W1: A brief introduction

1. What is economic geography?

- Is the study of the location, distribution and spatial organization of economic
activities across the space
- EcoGeo = Eco + Geo
- 3 economic problems/ques:
+ What: allocation
+ How: production
+ For whom: distribution
- Big profit = small shops + many shops
?. What are the opportunities and challenges of Vn during the US-China war:
- Opportunities
+ The possibility for nations like Vietnam to grow their export of certain items to the
United States and China, particularly to the former, is one of the beneficial effects
of the trade war.
+ During the first quarter of 2019, Vietnam’s exports to the US increased 40.2%.
The second quarter showed similar trends, particularly after the US significantly
lifted tariffs in May.
+ One of the few countries in the area that has so far escaped the effects of the
US-China trade war is Vietnam, which continues to outperform the region's
economies. Countless manufacturers have moved, or are in the process of
moving their manufacturing operations from China to Vietnam, including the
recent announcements from LG, Google, Apple and Sharp. (Total disbursed FDI
increased by 6.3 percent to US$12 billion in the first eight months of 2019
compared to the same period last year, according to government data, with the
number of newly-registered projects increasing by 25 percent to 2,406)
+ Foreign firms that have manufacturing bases in Vietnam are benefiting from this
surge since it is the fastest path to market and facilitates international brands to
shift production to Vietnam without much interruption.
- Challenges
+ Vietnam will face a complex and multidimensional problem
+ Vietnam's trade deficit with China will rise as China ups its exports to the country,
and domestic businesses there will face increasing competition from Chinese
goods.
+ One key negative impact is Vietnam being used as a convenient trans-shipment
platform for Chinese exports to sidestep the tariffs imposed by America on China.
+ Another impact is that Chinese enterprises may find ways to invest in other Asian
countries – including Vietnam – to produce items for export to the United States..
While a strong increase in the committed capital of Chinese FDI into Vietnam is a
good signal, there are also potential risks that Vietnam needs to be cautious
about regarding the types and quality of Chinese technology and projects, given
the notorious image of Chinese companies in the eyes of Vietnamese people.
+ Finally, there are concerns about Vietnam’s ability to fully absorb and take
advantage of the increasing FDI inflow from the trade war, due to Vietnam’s

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 limited production infrastructure as well as its quality of raw materials. Vietnam is
actually realizing that expectations are much higher than reality. Businesses like
Coach, Kate Spade, and Eclat Textile Co. are among those grumbling more and
more about clogged ports and roadways, rising labor and land prices, and
restrictions that aren't being loosened up quickly enough.
2. Basic concept of Geography:
- Location: position of things, places on the map. Based on fix point of the Earth
(one grid on the map)
- Relative location is position of place, things or people in relation to the others
- Distance:
+ Absolute distance: total space between things, or objects, (usually
measured in meter, centimeter or kilometer).
+ Relative distance: a measure of social, cultural and economic relatedness
or connectivity between two places (how connected or disconnected they
are) despite their absolute distance from each others)
- Place: an area with definition or indefinite boundaries; a portion of space
+ Occupies specific location on earth
+ Unique in terms of natural ( environment, landscape, condition) and
human features (culture, social life, government, policy, economic
activities)

W2: Who makes the economy?

1. Who?
- Economy is the large set of interrelated production and consumption activities in
determining how scarce resources are allocated
+ An important mean to satisfy human needs
+ It’s a mechanism combining activities and values of stakeholders into
goods and services
+ Centrally planned economy, market economy, semi-market economy

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 + Exports are domestically produced good and services that are sold
aboard
+ Imports are good and services that are produced abroad and sold
domestically
Net exports = value of exports - value of imports ( trade balance)
+ Factors affecting net exports:
● Taste of consumers
● Prices of goods and services
● Exchange rate
● Income of customers at home and abroad
● Cost of transporting goods from country to country
● Government policy toward trade
- 2, Flow of financial resources
Net capital outflow = the purchase of foreign assets by domestic residents
- the purchase of domestic assets by foreigners.
+ An U.S. resident buys stock in the Toyota corporation and a Mexican
buys stock in the Ford Motor corporation.
+ When a U.S. resident buys stock in Telmex, the Mexican phone
company, the purchase raises U.S. net capital outflow.
+ When a Japanese residents buys a bond issued by the U.S. government,
the purchase reduces the U.S. net capital outflow
-> The flow of capital between a country economy and the rest of the world is so
called Foreign Direct Investment (FDI)
+ Variables that influence net capital outflow
● The real interest rates being paid on foreign assets.
● The real interest rates being paid on domestic assets.
● The perceived economic and political risks of holding assets
abroad.
● The government policies that affect foreign ownership of domestic
assets.

? Vietnam is exporter
5 main export products:

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? Why export and import of Vietnam increase though time
- In export: This growth is in large part due to increases in foreign demand, increased
domestic production, changes in the terms of trade, and reductions in the cost of
international transactions.
+ Vietnam has emerged as a major electronics exporter, with electrical and
electronic goods overtaking textiles, coffee, and rice to become the top export
item.
+ The footwear industry has benefited from several favorable factors throughout its
growth in the country. The EU-Vietnam free trade agreement (EVFTA) is
expected to significantly help the sector.
+ Vietnam has approximately 6,000 garment and textile manufacturing companies
employing 2.5 million people, and its top export destinations are leading
consumer markets – the US, Europe, Japan, and South Korea.
+ Furniture, lighting, and prefabricated buildings feature high on Vietnam’s export
list. The sector accounted for 4.4 percent of Vietnam’s exports in 2020. The
effect of the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP) and EVFTA is further expected to propel Vietnam as the
second-largest interior furniture exporter after China in the next seven to eight
years with new markets in Canada and Mexico
- In import: If incomes rise at home, more imports may be bought. Firms are likely to buy
more raw materials and capital goods, and some of these will come from abroad.
Households will buy more products, and some of these will be imported.
+ One of the reasons for the sharp increase in the import value of items is that the
import price index in the first 6 months of 2021 increased by 2.24% over the
same period last year
+ In which, import prices of some important products for processing and
production increased: other common metals increased by 12.8%; iron and steel
increased by 7.65%; fabric increased by 1.65%; electronics, computers and

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 components by 1.62%; machinery, equipment, tools and spare parts increased
by 0.56%.
+ However, if there is no solution to limit the trade deficit, the long-term trade deficit
and especially the trade deficit of consumer goods will partly cause negative
impacts in the economy. The high import of consumer goods, especially luxury
consumer goods, will reduce the competitiveness of domestic goods, causing
difficulties for domestic production activities.
3. Economic growth:
- Economic growth Moving upward of the PPF of a nation through time. In other
words, its is the increase in gross products of a country usually measured by its
real GDP raising (adjusted inflation)
- GDP Total value of all final goods and services produced and traded within
territory of a nation in a specific duration
- Production possibility frontier (PPF): đường giới hạn khả năng sx iThe PPF
captures the concepts of scarcity, choice, and tradeoffs.
4. The factors of production:
- Physical capital (investment)
- Human capital
- Natural capital
- Technological knowledge
? Which factors of production dominate economic growth in Vietnam?
- The four main factors of economic growth are land, labor, capital, and entrepreneurship.
W3 + W4 + W5: Can nature be a commodity?
1. Commodity: hàng hoá
- use value (giá trị sử dụng)
- Value
- Depreciation: sự khấu hao
- Scarce: khan hiếm (có hạn, cần đc bảo quản và sử dụng tối ưu nhất-> mang lại
lợi ích KT lớn nhất) limited, should be preserved and used optimally, bring
maximum economic benefits

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 2. Environmental commodity:
3. Mô hình kinh tế:
- Provision of
+ Resource
+ space
- Hậu quả: environment receives waste
- Giải pháp: 3 main functions of environmental commodity
+ Provide input resources for economic system
+ Provide space/place for economic activities
+ Carry waste discharged from economic system
-> The COMMODITY is NOT infinity, it is limited Use and allocate it for EFFICIENCY
4. Total economic value of environment commodity:
- Use values
+ Direct: wood products(timber, fiber,fuel)/ non-wood(food,medicine,genetic
medicine) / educational uses/recreational uses/ cultural uses/ human
habitat
+ Indirect: watershed protection/ nutrient cycling/ air pollution reduction/
microclimate regulation/carbon storage
+ Option value: future direct and indirect uses
- Non-use values: existence value: biodiversity/culture/heritage/bequest values-for
future generation.
? What is the role of natural resources in Vn ?
Viet Nam's rich natural resources, including minerals, oil, gas and hydropower, and a diverse
ecosystem, have contributed to the country's wealth and development, including important
sectors such as tourism and agriculture, providing jobs for more than 20 million Vietnamese.
? Do you think that the natural resource intensive economic model of Vietnam is sustainable?
- Vietnam’s strong economic performance has helped reduce poverty over the past
decades. However, rapid industrialization since the late 1980s has relied on intensive
and unsustainable exploitation of forests, fisheries, and other renewable and
nonrenewable natural resources.
- Moreover, Vietnam’s stock of natural capital has declined as mineral and non mineral
resources were depleted. Agriculture and industry have contributed significantly to
degradation of natural capital. Vietnam’s extensive use of fertilizers contributes largely to
polluting land and water and adds to legacy issues related to the war.
- The Vietnamese authorities recognize the challenges posed by climate change and a
more sustainable, greener growth model is at the core of their development agenda.
+ Lowering the intensity of fossil fuels in Vietnam’s GDP: raising the contribution of
renewable energy would help to break the link between greenhouse gas
emissions and output.
+ Providing stronger incentives for households, firms, and government to pursue
green growth: taxation of fossil fuels that fully prices environmental and health
externalities would nudge energy demand toward renewables and generate
revenue to finance adaptation and mitigation plans.

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 + Investing in climate resilient infrastructure would help households and firms cope
with storms. The expected cost of natural disasters could be usefully included in
public debt sustainability analyses.
+ Promoting research and development and other innovation policies can provide
further incentives to investment in existing clean energy sources and
improvements in clean technologies.
+ Shifting to autonomous, electric, shared vehicles, as already planned in
Singapore, would help reduce congestion and pollution in cities. Improved
government capacity to coordinate technological change and promote innovation
and green growth would be key
5. Natural resource
- trend and issues
- Population trend
- Growth and environment
6. Role of natural resource in Vn economy
7. The cost of pollution in VN:
- EPI Vietnam ranks 79; (air: 123 - 10 worst, water: 80). 60% of the rural
population has no access to water.
- Pollution causes 5,5% GDP loss
- $2 billion loss for heath damage
- 20.000 dead water and 18.000 deaths of air pollution annually. 40% residents of
Hanoi get air pollution disease
8. Growth and environment - choice:

- Pollution haven hypothesis

- Potential energy:
+ Solar
+ Hydrogen
+ Wind
9. The environment
- Input : natural resources, energy
- Output : wastes

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 10. Trends:
- Trend 1: natural resources are running out of quickly due to social-economic
+ Tgian tăng dân số rút ngắn lại-> bất thường
- American dream:
+ Quốc gia càng phát triển thì lượng tiêu thụ càng nhiều
+ Các mối nguy hại:
● Năng lượng ko tăng nhưng lượng tiêu thụ nhiều (trc WW2)
● Dầu mỏ, than đá, khí đốt (90% tổng năng lượng tiêu thụ):
non-renewable resource -> muốn phình to nhưng đầu vào
cạn kiệt
● Lượng tiêu thụ nhiều -> khan hiếm -> giá tiếp tục bị đẩy
lên (vd: Đực bị phụ thuộc vào năng lượng hóa thạch ->
dẫn đến lạm phát -> kt bất ổn,...)
● Dầu mỏ-khí đốt- than đá (thứ tự cạn kiệt)

- Trend 2: Climate change

W6: Labor power: Can workers shape economic geographies?
1. Labor power: can workers shape ecogeo:
- Human resource:-> nxld-> gdp
+ Knowledge, skill, experience, capacity, health, motivation of labor force
+ HR is an important capital (vốn) for economic growth
- How is labor force measured:
+ measured by the Bureau of Labor Statistics (BLS) or GSO (Vietnam)
+ It surveys 60,000 randomly selected households every month/quarterly. -
> The survey is called the Current Population Survey.
- The statistics offices place each adult into one of three categories:
+ Employed: those who worked as paid employees, worked in their own
business, or work as unpaid workers in a family member’s business
● Both full/part time
● Include those who are not working but having jobs from which
they are absent temporarily ( ill,vacation, bad weather )

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 + Unemployed: Include those who are available for work but not employed,
or try to find employment during the previous 4 weeks.
+ Not in the labor force: A person who fits neither of 2 above categories
(employed and unemployed) is not in the labor force (such as a full-time
student, homemaker, or retiree)
- State of labor force: the Labor force is the total number of workers, including both
the employed and the unemployed
Labor force = number of employed + number of unemployed
- How is unemployed measured: the unemployed rate is calculated as the
percentage of the Labor force that is unemployed
number unemployed
Unemployed rate = x 100
LB
- How is labor force participation rate measured: the labor-force participation rate
is the % of the adult population that’s in the Labor force
LB
Labor force participation rate = x 100
adult population

2. Labor mobility:
- Definition:
+ Labor mobility refers to the situation with which laborers are able to move
within an economy and between different economies.
+ 2 primary types:
● Geographical mobility refers to a worker's ability to move between
regions or countries.
● Occupational mobility refers to a worker's ability to change job
types.
- Better income and working condition
- Open labor market (MRAs)
- Policy for immigrants
Minimum wage law policy and unemployment in skilled job

? What are the challenges of Vn in the process of “open labor market in Asean” ?

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 -Lack of education: most of the population of Vietnam’s labor force can only do manual
jobs (Lao động chân tay) => come back to the country can’t help to improve the quality of labor
-Lack of english: According to statistics: only 15% of the population in Hanoi know how to speak
English and use it, working with the computer => foggy with the world. In the context of 4.0
industry, businesses have to apply high technology and adjust the production process to adapt
to the new circumstances. They will need workers with professional and technical qualifications,
equipped with many skills.
-Labor quality is still poor: 3.75/10, ranked 11th out of 12 Asian countries in the rating (WB).
-Labor force: ranked 77th out of 125 countries and territories
? “Vietnamese labor quality is among the worst in the world”. Do you think so and
why? How can we improve our labor quality for better economic development ?
- Yes, because ( above)
How to improve:
-Resource Allocation
-Increases in Physical Capital: Buildings, grain bins, machinery and equipment, and land are all
examples of physical capital. For decades, farming has embraced technology that needs
relatively less work and comparatively more cash. The key here is to ascertain whether
advances in labor productivity and efficiency have resulted from increases in your farm's
physical capital. Of course, it is also crucial to ascertain whether the acquisition of assets has
increased profitability.
-Increases in Human Capital: Human capital represents knowledge and skills that individuals
acquire through education, experience, and training. It is important for farm managers and
operators to assess their current management skills and gaps. Skill checklists can provide this
self-assessment.
-Technological Change: In production agriculture, technology adoption often fosters more
efficient use of labor, and leads to economies of scale and competitive advantage for a couple
of reasons. First, early adopters of technology often reap above average profits. Second, farms
that do not adopt beneficial technology become increasingly inefficient.
3. Labor outsourcing ( sự chuyển giao và thuê ngoài):
Outsourcing is a process of transferring portions of work to outside suppliers rather than
completing it internally by companies
It is an effective cost-saving strategy when used properly
-the most commonly outsourced streams of business include:IT outsourcing, Legal
outsourcing ,Content Development, Web Design & Maintenance, Recruitment, Logistics
Manufacturing, Customer Support
- Why outsource:
+ Quality and Expertise
+ Concentrating on core process rather than the supporting ones
+ Risk-sharing (Note)
+ Reduced Operational and Recruitment costs
- Disadv:
+ Risk of exposing confidential data

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 + Synchronizing the deliverables: (In case you do not choose a right
partner)
+ Hidden costs ; + Lack of customer focus
? What are popular types of outsourcing services Vietnam is doing for the world? Why ?
It legal,Content development, Web design and maintenance, Recruitment, Logistics
Manufacturing, Customer support
? In the future, what are the strengths/advantages of Vietnam in outsourcing for the world? How
to enhance them ?
-When a boarding student come back to the country educated by developed countries can help
to improve the quality of work( moraroly).
-The cost of labor there can be up to 90% less than what you would pay in the United States.
Their facilities are also very conducive compared with other developing nations like China or
India, where outsourcing might become more difficult as costs rise (Top 10 Countries list)
-Vietnam has a huge amount of skilled software engineers that companies can hire to work with
them. Vietnam software outsourcing is turning into an excellent market for the country’s IT
professionals, as they rank among some of the finest in the Asia Pacific and even worldwide.
- Enhance:
+Develop appropriate policies, establish favorable conditions for people, and assure work
development.
+Encourage, assist, and equip the conductor with necessary skills, particularly those related to
technology, such as computer use. Learn English to broaden relationships
+Those who already speak English fluently should be given the chance to study
W7: Making money: why has finance become so powerful?
Making money: why has finance become so powerful?
1. Financial systems: (mạch máu của nền kinh tế-tiền)
-From: saving/ bank, relatives/co-work( công hoặc tư) -> huy động vốn (investment)
-Consists of the group of institution in the economy that help to match one’s person saving with
other person’s investment
-Move the financial scare resources forms savers to borrowers
-Can be freed into 2 groups: financial market/ financial intermediaries
-Function of financial system:

-
-Financial market:
1,The bond market:

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Is a certificate of indebtedness that specifies obligations of the borrowers to the holder of the
bond: hợp đồng ghi nợ, trg đó xác lập trách nhiệm bên đi vay phải thực hiện đối vs ng cho vay:
● Characteristics of bond: term: the length of time until the bond
matures; credit risk: the probability that the borrower will fail to pay
some of the interest or principal
● Tax treatment: the way in which the tax laws treat the interest on
the bond
2 thông tin quan trọng: thời gian đáo hạn(maturity rate)/Lãi suất (interest rate)
Credit risk: the probability that the borrower will fail to pay some of the interest or principle
2,The stock market:
● Represents ownership in a firm and is therefore, a claim to the profits that the firm
makes (một phần sở hữu/tsan của cty)
● The sale of stock to raise money is called equity finance ( vs debt finance)
● Owner of shares and owner of bonds. Compared to bonds, stocks offer both
higher/slower risk.
Sự khác nhau: tính sở hữu
- Financial intermediaries: are financial institutions through which saver can
indirectly provide funds to borrowers
+ Banks
● Take money/deposit from ppl want to save and use the deposits to make
loans to ppl who want to borrow
● Pay deposit interest on the deposits and charge borrowers slightly higher
interest on their loans
+ Mutual funds (quỹ đầu tư tài chính): is an institution that sells share to the public
and use the proceeds to buy a portfolio, af various types of stocks, bonds and
both. Shareholders accept risk and return.
● Quỹ ủy thác (quỹ quay vòng)
- Finance in the national income accounts:
+ C: domestic consumption (tiêu dùng nội địa)
+ I: investment (đầu tư)
+ G: government expenditure
+ NX: net export
+ Recall that gdp is both total income in an economy and total expenditure
on the economy’s output of goods/ services
Y = C + I + G + NX
+ Assumed a closed economy - one that does not engage in international
trade( ko xuất khẩu ngoại)
Y=C+I+G
+ Subtracts C and G from both sides of the equation:
Y-C-G=I
+ Saving: The left side of the equation is the total income in the economy
after paying for consumption and government purchases and is called
national saving, or just saving (S).
+ Substituting S for Y - C - G, the equation can be written as:

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 S=I
+ For the economy as a whole, saving must be equal to investment
S= (Y - T - C ) + (T -G)
Private saving is the amount of income that households have left after paying their taxes
and paying for their consumption. *Private saving = (Y – T – C)
Public saving is the amount of tax revenue that the government has left after paying for
its spending. *Public saving = (T – G)
+ The surplus of T - G represents public saving
-T>G: thu hơn chi: receive more than spend: thặng dư ngân sách budget surplus
-G>T: thâm hụt ngân sách ( bội chi nhiều năm cộng lại-nợ công-public debt) - budget
deficit: spend more money than receive in tax revenue
W8: Technology change: Is the world getting smaller?

1. Technology and income:

- 2016, Việt Nam exported 102.311 tons of mineral valuing 24,8 mil USD
- IP7 2016 revenue 46,9 bil USD (From 9-12/2016) – 2.000 TIMES greater than
mineral exported value of Vietnam
2. It is a small world
- Technology: society’s understanding of the best ways to produce goods and
services.
- The 21th century saw the greatest changes in technological progress than ever
and this changes the way we live and also economic activities (Steve Jobs)
-> The world is getting… …...SMALLER
3. Technology revolution 4.0:
- Cloud computing
- Sharing economy:
The sharing economy is an economic model defined as a peer to peer (P2P) based activity of
acquiring, providing, or sharing access to goods and services that is often facilitated by a
community-based on-line platform.
KEY TAKEAWAYS
-The sharing economy involves short-term peer-to-peer transactions to share use of idle assets
and services or to facilitate collaboration.
-The sharing economy often involves some type of online platform that connects buyers and
sellers.

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-The sharing economy is rapidly growing and evolving but faces significant challenges in the
form of regulatory uncertainty and concerns about abuses.
Remote working - flex jobs:-Working from a location other than the traditional office:
telecommuting, home, remote, mobile, virtual, or cloud working.
-IT jobs topping the list, followed by medical and health, sales, administrative, customer service,
education and training, and finally, marketing
-Toyota, 25.000/72.000 staff working at home (human resources, accounting finance, R&D)
-Working at home, online, save time for traveling, cloud system
? . What impacts and challenges 4.0 technology revolution imposes on the Vietnamese
economy?
- Impacts - opportunities:
-Việt Nam is a late comer so with lessons learned from other nations we can take a shortcut.
We will be able to utilize opportunities presented to us while bypassing certain stages of
development.
-adopt new models suitable to its own conditions in the course of economic development.
However, Việt Nam will also face many challenges, particularly in technology, human resources,
policies and infrastructure. It is a naked truth that our technology is at a moderate level and the
level is not the same across the board. These are the hindrances for us in the course of
implementing Industry 4.0, particularly the level of our human resources and infrastructure.
-realized the importance of good infrastructure, particularly IT technology, including internet and
4G and 5G
- Challenges:
-needs a more transparent environment for business operation. This is a pivotal condition for
creative enterprises.
-We need to change our human resources training, starting from general education to tertiary
education. This is the right plan for us to educate and train workers with high technological
levels to meet the requirements of Industry 4.0.
-must adopt good policies in human development, with science and technology the mainstay for
the country’s advancement.
-Needs to have healthy competition between enterprises and between different economic
sectors. This is a foundation for transparency and accountability for our society.
W9: International trade - application and implication.
1. Why “trade”? (Why should we have trade?)
- Trade makes people better off
Absolute advantage: if he can do it better than other pp
Specialization and trade: each nation would be better off if we specialize in producing the
product we are more suited to produce, and then trade with each other
Comparative advantage: if the opportunity cost is lower for that individual than other pp
-Using all its resources, country can produce 30m cars or 6m trucks, and country B can produce
35m cars or 21m trucks
-Country B has the absolute advantage in producing both products, but it has a comparative
advantage in trucks because it is relatively better at producing them
-Benefit:

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 ● Self sufficiency: if both countries become self-sufficient, and
allocate their scarce resource evenly, they will produce the
following combined output
● Specialization and trade: if both countries specializes, based on
their comparative advantage, would output will be
- Comparative vs absolute advantage:
+ An individual has comparative advantage in producing a good or service if
the opportunity cost of producing the good is lower for that individual than
for other people
+ An individual has an absolute advantage in an activity if he or she can do
it better than other people. Having an absolute advantage is not the same
thing as having a comparative advantage
- Comparative advantage and trade:
+ Ricardo theory of comparative advantage suggests that one country
should SPECIALIZE in producing those goods that they produce most
efficiently and buying goods that they produce less efficiently from other
countries.
+ Trade makes every country better off
? What G&S are the absolute advantages of Vietnam?
? What G&S are the comparative advantages of Vietnam?
? What determines whether a country imports or exports a good?
? Who gains and who loses from free trade among countries?
- Free trade means that firms can export and import goods without tariff barriers.
Free trade leads to lower prices and increased exports and imports.

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- Winners:
+ Exporters: Competitive businesses will be able to export more if tariff
barriers are removed. This will enhance output for these exporting
businesses and generate jobs in the export industry. Businesses can
specialize in specialized manufacture and export their goods globally. As
a result of the company's ability to manufacture for a worldwide market
rather than simply the domestic one, this greater specialization may
provide economies of scale. According to the New Trade Theory, these
economies of scale are one of the most important features of free trade.
+ Consumers benefit from lower prices: Imported items become less
expensive because of free trade. Consumers can benefit from higher
living standards thanks to this. They have more money left over after
paying for imports, which they may use to buy other items. More
competition might also result from free trade. Foreign competition is
increasingly more intense for domestic monopolies. This competitive
pressure has the potential to further lower prices for customers.
+ Domestic firms:If customers gain from decreased pricing, they will have
more money to spend. Although less evident and visible, decreased tariffs
and the greater disposable income of local customers would indirectly
enhance demand for other domestic enterprises.
+ Increased economic growth and tax revenue:Trade liberalization may
contribute to economic development, which will raise tax revenues and
free up more money for public expenditure.

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 - Losers:
+ Uncompetitive domestic firms. Tariffs are often designed to protect
domestic firms which produce at a higher cost than international
competitors. With free trade, they will see a fall in demand and could go
out of business.
+ Workers in these uncompetitive industries could lose jobs. If free trade
leads to a sharp shift in domestic demand, old exporting industries may
close down, leading to jobs losses.
+ Negative regional multiplier effects: Some sectors that are concentrated
in certain places may be impacted by free trade. A negative regional
multiplier effect will result in greater regional and structural unemployment
if an area experiences job losses and poorer productivity. Even while the
overall country's net economic wellbeing may rise, some regions that rely
on outdated exporting sectors may find it difficult to adjust to changing
economic conditions. This is evident in places like the "rust belt" of the US
and regions of the UK that had a sharp decrease in industry.
+ Potential environmental costs: Modern trade agreements like TIPP go
beyond simply lowering tariffs. These rules let businesses to sue
governments for lost profits resulting from regulation while ignoring the
costs and advantages of social welfare. For instance, green energy is
subsidized in Europe. Free trade agreements, however, might equalize
the playing field between fossil fuels and renewable energy, disregarding
the external costs and advantages. Free trade may have an impact on the
environment.
2. Why determine whether a country imports or exports a good?
- The determinants of trade
+ Equilibrium without trade
+ .
- The world price and comparative advantage:
+ The effects of free trade can be shown by comparing the domestic price
of a good without trade and the world price of the good.
+ If a country has a comparative advantage, then the domestic price will be
below the world price, and the country will be an exporter of the goods.
+ If the country does not have a comparative advantage, then the domestic
price will be higher than the world price, and the country will be an
importer of the good
● International trade in an exporting country

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3. Who gains and who loses from free trade among countries? How does trade impact the
welfare of different groups in society?
- How free trade affects welfare in an exporting country:

+ Trade raises the economic well-being of the nation as a whole

+ Domestic producers of the good are better off, and domestic consumers
of the good are worse off

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 - The gains and losses of an importing country:
+ If the world price of steel is lower than the domestic price, the country will
be an importer of steel when trade is permitted.
+ Domestic consumers will want to buy steel at the lower world price.
+ Domestic producers of steel will have to lower their output because the
domestic price moves to the world price.
+ International trade in an importing country

4. Free trade vs protectionism?

- How free trade affects welfare in an importing country

- Trade raises the economic well-being of the nation as a whole because the gains
of consumers exceed the losses of producers.
+ Domestic producers of the good are worse off, and domestic consumers
of the good are better off.
- Some common trade policies:
+ A tariff is a tax on goods produced abroad and sold domestically.
+ Tariffs raise the price of imported goods above the world price by the
amount of the tariff.

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The effects of a tariff:
With a tariff, total surplus in the market decreases by an amount referred to as a deadweight
loss.
+Consumer: worse off +Producer: better off +Government: better off
+Whole economy: worse of
- The effects of an import quota:
An import quota is a limit on the quantity of a good that can be produced abroad and sold
domestically
- The lessons for trade policy
+ Tariffs:-raise domestic prices. -reduce the welfare of domestic consumers.
-increase the welfare of domestic producers. -cause deadweight losses.
+ Other benefits of international trade (the argument for free trade)
-Increased variety of goods -Lower costs through economies of scale
-Increased competition -Enhanced flow of ideas
+ The argument for restricting trade
- Jobs - National Security -Infant Industry -Unfair Competition - Protection-as-a-
Bargaining Chip
5. Trade agreements and the world trade organization:
- GATT:
+The General Agreement on Tariffs and Trade (GATT) refers to a continuing series of
negotiations among many of the world’s countries with a goal of promoting free trade.
+GATT has successfully reduced the average tariff among member countries from about 40
percent after WWII to about 5 percent today.
6. Summary:
- The effects of free trade can be determined by comparing the domestic price
without trade to the world price.
+ A low domestic price indicates that the country has a comparative
advantage in producing goods and that the country will become an
exporter.
+ A high domestic price indicates that the rest of the world has a
comparative advantage in producing the good and that the country will
become an importer.
- When a country allows trade and becomes an exporter of a good, producers of
the good are better off, and consumers of the good are worse off.
- When a country allows trade and becomes an importer of a good, consumers of
the good are better off, and producers are worse off
- A tariff—a tax on imports—moves a market closer to the equilibrium than would
exist without trade, and therefore reduces the gains from trade.
- Import quotas will have effects similar to those of tariffs
- There are various arguments for restricting trade: protecting jobs, defending
national security, helping infant industries, preventing unfair competition, and
responding to foreign trade restrictions.
- Economists, however, believe that free trade is usually the better policy

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