim was to
bring about economic integration, including a common market, among its six founding members:
Belgium, France, Germany, Italy, Luxembourg, and the Netherlands.
- The Benelux common market until it was converted into an economic union in 1959

QUESTION 11
What are the main ideas of Mercantilism? What are the main benefits of neo mercantilism countries:
such as China, Germany and Japan. What are the main sources of gain from trade between nations?

➽ The Mercantilist’s views on trade OR The main trade arguments of Mercantilism: main trade
argumen

- It’s an Economic philosophy in the 17th and 18th centuries, in England, Spain, France, Portugal and
the Netherlands.
- The Mercantilists believed that nation could become rich and powerful only by exporting more than
it imported
- Mercantilism advocates government intervention to achieve a surplus in the balance of trade and
trade policies that protect domestic industries
- It views trade as a zero-sum game, one in which a gain by one country results in a loss by another.
- The Mercantilists measures wealth of nations by the stock of precious metals (gold and silver) it
possessed.

Some examples of countries: China, Germany, Japan. The Trade policy of these countries follow the
strategy that it is in a country’s best interest to maintain a trade surplus- to export more than it imports.
➽ What are the main benefits of neo mercantilism countries: such as China, Germany and Japan
- It encourages the complete development of all natural resources.
- It encourages trade deficits for foreign nations.
- It naturally reduces unemployment rates.
- Cultural exchanges are encouraged to promote trade.
For example, in China:
- The government is centralized, controls capital movements, discourages imports and encourages
exports. From these exports, China builds up enormous foreign reserves, which gives the
government extra power in monetary and fiscal policies.
- China’s Neo-Mercantilist strategies include promoting nationalism, patriotism and
technologicalism, stockpiling gold and foreign reserves and striving for a favorable balance of
payment via exchange rate manipulation, tariff, export subsidies and other trade protections.
➽ What are the main sources of gain from trade between nations?
- Trade benefits countries by allowing them to export goods made with relatively abundant resources
and import goods made with relatively scarce resources.
- When countries specialize, they may be more efficient due to the larger scale of production.
- Countries may also gain by trading current resources for future resources (international borrowing
and lending) and from international migration.

QUESTION 12
Why do nations trade ? Give some benefits to countries ? What are the main benefits of CPTPP for
Vietnam? Nations Trade with others because : (Reasons countries trade goods with each other
include)

Why do nations trade? Nations Trade with others because: (Reasons countries trade goods with each
other include)
- Differences in the technology used in each country (i.e., differences in each country’s ability to
manufacture products): The quality of goods and services is likely to increase as competition
encourages innovation, design and the application of new technologies. Trade will also encourage
the transfer of technology between countries.
- Differences in the total amount of resources (including labor, capital, and land) found in each
country
- The proximity of countries to each other (i.e., how close they are to one another)
- Specialize in the manufacture and export of products that can be produced most efficiently in that
country.
- Import products can be produced more efficiently in other countries.
- Trade means that more will be employed in the export sector and, through the multiplier process,
more jobs will be created across the whole economy.

➽ Give some benefits of countries: ( thi chép cái in đâm thui nhé nha)
- High prices for exports and lower prices for imports is a net gain for a country. Efficient
allocation of resources is a result of such exchanges. There’s an increase in overall welfare because
of the larger bundle of goods from such affiance.

- Trade liberalization increases real GDP. Efficient allocation of resources has a positive influence
on GDP. International trade offers the exchange of ideas and technical flow of expertise.
- Development of high quality and more effective institution’s policies encourages domestic
innovations. Domestic productivity benefits from foreign development and researchers.
- Global competition motivates companies to become more efficient because they face an open
field. Multinationals also operate on a larger scale leading to cost savings.
- Consumers access a variety of goods and services at lower prices. Hence, living standards of
people improve. The absence of restrictions and tariffs enable production and shipment; hence,
ensuring availability of goods and services.
- An increase in competition leads to a fall in monopoly power. Thus, the market becomes more
efficient.
- Trade encourages efficiency. Through specialization, countries have to concentrate on producing
more of the goods they could produce very well over goods they cannot produce with efficiency.
➽ What are the main benefits of CPTPP for Vietnam
ESTABLISHES DUTY-FREE → INCREASE EXPORT: The CPTPP establishes duty-free access to
goods trade between the two countries, while helping Vietnamese consumers buy high- quality products
with lower price from member countries and Vietnam can export to member countries.

INCREASE FOREIGN INVESTMENT: The anticipated increase in FDI is expected to lead to a further
expansion of services sectors and boost productivity growth. It will create opportunities for domestic private
firms to integrate into global value chains and promote the development of the SME sector. More jobs
opportunities.. Receive new technology, know-how in advanced, industrial sectors. → Faster economic
growth.

PHẦN BỔ SUNG THÊM LÝ THUYẾT

CÂU 1: The main drivers of globalization:

- The fall of barriers to the trade flows: goods and services and capital that has occurred since the end
of World War II. EX: with the creation of GATT and WTO.
- The technological change and the rise of Internet : The development of new mode of transport and
reduction of cost of transactions between nations. EX: Fall in communication and transportation
costs.
- AN example of globalization in the economic field: Boeing 787, Iphone 8, Samsung electronics
OR
- The world is moving away from self-contained national economies toward an interdependent,
integrated global economic system. Government influence

with policies leading to reductions in trade barriers and a shift towards an open market economy.
- It’s driven by international trade and investment - the growing trade between nations along with
FDI: Because of the fall of barriers to the trade flows: goods, severices, ideas and people are getting
easier to cross traditional borders and boundaries since the end of World War II (Eg. the creation of
GATT & WTO)
- The technological change and the rise of Internet: the development of new mode of transportation
and the reduction of cost of transactions between nations (Eg. Fall in communication and
transportation costs).
- Example of globalization in the economic field: Boeing 787, Apple electronics (Iphone, Ipads…),
Samsung electronics,…

The benefits and challenges of globalization to the development of a country:

- The benefits:
 Increase the trade and investment among nations
 Lower price and more choice for consumer products and services.
 Greater economic growth
 More jobs opportunities

- The challenge:

 Jobs losses
 Pollution, and environment problems
 Dominance of global media and MNEs
 Increase in poverty and inequality
CÂU 2: What are the types of Protectionism?

Tariffs, subsidy, import quotas, VER, Administrative policies….

Tariffs are taxes levied on imports that effectively raise the cost of imported products relative to domestic
products.
Protectionism to protect the domestic automobiles/auto industry in Vietnam.
The domestic industry will have to face tough competition from the beginning of 2018 when imported cars
from ASEAN to Vietnam are not taxed. It will reduce competitiveness and threaten the survival and
development of the domestic automobiles industry.
Administrative policies are bureaucratic rules that are designed to make it difficult for imports to enter a
country. These policies hurt consumers by denying access to possibly superior foreign products.

On t17 October 2017, the Government issued Decree 116/2017/ NS

-CP regulating the statutory conditions of automobile manufacturers, assembly, import and warranty &
maintenance services. These regulations apply to companies operating in automobile manufacturers,
assembly, import and warranty & maintenance services in VietNam and for related authorities,
organizations and individuals.

CÂU 3: Explain the absolute advantage theory of Adam Smith.

 Adam Smith argued that a country has an absolute advantage in the proportion of a product when it
is more efficient than any other country in producing it.
 According to Smith, Countries should specialize in the production of goods for which They have an
absolute advantage and then tarde these goods for the goods produced by other countries.
 Consider the example of trade between the USA and Mexico. In this example , it takes 4 U.S
workers to produce 1000 pairs of shoes, but it takes five Mexican workers to do so. It takes one US
worker to produce 1000 refrigerators , but it takes 4 Mexican workers to do so. The US has an
absolute advantage in productivity with regard to both shoes and refrigerators; that is, it takes fewer
workers in US than in Mexico to produce both a given number of shoes and a given number of
refrigerators

CÂU 4 . 5 Level of integration economics? What is the difference between custom union and free
trade? Give characteristics of NAFTA and THE ANDEAN PACT.

- 5 Level of integration economics?

FTA, Custom Union , Common market, Economic Union, Political Union..

- the difference between custom union and free trade

Custom Union eliminates trade barriers between member countries and adopts a common external
trade policy.
 Free trade area eliminates all barriers to the trade of goods and services among member countries,
but members determine their own trade policies for nonmembers.
NAFTA

Abolished tariffs on 99 % of the goods traded between members Removed most barriers on the
cross border flow of services Protect intellectual property rights
 Removes most restrictions on FDI between the three member countries
 Allows each country to apply its own environmental standard, provided such standards have a
scientific base
 Establishes two commissions to impose fines and remove trade privileges when environmental
standards or legislation involving health and safety, minimum wages or child labor are ignored.
THE ANDEAN PACT

 Was formed in 1969 using the EU model Had more or less failed by the mid 1980s
  Was relaunched in 1990, and now operates as a customs union
 Signed an agreement in 2003 with MERCOSUR to restart negotiations towards the creation of a
free trade area.

CÂU 5: What are the factors that determine how countries will specialize in international trade?
What are the Sources of Comparative Advantage? Nations may lose from trade and give examples?
What does the Heckscher and Ohlin theory postulate?
 Main determinants of Comparative advantages:
 Labor productivity, Climate condition, geographical, Capital...
 The sources of Comparative advantages for a nation:

Difference in natural resources, topography, climate may play an initial role – but acquired advantages
dominate differences in initial conditions.
Climate/Resources/ relative abundance of labor

China – workforce/technology Canada – resources Alberta - oil India - technology/skilled people.

Nations may lose from trade:

Small countries may be forced to specialize in an industry with decreasing returns to scale. Example: Poor
nations have to produce in industry with decreasing returns to scale like agricultural, old industry...

Heckscher-Ohlin Theorem with a Single Technique:

In summary, the capital-abundant country exports the capital intensive commodity, and the labor- abundant
country exports the labor-intensive commodity.

Câu 6: What Arguments for Protectionism and arguments against Protectionism (support free trade)? Give
some of your arguments?
Arguments for Protectionism:
 save jobs
 support domestic industries a chance to recover and prosper. Help domestic producers improve their
 competitiveness, have conditions to expand production because Trade Protection reduces the
competitiveness of imported goods.
 and reduce the trade deficits.

Protectionism can also prevent dumping, this is where foreign and bigger economies enter an economy and
sell their goods at a price lower than the costs of production. Creating a more equitable and healthy
international trade environment.

Arguments against Protectionism (support free trade):

Free trade can foster economic growth, increase the living standard of the citizen. Free trade would cause
world resources to be utilized most efficiently, maximizing world welfare. A nation can achieve
consumption levels beyond what it could produce by itself. Higher prices from tariffs tend to hit those on
lower incomes hardest, lead to a rise in relative poverty,
because the tariffs (e.g. on foodstuffs, tobacco, and clothing) fall on products that lower income families
spend a higher share of their income Due to higher import duties, consumers are forced to buy household
goods, often with lower quality and often higher prices.
Give your argument: to protect jobs, to promote local economic development..., gain trade
advantage.

Câu 7: What is the benefit of Vietnam when we participate in many trade agreements? Give example
some FTAs that Vietnam signed.
 the benefit of Vietnam when we participate in many trade agreements:
 Gain more market access for export/ trading opportunities.
 More Goods and better quality products, a lower price of consumer goods and services.
 Faster economic growth more investment and trade activities between nations.
 More jobs opportunities received new technology, know-how in advanced , industrial sectors.

Sectors: Textile, Furniture, Aqua - product...

 Some FTAs that Vietnam signed :
 Asean FTA, Cp-TPP, Korean -ASEAN FTA..., ASEAN - Australia FTA...

Suppose that there: Airplane is Capital-intensive commodity and Rice is labor-intensive commodity,
and we have two nations: France is rich and capital-abundant nation; Somali is a labor abundant
country.
What can we say from the trade pattern between two countries?

This is why labor-abundant countries, such as India and China export footwear, rugs, textiles, and other
labor intensive commodities; and land- abundant countries, such as Argentina, Australia, and Canada, export
meat, wheat, wool, and other land-intensive commodities.
A country has comparative advantage in those commodities that use its abundant factors intensively.
In summary, France, the capital-abundant country exports Airplane the capital-intensive Product (i.e import
coffee, labor-intensive commodity) , and Vietnam the labor-abundant country exports Coffee ,the labor-
intensive commodity.

Này chắc là của 1 CASE khác:

In summary, Japan, the capital-abundant country exports car the capital- intensive Product (i.e import
textile, labor-intensive commodity) , and India the labor-abundant country exports textile ,the labor-
intensive commodity.
CÓ TRONG ĐỀ THI

Câu 8:
a.What Is Comparative Advantage?
Comparative advantage is an economy's ability to produce a particular good or service at a lower
opportunity cost than its trading partners. A comparative advantage gives a company the ability to sell goods
and services at a lower price than its competitors and realize stronger sales margins.

a. What is international trade?

International trade is the exchange of goods and services between countries. International trade allows
countries to expand their markets and access goods and services that otherwise may not have been available
domestically. As a result of international trade, the market is more competitive. This ultimately results in
more competitive pricing and brings a cheaper product home to the consumer

Câu 9: What is the meaning of a Porter Diamond Model?

The Porter Diamond of National Advantage by Michael Porter (1990) refers to an economic model that
aids the understanding of factors that give a group, organization or country a competitive advantage over
others. It is a model or framework that explains the competitive advantage that a nation possesses and
resources or factors available to them that put them in that position. It also explains ways through which
governments improve the competitive advantage of countries in international environments." Here are some
vital points to note about Porter Diamond:

Câu 10: What is the opportunity cost?

According to the opportunity cost theory, the cost of a commodity is the amount of a sec-cond commodity
that must be given up to release just enough resources to produce one additional unit of the first commodity.
No assumption is made here that labor is the only factor of production or that labor is homogeneous. Nor is
it assumed that the cost or price of a commodity depends on or can be inferred exclusively from its labor
content. Consequently, the nation with the lower opportunity cost in the production of a commodity has a
comparative advantage in that commodity.
 Example:
3. A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an
alternate use of the resources (land and farm equipment).
4. The opportunity cost is time spent studying and that money to spend on something else
5. The opportunity cost of taking a vacation instead of spending the money on a new car is not
getting a new car.

Câu 11: what is free trade?

Free trade is a largely theoretical policy under which governments impose absolutely no tariffs, taxes,
or duties on imports, or quotas on exports. In this sense, free trade is the opposite of protectionism, a
defensive trade policy intended to eliminate the possibility of foreign competition.

Câu 12: What is the FPI

Foreign portfolio investment (FPI) consists of securities and other financial assets held by
investors in another country. It does not provide the investor with direct ownership of a
company's assets and is relatively liquid depending on the volatility of the market. Along with
foreign direct investment (FDI), FPI is one of the common ways to invest in an overseas
economy. FDI and FPI are both important sources of funding for most economies.

Câu 12.2: WHAT IS THE FDI?

Foreign direct investment (FDI) is an investment from a party in one country into a business or
corporation in another country with the intention of establishing a lasting interest. Lasting
interest differentiates FDI from foreign portfolio investments, where investors passively hold
securities from a foreign country. A foreign direct investment can be made by obtaining a lasting
interest or by expanding one’s business into a foreign country.
Câu 13: what is the ASEAN? What is its main function?

a. The Association of Southeast Asian Nations (ASEAN) is a regional grouping that promotes
economic, political, and security cooperation among its ten members: Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam

b. Main function of ASEAN:

The ASEAN Declaration states that the aims and purposes of the Association are: (1) to accelerate
economic growth, social progress and cultural development in the region and (2) to promote
regional peace and stability through abiding respect for justice and the rule of law in the
relationship among countries in the region and adherence to the principles of the United Nations
Charter.

a. Nation 1:

(K/L)x = 5/4 = 1.25 (K/L)y = 8/6 = 1.3

→ (K/L)x < (K/L)y → y: capital intensive commodity, x: labor intensive

commodity

Nation 2:

(K/L)x = ⅗ = 0.6

(K/L)y = 4/4 = 1

→ (K/L)x < (K/L)y

→ Y is capital-intensive commodity, X is labor-intensive commodity.

b. Pk/Pl Nation 1 < Pk/Pl Nation 2 (11/8 <5/3)

→ Nation 2 is the capital-abundant nation. Nation 1 is a labor-abundant nation.

According to H-O theory, Nation 1 (labor-abundant nation) exports commodity X (labor-

intensive commodity)

c. According to H-O theory, Nation 2 (capital-abundant nation) export commodity Y (capital-

intensive commodity)
Câu 14. FTA definition:

A free trade agreement is a pact between two or more nations to reduce barriers to imports and
exports among them. Under a free trade policy, goods and services can be bought and sold across
international borders with little or no government tariffs, quotas, subsidies, or prohibitions to
inhibit their exchange. The concept of free trade is the opposite of trade protectionism or
economic isolationism.

ĐỀ 101
Câu 15: what is the quota?
A quota is a government-imposed trade restriction that limits the number or monetary value of
goods that a country can import or export during a particular period. Countries use quotas in
international trade to help regulate the volume of trade between them and other countries.
Countries sometimes impose quotas on specific products to reduce imports and increase domestic
production. In theory, quotas boost domestic production by restricting foreign competition.
Government programs that implement quotas are often referred to as protectionism policies.
Additionally, governments can enact these policies if they have concerns over the quality or
safety of products arriving from other countries.
Câu 16. what is non-tariff policy about?

A nontariff barrier is a way to restrict trade using trade barriers in a form other than a tariff.
Nontariff barriers include quotas, embargoes, sanctions, and levies. As part of their political or
economic strategy, some countries frequently use nontariff barriers to restrict the amount of trade
they conduct with other countries.
Câu 17: what is EVFTA? and what are the benefits?

The EVFTA is a win-win trade deal with balanced benefits for both Vietnam and the EU which
complies with the provisions of the World Trade Organisation (WTO).The EU-Vietnam Free
Trade Agreement (EVFTA) is a
new generation FTA between Vietnam and 28 European Union member states.
BENEFIT

It is a comprehensive and high-quality agreement which ensures balanced benefits for both
Vietnam and the EU, with consideration for the differences in development levels between the
two sides. Upon entering into force, the EVFTA is expected to be a huge boost to Vietnam's
exports, helping to diversify markets and exports, particularly agricultural and aquatic products as
well as Vietnamese products with competitive advantages.
What are the main benefits of EVFTA (EU-Vietnam Free Trade Agreement) for Vietnam?
- The EU-Vietnam agreement offers more opportunities for companies on both sides. This will
happen through removing tariffs
- Reducing non-tariff barriers
- reducing regulatory barriers and overlapping red tape
- ensuring protection of geographical indications
 - opening up services and public procurement markets making sure the agreed rules are enforceable :
committed to open up to investments in manufacturing in a number of key sectors such as food
products and beverages, tyres and tubes, ceramics and construction materials

Câu 18: What is CPTPP? and what are the benefits?

The CPTPP is a free-trade agreement (FTA) between 11 countries around the Pacific Rim:
Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia,
Vietnam and Japan.
BENEFITS:
- The Agreement will generate significant economic benefits for members, including access to
Japan (the world’s third-largest economy) and Canada (one of the world's largest economies)
as well as fast- growing markets such as Malaysia and Vietnam. These benefits will continue
to grow as the CPTPP expands to include new members.
- Provisions on technical barriers to trade (TBT), investment, intellectual property, sanitary
and phytosanitary measures, and other areas in the CPTPP Agreement are now in force to
secure the goods market access gained through tariff elimination. It will create a predictable
trading environment for CPTPP members, giving manufacturers and exporters a leg-up in
prospective markets.
Câu 19: The Mercantilists’ Views onTrade
– Export surpluses brought an inflow of gold and silver.
–Trade policy was to encourage exports and restrict imports.
–One nation gained only at the expense of another.
Câu 20: What is the meaning of The Heckscher-Ohlin? Give example.

The Heckscher-Ohlin theory argues that trade occurs due to differences in labor, labor skills,
physical capital, capital, or other factors of production across countries.
–Countries have different relative abundance of factors of production.
– Production processes use factors of production with Different relative intensity.
According to H-O, a country’s comparative advantage lies in the production of goods that use
relatively abundant factors. And a nation will export the product that uses its most abundant factor
intensively.
Example:
1. Labor abundant countries such as India and China export footwear, rugs, textiles, and other
labor intensive commodities. While land abundant countries, such as Argentina, Australia, and
Canada, export meat, wheat, wool, and other land intensive commodities

2. A small country like Luxembourg has much less capital in total than India, but Luxembourg has
more capital per worker. Accordingly, the Heckscher- Ohlin theory predicts that Luxembourg
will export capital-intensive products to India and import labour-intensive products in return.

Câu 21: What is the meaning of a zero sum game ?

• A zero-sum game is a situation where, if one party loses, the other party
wins, and the net change in wealth is zero. A gain by one country results in a loss by
another.

• In financial markets, futures and options are considered zero-sum games because the
contracts represent agreements between two parties and, if one investor loses, then the
wealth is transferred to another investor.
• Most transactions are non-zero-sum games because the end result can be beneficial to both
parties.

a. Nation 1

(K/L)x = 5/4 = 1,25 (K/L)y = 6/7 =0,86

→ (K/L)x > (K/L)y → X: capital intensive commodity; Y: labor intensive commodity
Nation 2:
(K/L)x=4/2=2 (K/L)y=6/5=1.2
(K/L)x>(K/L)y ---> X: capital intensive commodity; Y: labor intensive commodity

d. Pk/Pl Nation 1 < Pk/Pl Nation 2 (11/9 <4/3)

→ Nation 2 is the capital-abundant nation. Nation 1 is a labor-abundant nation.

According to H-O theory, Nation 1 (labor-abundant nation) exports commodity Y (labor-

intensive commodity)
 e. According to H-O theory, Nation 2 (capital-abundant nation) export commodity X
(capital-intensive commodity).

Câu 22: What is globalization?

- Globalization is a process of interaction and integration among the people, companies, and
governments worldwide, as forces like technology, transportation, media, and global finance
make it easier for goods, services, ideas and people to cross traditional borders and boundaries.

The Globalization process has effects on:

+ the environment
+ cultures

+ political systems

+ economic development and prosperity

+ human physical health and well-being in societies around the world.