From last class (20 mins) • Quick recap – gains from trade • Add few words to these • Exchange • Consumer • Price • Natural resources • Skills • Relations • advantage • Summary of article read by you – highlight the economic concepts
Warm up (10 mins) Pick one note card and get ready to answer the question that follows. Write your name and today’s date on your note card
Answer the following • There are so many benefits from trade, think of reasons why governments would want to restrict tradle in any way.
Note Card check • Sharing …..
Protecting domestic employment • Foreign goods may lead to domestic industries dying leading to large structural unemployment
Protecting infant industries • Small industries cannot compete with big giants • Do not have economies of scale Flaws: • Industries may never become self reliant
Risk of over specialization • Too much dependence on export of a couple of products
dumping • Large quantities are sold at costs lower than cost of production, domestic industry suffers. • Lower cost due to subsidies by their govt.
Strategic • Need certain industries – agriculture, steel, power
Protect product standards • Safe products for domestic consumers • Eg. EU ban on American beef
Raise government revenue • Impose taxes on imported products
Correct balance of payments deficit • Reduce import expenditure • Import means using up foreign exchange • Current account deficit is higher with higher imports
Reading • http://econblog.aplia.com/search?q=trade • Next block – cw questions on trade