International Trade Theories
Chapter 1 Benefits of International Trade
In this chapter, we first explain the meaning of international trade, and then turn our attention to benefits from international trade.
Definition of International Trade
International trade, sometimes also called international business or simply foreign trade, occurs when a firm exports goods or services to consumers in another country. Nowadays when talking about international trade we do not just mean selling and buying goods on an international scale but also cross-border trade in services and carrying out of investment activities abroad.
The Benefits or Gains from International Trade
Why do nations trade with each other? The answer is simple: Because we can receive benefits or make gains from it.
Now let’s have a look at the chief benefits from international trade. (1) Helping to raise the living standards of the people
Take the United States. A great deal of its high standard of living depends on international trade. Without international trade the United States cannot become a kingdom of automobiles because most of its oil is imported from abroad. Without international trade the United States can not have enough tin, tungsten and chromium for certain industrial process because the United States has no deposits of them. Remember no country is able to produce everything it needs. That is an important reason for trade.
(2) Helping to upgrade a country’s modernization
Foreign trade can help a nation make money in the form of foreign exchange which can be used to finance its purchases of high technology needed for upgrading its modernization and speeding up its industrialization process.
(3) Helping to solve a country’s shortage of capital
A lot of world’s enterprises, esp. those of the developing nations, are in desperate need of capital, for their expansion, for employing workers, for buying raw materials, for purchasing advanced equipment and carrying out the R & D programes. Such a problem can be solved by attracting foreign investment through forming joint ventures.
(4) Helping to solve unemployment problems
For both developed nations and developing nations export trade can provide more employment opportunities. Without foreign trade some people will lose their jobs.
(5) Helping to promote mutual understanding and friendship between trading
Through foreign trade a country can know more about a country’s economic situation, legal system, culture and customs. Businessmen or foreign trade workers of different countries become friends by trading with one another.
(6) Helping to boost a country’s competitiveness in the world market
If a country’s business wants to gain market access to a foreign country, it must be able to compete with its rivals with high quality goods, attractive designing, and better after-sales service.
(7) Helping a country to accelerate its overall economic growth
Here is a case in point. In 1970 living standards in Ghana (well-known for its cocoa) and South Korea were roughly comparable. Ghana’s GNP per capita was $250, and South Korea’s was
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$260. By 1995, the situation had dramatically changed. South Korea had a GNP per capita of $ 9,700 while Ghana’s only $390, reflecting a vastly different economic growth rate. Between 1968 and 1995, the average annual growth rate in Ghana’s GNP was under 1.4%. In contrast, South Korea achieved a growth rate of about 9% annually in the same period of time. Why the sharp difference? Of course there is no easy answer because many factors affect a country’s growth. But one thing is certain, that is, The South Korean government implemented policies that encouraged companies to engage in international trade, while the actions of the Ghanaian government discouraged domestic producers from becoming involved in international trade. That is why some economists say foreign trade can be compared to the engine of economic growth.
New Words
1. cross-border 跨国境的 2. tin 锡
3. tungsten 铬 4. chromium 钨
5. deposit(s) 贮藏量 6. to finance 为……提供资金 7. to upgrade 使升级， 提升 8. vastly 巨大地
9. industrialization 工业化 10. firm 公司，企业
11. modernization 现代化 12. automobiles （美）汽车（常用auto） 13. to boost 增加 14. competitiveness 竞争力
15. to accelerate 加快 16. to implement 执行（政策等）
Useful Phrases and Idiomatic Expressions 1. on an international scale 在国际范围内 2. a case in point 恰当的例子，例证 3. to engage in 从事与
4. to discourage sb. from doing sth. 不鼓励某人做某事，劝阻某人不做某事 5. to be compared to 将……比作
6. in the form of 以……形式，用……方式 7. in contrast 相形之下
8. to turn one’s attention to 将某人注意力转向
Exercises
I. Answer the following questions:
1. What is meant by international trade?
2. What are the chief benefits from international trade?
3. Give examples to show that no country is able to produce everything it needs.
4. Does international trade have negative effects on a country’s economic development?
II. Translate the following into English:
1. 对外贸易可以给一国带来以下七个方面的好处：
（1）通过对外贸易可以充分利用国外资源，协调发展它的国民经济；
（2）通过与其他国家的贸易可以引进先进的技术设备，促进生产率的提高； （3）可以帮助它扩大资本的积累；
（4）帮助一个国家进口国内无法生产的产品，更好满足国内人民的需求； （5）通过国际贸易可使一国参加国际分工； （6）通过国际贸易带动一国经济发展；
（7）通过国际贸易发展对外经贸关系和扩大影响力。
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2. 世贸组织机制受到抨击的一个理由是这些规则本身就不得人心。如：发展中国家在乌拉圭回合中是被迫接受知识产权协议的，而这种东西不能给它们带来多少益处；另一方面，富国（如美国、欧盟中的法国、日本）却不愿在发展中国家最为关心的问题上（农业、反倾销和反补贴）作出大的让步。
3. 在不同国家的人民之间进行货物与服务的交换就是国际贸易。
III. Paraphrase the following, esp. the underlined parts:
Some governments implement policies that encourage their companies to engage in international trade, while the actions of other government discourage their domestic producers from becoming involved in international trade.
Supplementary Reading (1) for Chapter 1
National Gains from International Trade
Although conceivably a nation might have a sufficient variety of productive factors to produce every kind of goods and services, it would not be able to produce each kind of goods and service with equal facility. The United States could produce hand-woven rugs, but only at a high cost since the production of such rugs requires great quantities of labor, which is expensive in this country. The production of hand-woven rugs however, would afford a reasonable employment for the large supply of cheap labor in a country like India. It would be advantageous for the United States, therefore, to specialize in a commodity such as trucks, whose production makes use of the abundant supply of capital in this country, and to export trucks in exchange for hand-woven rugs from India.
This example illustrates in a very simple way the gains that result from international specialization—each nation is able to utilize its productive factors in their most productive combinations. By raising the productivity of national economies, international specialization increases the output of goods and services. This is its economic justification and the justification of the international trade that makes possible such specialization.
The contribution of international trade is so immense that few countries could become self-sufficient even with the greatest effort. Contemporary economies have been shaped by the international trade and specialization of the past, and their continued viability is closely dependent on the world economy. For example, it is physically impossible for the United Kingdom and Japan to feed, clothe, and house their present populations without imports from other countries. Economic self-efficiency for these two nations would mean mass starvation and poverty standards of living unless emigration proved possible on a very large scale. The survival of these countries depends essentially on the export of manufactures that require little space to produce in exchange for foodstuffs and raw materials which require great space to produce or are found in only certain areas of earth.
The United Kingdom and Japan are examples of high dependence on international trade. But even countries that are able to supply their own peoples with the basic necessities of life out of domestic production would be faced with an unbearable decline in living standards if they were cut off from international trade. New Zealand produces far more foodstuffs than are needed to nourish its sparse population, and it is able to trade this surplus with industrial countries like the United Kingdom and Japan. Hence, for New Zealand economic self-sufficiency would not mean starvation but rather the deprivation of manufactured goods that are necessary to sustain its current
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standard of living. Of course, New Zealand could produce some manufactures to take place of imports, but its efforts in that direction would be limited by its scarce supplies of labor, capital, and industrial raw materials. The New Zealand economy itself is the product of international specialization and trade, and a far different and poorer economy world have evolved in the absence of world markets.
The United States, with its continental sweep and immense resources, could afford economic self-sufficiency with the least cost of any nation, with the possible exception of the former Soviet Union and China. Perhaps this explains why, far more than other peoples, Americans are inclined to underestimate the importance of international trade.
But even for this country, the cost of self-sufficiency would be formidable. American consumers would experience an immediate pinch in their standards of living. An entire rage of foodstuffs would no longer b e available or would be available only at exorbitant prices. The American institution — the cup of coffee — would become a luxury to all but a few, and most of us would be forced to do without our daily stimulant or to use inferior substitutes. Even then, the sugar for our beverage would be an expensive item.
As regards basic foodstuffs, we should, of course, have a plentiful supply. In fact, we would become embarrassed by growing stockpiles of agricultural products as farmers lost export outlets for one-fourth of their wheat crop, one-third of their cotton crop, and large factions of many other crops. Eventually many farmers would be ruined, and the agricultural sector of our economy would become less important.
Manufacturing industries would also face many difficulties. Without imports, many raw materials would no longer be available and inferior substitutes would replace them. Domestic supplies of other raw materials would no longer be supplemented by imports and their prices would rise to increase costs of production all along the line. The loss of export markets would also cause severe dislocation in many manufacturing industries.
Thus, the outcome of economic self-efficiency for the United States would be a noticeable decline in the American standard of living. Only those producers in direct competition with imports would benefit from self-sufficiency, but the improvement in their fortunes would be purchased at the cost of a general deterioration in the economic well-being of most Americans. Because of the rising dependence on imports of raw materials (particularly petroleum), the national interest of the United States in foreign trade will grow in the future: More than at any time in the past our economic prosperity in the years ahead must rest upon an expanding world economy.
New Words
1. conceivable 可相信地，可想见地
2. facility 熟练，灵巧（复数表示“设备”、“工具”） 3. hand-woven 手工编织的 4. rug 小地毯 5. to afford 提供
6. truck （美）卡车（英国人常用lorry） 7. abundant 充裕的，丰富的 8. to evolve 逐渐形成
9. formidable 可怕的，令人生畏的 10. pinch 重压
11. exorbitant 昂贵的，过高的 12. stimulate 刺激物，兴奋剂 13. inferior 劣等的，差的，次的 14. substitute(s) 替代物，替代品 15. beverage 饮料
16. plentiful 富裕的，丰富的，充足的 17. stockpile 推存，贮存 18. outlet(s) 出路 19. to be ruined 被毁灭
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20. to be supplemented 得到补充 21. severe 严重的 22. dislocation 混乱，秩序变乱 23. fortune(s) 财富 24. well-being 福利 25. noticeable 显著的
26. petroleum 石油（也可用oil） 27. prosperity 繁荣（= boom） 28. to underestimate 低估（反面为overestimate） 29. immense 极多的
Useful Phrases and Idiomatic Expressions 1. in exchange for 交换，换取 2. to specialize in 专门从事
3. in the absence of 在缺乏……情况下 4. to be inclined to do sth. 倾向于做某事
5. all but a few 很少的几个人，寥寥无几的人 6. as regards 至于
7. all along the line 全线的，全面的
8. in direct competition with 与……直接竞争 9. to benefit from 从……中获益
10. in the years ahead 在今后的岁月里 11. to rest upon 依赖（也可用to rest on）
Discussion
1. Do you think a country can be truly self-sufficient? 2. What is the benefit of international specialization?
3. Why are Americans inclined to underestimate the importance of international trade? 4. What will the world look like in the absence of international trade? 5. What would be the outcome of economic self-sufficiency for the U.S.?
Supplementary Reading (2) for Chapter 1
Dangerous Activities
BRUSSELS, GENEVA AND WASHINGTON, DC
Europe and America always have plenty of trade rows. Steel is only the latest. But farm subsidies could yet do the most damage of all
Six months ago, the prospects for freer global trade seemed a lone bright spot in a dark world. Two months after the terrorist attacks on September 11th, 142 countries agreed to launch a new round of multilateral trade negotiations at Doha, in Qatar. A month later, China, the world’s most populous country, joined the World Trade Organisation (WTO) and with it the multilateral trading system.
Even better was the fact that the United States and the European Union, the world’s biggest traders, so often at loggerheads in the past, worked in close alliance at Doha. The two sides’ trade supremos, America’s Robert Zoellick and Europe’s Pascal Lamy, were longstanding personal friends and fellow long-distance runners. Several simmering bilateral trade disputes, from bananas to Irish music, seemed to have been largely diffused. Transatlantic tensions, in short, appeared to have given way to a joint leadership that was at last pushing for freer trade.
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