Trade Free Trade (definition) 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. What is International Trade? International trade is an exchange involving a good or service conducted between at least two different countries. The exchanges can be imports or exports. 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
TABLE OF CONTENT Globalization Definition Benefit Challenges Effects of the Pandemic on Globalization / Economies Trade Free Trade (definition) What is International Trade? Pros and Cons of International Trade: What is the trade war? What are the negative sides of free trade? What are the positive sides of free trade? Free theory support free trade: Is An Interdependent Global Economy A Good Thing? (kt phụ thuộc có tốt?) Three most important of Trade Theories: Trade patterns for Vietnam (Mô hình thương mại) What are the terms of trade? (điều khoản thương mại) What are the Consequences (Benefits and Costs) of International Trade? Other sources of Gain from Trade Classical Trade Theory Contributions Why is free trade bad for developing countries? National can loss from trade: 6 6 7 7 7 8 8 9 10 10 10 Mercantilism / Protectionism 11 Definition 11 The Mercantilist Views on Trade or The new contributions of Mercantilists views on Trade 11 Arguments for Protectionism: lập luận ủng hộ 12 Arguments against Protectionism (support free trade): lập luận chống lại 12 The weak point 13 The strong point of Mercantilists (benefit of neo Mercantilists countries: China, Japan 13 Consequences of Mercantilism (Hậu chủ nghĩa trọng thương) 13 Colbert’s Mercantilist Policies 14 A zero-sum game 14 Arguments for and against 14 Which Industries Are Protected? 14 The Invisible Hand (bàn tay vô hình) 14 Absolute Advantage (lợi tuyệt đối) 15 Definition (include example) 15 Absolute Advantage View on Trade 15 Contribution of Adam Smith in trade theory 15 What are the gains from trade? 15 Role of Government: Government should 16 How could country that is the most (least)efficient producer of everything gain from trade?16 What is the structure/pattern of trade? 16 Why some countries export certain products? 16 Comparative Advantage (Lợi tương đối) Definition (main theme) Sources of Comparative Advantage Main determinant (yếu tố định chính) The Gains from Trade Trade patterns for Vietnam If a government restricts trade,what are the costs if foreign governments respond likewise Implications of comparative advantage (hàm ý) Opportunity Cost Definition (include Example) 16 16 17 17 17 17 17 17 18 National Competitive Advantage: Porter’s Diamond Definition 18 18 Heckscher - Ohlin (H-O) Definition (include example) Main determinants of comparative advantages of H-O theory: Factor endowments Factor intensity Heckscher-Ohlin Theorem with a Single Technique: Determinants of comparative advantage ? 18 18 19 19 19 19 19 New trade theory Definition Implications of the New Trade Theory (hàm ý) - main new trade Intra - Industry Trade: 20 20 20 20 Common trade Barriers: Most Common Trade Barriers: Purpose about barrier:(mục đích) Explain how tariff could affect me, you and other company? Welfare effects of one country reducing its tariff on a good from a partner country: 20 20 21 21 21 Reasons Economic of Tariffs: Consumption effect (hiệu tiêu dùng) Production effect (hiệu sản xuất) Trade effect Revenue effect Redistribution effect Welfare Effects of a Tariff (ảnh hưởng phúc lợi thuế quan) The Impact of Import Tariff: Protectionist Policies: Tariff (chính sách bảo hộ thuế quan) Subsidies Function of subsidies in trade policy Effect on the subsidizing country Subsidies: Are They Used? Explain why the use subsidies are on the rise in recent years and give some examples? Purpose of dumping: The different types of dumping Explains the dumping argument against freetrade? Lập luận ủng hộ bán phá giá Why is dumping harmful for the economy? Explain why subsidy and dumping are harmful for free trade? What is anti-dumping in trade? (thuế chống bán phá giá) What is quota? What is the Non Tariff policy about? Definition Nontariff barriers to imports Non-tariff barriers to trade can arise from (phát sinh từ) Technical Barrier TBT (rào cản kỹ thuật) Customs Procedures Main arguments to use subsidy and non tariff measures: Economic integration Economic Integration Levels of economic integration Economic What are PTAs? Effects of PTAs Economic Integration: Information for compare Economic integration EU - VN ( example of benefit, market access …… ) Free – Trade Area What is the purpose of free trade agreements? Custom Union (characteristics) 22 22 22 22 22 22 22 22 23 23 23 24 24 24 24 25 25 26 26 26 26 26 27 27 27 27 27 28 28 28 28 29 29 30 31 31 31 32 Common Market Give some examples of common market in the world Economic Union: Monetary Union: The United States - Monetary union Monetary Union: The United States 32 32 32 33 33 33 Agreement (EU – AEC – RCEP – EVFTA - WTO) 34 Why is it beneficial for countries to engage in free trade?(tham gia thương mại có lợi?) 34 The Lure of Protectionism:(sức hấp dẫn) 34 WTO (definition + function) 34 Why nations prefer to negotiate bilateral trade agreements than the WTO (multilateral systems)? 34 RCEP 34 Function of RCEP? (chức năng) (benefit) 35 Which industries are expected to benefit the most in Vietnam from the RCEP? 35 FTAs (some FTAs of VN) 35 What is EV FTA? 35 EVFTA is a new generation FTA between Vietnam and 27 European Union member states EVFTA is one in two of the largest new generation free trade agreements that Vietnam's largest ever negotiated 35 Benefit of EVFTA 35 Benefit of VietNam when participating in EVFTA 36 CPTPP 36 Function of CPTPP? (chức năng)(benefit)(VN) 37 What is the ASEAN? 37 What is its main function of ASEAN? 37 The benefits for member countries of ASEAN 37 Benefit of VietNam when participating in many trade agreements 38 Less Globalization, More Multilateralism (bớt tồn cầu hóa, nhiều đa phương) 38 Trading blocs 38 Benefits of Economic Integration: 38 Impetus for Regionalism(positive impacts) động lực CN khu vực 38 Effects of a Regional Trading Arrangement (Ảnh hưởng thỏa thuận) 39 Static Effects of Economic Integration (ảnh hưởng tĩnh) 39 Dynamic effects of economic integration (ảnh hưởng động) 39 Lock-in reforms (cải cách khóa trong) 40 What is the EU? 40 The benefits for member countries of the EU? 40 The challenges for member countries of EU 40 Four freedoms of movement: 40 The single market has led to: (dẫn đến) 41 Cons of Unification: EU 41 Why adjustment is hard (điều chỉnh khó khăn) 41 Without adjustment (không cần điều chỉnh) 41 What the WTO stand for 42 WTO: Primary Functions 42 WTO’s Two Basic Principles (Today) (hai nguyên tắc bản) 42 MFN = Most Favored Nation 42 National Treatment 42 What is APEC? 42 Benefit of APEC 42 The ASEAN Plus Agreements 43 What is FPI? 43 What is FDI? 43 What are the gains from trade? 43 How could a country that is the most (least) efficient producer of everything gain from trade? 43 Globalization Definition Globalization is a process toward a more integrated and interdependent world economy between people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world Benefit - Access to New cultures - Develop about education - Access to New Talent, New market , New technology and innovation - Lower costs for products and transhipment - Lower tariff help trade to easier and more than - Improve standards of living - When globalization, customer have more choice because the variety of products Challenges - Increase wealth gap - Easier to loss of cultural identity - Immigrarion challenges - Increase job loss at worker at developed country - Polluted environment -Challenge with domestic production must improve and develop to compete with foreign market or MNCs Effects of the Pandemic on Globalization / Economies –Travel halted –Stock markets fall –Factories shut down –Supply chains interrupted –Trade plummets –Unemployment –Reduced GDP –Panic buying and shortages Trade Free Trade (definition) 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 well What is International Trade? International trade is an exchange involving a good or service conducted between at least two different countries The exchanges can be imports or exports 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 Pros and Cons of International Trade: What is the trade war? A trade war is an economic conflict between countries This results in both countries imposing trade protectionist policies against one another in the form of trade barriers These barriers can be imposed in a number of different ways, including but not limited to tariffs, import quotas, domestic subsidies, currency devaluation, and embargos What are the negative sides of free trade? Free trade does not create more jobs There are more risks for currency manipulation There can be fewer intellectual property protections because of free trade Environmental can be polluted There can be fewer revenue generation opportunities in free trade It can stiffen international competition for domestic economies What are the positive sides of free trade? Free trade creates economic growth opportunities There are more opportunities for foreign direct investment It lowers the taxes that consumers and businesses pay Fewer government expenditures occur because of free trade It creates better goods Free trade involves more than just consumer goods It helps the people who have the least amount of money to spend Free trade creates more opportunities to solicit workers with expertise Experts get to have access to the most resources with free trade Free theory support free trade: Is An Interdependent Global Economy A Good Thing? (kt phụ thuộc có tốt?) Supporters believe that increased trade and cross-border investment mean – lower prices for goods and services – greater economic growth – higher consumer income, and more jobs Critics worry that globalization will cause – job losses – environmental degradation – the cultural imperialism of global media and MNEs Anti-globalization protesters now regularly show up at most major meetings of global institutions Three most important of Trade Theories: Trade patterns for Vietnam (Mơ hình thương mại) Strong outward-oriented (export-dependent) economy with trade in goods and services accounting for more than 170% of GDP Main exports: labour-intensive manufactures (clothing, shoes, electronics), seafood, crude oil, rice, coffee, wooden products, machinery Main imports: Machinery and equipment, petroleum products, steel, raw materials for clothing/shoe industry, electronics, plastic, automotives Services remain the strongest sector, accounting for about 43% of GDP (but only 30% of employment) Major services sectors: trade, finance, real estate, tourism What are the terms of trade? (điều khoản thương mại) Definition: the price of export goods relative to import goods – relative prices The terms of trade of a given country are a proxy for the benefits from trade to that country Once a country is engaged in trade, any change in world market prices affects its terms of trade, its real income and wealth What are the Consequences (Benefits and Costs) of International Trade? Benefits of International Trade Individuals ▪ Consumption of better quality products with lower prices ▪ Consumption of diverse products Firms ▪ Greater business opportunities ▪ Greater profit Nation ▪ Fast economic growth ▪ Job creation Costs of International Trade Individuals ▪ Loss of jobs employed in the less competitive industries Firms ▪ Face stronger competition and may lose competitive edge Nation ▪ Greater income disparity ▪ Possibility of environmental degradation in developing countries ▪Greater vulnerability to foreign shocks Other sources of Gain from Trade • Productivity (most productive firms expand and export) • Returns to scale (small countries can support larger firms) • Competition (monopolies in small countries lose market power) • Variety (buyers can access more choices) • Supply chains (firms source parts from cheapest sources) • Technology (producers access foreign technologies) Classical Trade Theory Contributions Adam Smith—Division of Labor – Industrial societies increase output using same labor-hours as pre-industrial society David Ricardo—Comparative Advantage – Countries with no obvious reason for trade can specialize in production, and trade for products they not produce Gains From Trade – A nation can achieve consumption levels beyond what it could produce by itself Why is free trade bad for developing countries? Trade liberalization can pose a threat to developing nations or economies because they are forced to compete in the same market as stronger economies or nations This challenge can stifle established local industries or result in the failure of newly developed industries there National can loss from trade: Compare Comparative - absolute advantage: Information for compare Economic integration EU - VN ( example of benefit, market access …… ) Free – Trade Area – Association of trading nations – Members agree to remove all tariff and nontariff barriers among themselves – Each member maintains its own set of trade estrictions against outsiders – North American Free Trade Agreement (NAFTA) Canada, Mexico, and the United States For example: EFTA: European Free Trade Association consists of Norway, Iceland, Switzerland and Liechtenstein NAFTA: United States, Mexico and Canada (being renegotiated) What is the purpose of free trade agreements? FTAs are treaties between two or more countries designed to reduce or eliminate certain barriers to trade and investment, and to facilitate stronger trade and commercial ties between participating countries Custom Union (characteristics) Agreement among two or more trading partners: – To remove all tariff and nontariff trade barriers between themselves – Each member nation imposes identical trade restrictions against nonparticipants – Ex: EU- Turkey Custom Union – Belgium, the Netherlands, and Luxembourg ● Andean Community (CAN) ● Caribbean Community (CARICOM) ● Central American Common Market (CACM) ● East African Community (EAC) ● Economic and Monetary Community of Central Africa (CEMAC) ● Eurasian Customs Union (EACU) ● European Union Customs Union (EUCU) ● EU-Andorra Customs Union Common Market – 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 – EX: European Union (EU), 1992 Give some examples of common market in the world European Single Market (European Economic Area – Switzerland) Central American Common Market (CACM) Southern Common Market (Mercosur) Economic Union: –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 For example European Union (EU) CARICOM Single Market and Economy (CSME) Central American Common Market Eurasian Economic Union (EEU) Gulf Cooperation Council (GCC) Monetary Union: – Ultimate degree of economic union – Unification of national monetary policies – Acceptance of a common currency administered by a supranational monetary authority The United States - Monetary union – Fifty states with a common currency – Federal Reserve Single central bank for the nation – Free trade among the states – Labor and capital move freely Monetary Union: The United States – Fifty states with a common currency – Federal Reserve Single central bank for the nation – Free trade among the states – Labor and capital move freely – Federal government Nation’s fiscal policy National defense Retirement and health programs International affairs – States can keep their identity within the union Police protection and education Agreement (EU – AEC – RCEP – EVFTA - WTO) Why is it beneficial for countries to engage in free trade?(tham gia thương mại có lợi?) International trade allows a country to: • Specialize in the manufacture and export of products that can be produced most efficiently in that country • Import products that can be produced more efficiently in other countries The Lure of Protectionism:(sức hấp dẫn) The argument for so-called "protectionism" (called "fair trade" by some) may at first sound appealing Supporters of "protectionist" laws claim that keeping out foreign goods will – save jobs, – give ailing domestic industries a chance to recover and prosper, – and reduce the trade deficits WTO (definition + function) Multilateral trade agreements are commerce treaties among more nations – Promote trade liberalization through worldwide agreements – Trade liberalization by any one nation Extended to all WTO members, 160 nations – Nondiscriminatory Regional trading arrangements – Nations reduce trade barriers only for a small group of partner nations – Discriminating against the rest of the world Why nations prefer to negotiate bilateral trade agreements than the WTO (multilateral systems)? They are easier to negotiate than multilateral trade agreements, since they only involve two countries This means they can go into effect faster, reaping trade benefits more quickly If negotiations for a multilateral trade agreement fail, many of the nations will negotiate a series of bilateral agreements instead RCEP – “Regional Comprehensive Economic Partnership” – Large FTA negotiated since 2013 by ASEAN 10 countries plus 5: China, Japan, South Korea, Australia and New Zealand India also, until it recently dropped out – Signed Nov 15, 2020 Function of RCEP? (chức năng) (benefit) RCEP offers further development and trade opportunities for Vietnam: An integrated market for goods that eliminate tariffs in certain areas Simplified customs procedures and common rules of origin make it easier for businesses to business in the region RCEP also allows Vietnamese products to enter high-end markets such as Australia, New Zealand and Japan RCEP strengthens Vietnam as a manufacturing hub in Asia Making Vietnam more attractive as an investment destination Which industries are expected to benefit the most in Vietnam from the RCEP? As RCEP focuses on trade facilitation, Vietnam's export-oriented industries such as IT, agriculture, automobiles, footwear and telecommunications are expected to grow In addition, consumer sectors such as tourism, education, entertainment, healthcare and retail are also expected to benefit as the middle class expands FTAs (some FTAs of VN) Free Trade Area is a region in which a group of countries has signed a free trade agreement and maintain little or no barriers to trade in the form of tariffs or quotas between each other What is EV FTA? EVFTA is a new generation FTA between Vietnam and 27 European Union member states EVFTA is one in two of the largest new generation free trade agreements that Vietnam's largest ever negotiated Benefit of EVFTA removing tariffs 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 Benefit of VietNam when participating in EVFTA CPTPP – “Comprehensive and Progressive TransPacific Partnership” – Successor to TPP after Trump/US pulled out – Includes 11 countries, including • Japan • Canada • Mexico • Australia • Chile Function of CPTPP? (chức năng)(benefit)(VN) Export turnover of Vietnamese goods to the European market and CPTPP member countries reached more than 40 billion USD and 38.7 billion USD respectively Goods with great export value to the EU include footwear, plastic products, rice, textiles and agricultural products The main products exported to CPTPP member countries are seafood, textiles, footwear, pepper and furniture Vietnam's participation in new-generation trade agreements has helped Vietnam attract more foreign direct investment (FDI) What is the ASEAN? The Association of Southeast Asian Nations (ASEAN) is a regional organization of Southeast Asian and Pacific Rim countries whose governments collaborate to promote socio-cultural, economic, and political advancement in the region What is its main function of ASEAN? Creating a single market between nations aimed at increasing intra-ASEAN trade and investments Seeks to attract continual foreign investment Mutual respect and non-interference in the internal affairs of one another Settlement of differences or disputes by peaceful manner Effective cooperation among themselves The benefits for member countries of ASEAN Benefit of VietNam when participating in many trade agreements Less Globalization, More Multilateralism (bớt tồn cầu hóa, nhiều đa phương) While some degree of deglobalization may be desirable today, this process also carries grave risks, from skyrocketing production costs to geopolitical conflict The only way to mitigate those risks is through enhanced multilateral cooperation Trading blocs A trading bloc is an agreement among countries to work toward eliminating trade barriers Trading blocs may be regional (e.g., NAFTA, EU), yet there are different degrees of integration possible Benefits of Economic Integration: 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 employment Increased income Increased interdependence among members Impetus for Regionalism(positive impacts) động lực CN khu vực Motivations for regional trading arrangements – Prospect of enhanced economic growth Economies of large-scale production Foster specialization and learning-by-doing Attract foreign investment – Foster a variety of noneconomic objectives Managing immigration flows Promoting regional security – Enhance & solidify domestic economic reforms Effects of a Regional Trading Arrangement (Ảnh hưởng thỏa thuận) Static effects of economic integration – On productive efficiency – And consumer welfare Dynamic effects of economic integration –Relate to long-term rates of growth Static effects – Trade-creation effect Welfare gain Some domestic production of one customs-union member – Replaced by another member’s lower-cost imports Consumption effect Production effect – Trade-diversion effect Welfare loss Imports from a low-cost supplier outside the union – Are replaced by purchases from a higher-cost supplier within the union Static Effects of Economic Integration (ảnh hưởng tĩnh) Trade diversion: Products which were formerly imported from the RoW are now imported from regional producers as their production costs are lower than those of the rest of the world plus customs duty ➢ Effects: a) increased producer surplus of the regional suppliers; b) negative consumer effects ➢ Trade creation shifts production towards the more competitive regional producers, resulting in an optimal factor allocation within the region; ➢ Trade diversion is ‘welfare decreasing’ as it promotes inefficient production Dynamic effects of economic integration (ảnh hưởng động) Economic effects: ✓ Increased specialization due to concentration on comparative advantages; ✓ Economies of scale due to enlarged market; ✓ Enhanced efficiency of resource allocation due to increased competition; consumer benefits; ✓ Technology transfer, innovation and learning effects; ✓ Option to reap higher levels of FDI ➢ Political motivations: Advanced relevance in bi- and multilateral trade negotiations, increased economic and political reputation since trade reforms are “locked-in”; increased security and stability in the region Dynamic effects of regional integration schemes Lock-in reforms (cải cách khóa trong) use of an RTA to send a signal to private and public agents that there will be no recidivism (helps to lock in reforms as in the case of WTO accession) This MAY uncertainty and investment, in particular foreign direct investment, as in the case of Mexico What is the EU? The European Union (EU) is a political and economic alliance of 27 countries The EU promotes democratic values in its member nations and is one of the world's most powerful trade blocs Nineteen of the countries share the euro as their official currency The EU grew out of a desire to strengthen economic and political cooperation throughout the continent of Europe The benefits for member countries of the EU? The European Union creates an allied front against outside aggression There are more jobs and higher wages across Europe because of the EU The European Union takes eco-friendly policies seriously Industrialization’s evolution has evolved dramatically because of the European Union It stops the aggression from other countries outside of Europe The European Union allows for resources to be invested instead of fought over The economic benefits of the European Union extend to the rest of the world It creates high food standards and consumer benefits that support consumer safety The challenges for member countries of EU It is easier to cross borders in Europe today because of the EU There are still many problems with division in Europe despite the EU The EU can suffer from a lack of transparency at times European countries must pay to play in the EU The EU favors the larger countries at the expense of the smaller Europe’s taxation structure doesn’t encourage the development of new businesses Four freedoms of movement: • goods • services • people • capital The single market has led to: (dẫn đến) • significant reductions in the price of many products and services, including airfares and phone calls • more choice for consumers • 2.8 million new jobs Pros of Unification:EU Proponents expected – Complete the internal market – Improved competition & efficiency – Arbitrage across national borders – New era of prosperity – Stable prices – Fiscal discipline – Lower interest rate ➢ thus higher investment ➢Stronger growth – More jobs Cons of Unification: EU Opponents expected: – Division of the EU – Loss of sovereignty – Little popular support – Regulatory & other costs – Difficulties of adjustment to asymmetric shocks (As had happened before, e.g., with German unification and discovery of North Sea Oil) Why adjustment is hard (điều chỉnh khó khăn) – Like states in the US, countries in Eurozone have No exchange-rate tool No separate monetary policies Very limited fiscal policies (due to SGP) – Unlike US states, however, in Eurozone Labor is less mobile across countries Wages are less flexible, due to social policies No mechanism for fiscal transfers among countries Without adjustment (không cần điều chỉnh) – When one country is hit with a shock that others are not (i.e., an “asymmetric shock”), Its markets don’t adjust (rigid wages) Its people don’t move It has fewer policies to deal with this Other countries don’t help What the WTO stand for Non-discrimination More “open”- ness Predictability and transparency More competitiveness Benefits for less developed countries (>75% are “developing” or LDCs) Protection for the environment WTO: Primary Functions Administering WTO trade agreements Forum for trade negotiations … (goods…+) Handling trade disputes Monitoring national trade policies Technical assistance and training for developing countries Cooperation with other international organizations WTO’s Two Basic Principles (Today) (hai nguyên tắc bản) MFN = Most Favored Nation Each member country should treat all members as well as it treats its “most favored nation” (i.e., the member that it treats the best) National Treatment Once a product or seller has entered a country, it should be treated the same as products or sellers that originated inside that country (There are many permitted exceptions to both of these principles) What is APEC? • Established in 1989 • Forum for facilitating economic growth, cooperation, trade and investment in the Asia Pacific region • Intergovernmental grouping that operates on the basis of non-binding commitments, open dialogue, and equal respect for the views of all participants • Composed of 21 Member Economies Benefit of APEC APEC works to help all residents of the Asia-Pacific participate in the growing economy The implementation of cooperation commitments in APEC has promoted Vietnam's trade, investment and tourism exchanges with APEC partners APEC cooperation opens up many opportunities for Vietnamese businesses, especially small and medium enterprises, in accessing the markets of member economies Increase energy efficiency and promote sustainable management of forest and marine resources Increase FDI The ASEAN Plus Agreements ASEAN has established FTAs with some of the world’s major economies as part of its broader trade liberalization agenda The ASEAN Plus FTAs are as follows: ASEAN-China Free Trade Area (ACFTA) ASEAN-Japan Comprehensive Economic Partnership (AJCEP) ASEAN-Korea Free Trade Area (AKFTA) ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) ASEAN-India Free Trade Area (AIFTA) ➢ Plus multiple bilateral FTAs of single ASEAN members ➢ Today: more than 90 bilateral, plurilateral and multilateral FTA treaties concluded and under negotiations (ADB, 2015) What is FPI? Foreign portfolio investment (FPI) is a common way to invest in overseas economies, involves an investor purchasing foreign financial assets It includes securities and financial assets held by investors in another country What is FDI? Foreign direct investment (FDI) is an investment direct from a party in one country into a business or corporation in another country with the intention of establishing a lasting interest What are the gains from trade? That there are gains from trade is probably the most important insight in international economics Countries selling goods and services to each other almost always generate mutual benefits When a buyer and a seller engage in a voluntary transaction, they are both usually better off Norwegian consumers import oranges that they would have a hard time producing in Norway How could a country that is the most (least) efficient producer of everything gain from trade? Countries use finite resources to produce what they are most productive at (compared to their other production choices), and then trade those products for what they want to consume Countries can specialize in production, while consuming a great diversity of goods and services through trade ➢ 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 Trade is predicted to benefit countries as a whole in several ways, but trade may harm particular groups within a country – International trade can harm the owners of resources that are used relatively intensively in industries that compete with imports – Trade may therefore affect the distribution of income within a country Infant industry: Công nghiệp non trẻ