Scribd Logo
Upload

Welcome to Scribd!

  • 36 views

    ApEcon Module 7

    Uploaded by

    Kim Christopher R. Niala
    International trade allows countries to specialize in producing goods and services that they have a comparative advantage in and exchange them for other goods. This benefits all countries as it allows for more efficient use of resources. For example, one country may be able to produce cotton sweaters at a lower opportunity cost than another country that can instead produce wine more efficiently. If these countries specialize and trade, both can gain access to more goods. The document then provides an example of international trade for the Philippines, noting declines in both exports and imports in June 2020 compared to the previous year due to the impacts of the COVID-19 pandemic.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    ApEcon Module 7

    Uploaded by

    Kim Christopher R. Niala
    36 views2 pages
    International trade allows countries to specialize in producing goods and services that they have a comparative advantage in and exchange them for other goods. This benefits all countries as it allows for more efficient use of resources. For example, one country may be able to produce cotton sweaters at a lower opportunity cost than another country that can instead produce wine more efficiently. If these countries specialize and trade, both can gain access to more goods. The document then provides an example of international trade for the Philippines, noting declines in both exports and imports in June 2020 compared to the previous year due to the impacts of the COVID-19 pandemic.

    Original Description:

    GRade 12

    Original Title

    ApEcon Module 7 (1)

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    International trade allows countries to specialize in producing goods and services that they have a comparative advantage in and exchange them for other goods. This benefits all countries as it allows for more efficient use of resources. For example, one country may be able to produce cotton sweaters at a lower opportunity cost than another country that can instead produce wine more efficiently. If these countries specialize and trade, both can gain access to more goods. The document then provides an example of international trade for the Philippines, noting declines in both exports and imports in June 2020 compared to the previous year due to the impacts of the COVID-19 pandemic.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    36 views2 pages

    ApEcon Module 7

    Uploaded by

    Kim Christopher R. Niala
    International trade allows countries to specialize in producing goods and services that they have a comparative advantage in and exchange them for other goods. This benefits all countries as it allows for more efficient use of resources. For example, one country may be able to produce cotton sweaters at a lower opportunity cost than another country that can instead produce wine more efficiently. If these countries specialize and trade, both can gain access to more goods. The document then provides an example of international trade for the Philippines, noting declines in both exports and imports in June 2020 compared to the previous year due to the impacts of the COVID-19 pandemic.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    LESSON

    International Trade

    If you walk in a supermarket and find products of China, the United States, Thailand,
    Malaysia, South Korea, you're experiencing the effects of international trade. International trade is
    the exchange of goods and services between countries. International trade allows countries to
    expand their business in the global arena.
    International trade is the key to the rise of the global economy where supply and demand,
    and so with the prices, are affected by global events. Political change in Asia, for example, could
    increase the cost of labor, thereby increasing the manufacturing costs for an American sneaker
    company based in the Philippines would increase the price charged at the local mall. A decrease in
    the cost of labor, on the other hand, would result in paying less for the new shoes. A product that is
    sold to the global market is called export, and a product that is bought from the global market is
    called import. Imports and exports are accounted for in the country's current account in the
    balance of payments.

    Comparative Advantage
    Comparative advantage refers to the ability of the economy to produce goods and services at
    a lower opportunity cost compared to trade 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.
    The law of comparative advantage is popularly attributed to an English political economist,
    David Ricardo in his book “On the Principles of Political Economy and Taxation” in 1817, although
    it is likely that Ricardo's mentor James Mill originated the analysis.
    Global trade allows rich countries to use their resources, whether labor, technology, or
    capital, more efficiently. Since countries are endowed with different assets and resources, some
    countries may produce the same goods more efficiently and therefore sell it cheaper than other
    countries. If a country cannot efficiently produce a good, it can obtain it by trading with another
    country that can produce more, this is known as specialization in international trade.
    Let's take a simple example. Country A and Country B both produce cotton sweaters and
    wine. Country A produces ten sweaters and six bottles of wine a year while Country B produces six
    sweaters and ten bottles of wine a year. Both can produce a total of 16 units. Country A, however,
    takes three hours to produce the ten sweaters and two hours to produce the six bottles of wine
    (total of five hours). Country B, on the other hand, takes one hour to produce ten sweaters and
    three hours to produce six bottles of wine (a total of four hours).
    But these two countries realize that they could produce more by focusing on those products
    with which they have a comparative advantage. Country A then begins to produce only wine, and
    Country B produces only cotton sweaters. Each country can now create a specialized output of 20
    units per year and trade equal proportions of both products. As such, each country now has access
    to 20 units of both products.

    International Trade in the Philippines


    The country’s total export sales in June 2020 amounted to USD 5.33 billion, a decrease of
    13.3% from the USD 6.15 billion total export generated in June 2019. The annual drop in June
    2020 was the fourth month that total exports had consecutive negative growth. In the previous
    month, the export value fell at an annual rate of 26.9% while in June 2019, it gained at a rate of
    3.9%. (Table A)
    Of the top ten major commodity groups in terms of exported value, eight had annual decline which
    was led by metal components (-30.5%); coconut oil (-29.7%); and machinery and transport
    equipment (-26.3%). (Tables B)

    Total imported goods in June 2020, which amounted to USD 6.63 billion, plunged at an
    annual rate of 24.5%. In the previous month, the decline was faster at 40.6% while in June 2019,
    imports decreased by 7.2% annually. The decrement of imported goods in June 2020 was due to
    the decrease in seven out of the top 10 major import commodities which were led by transport
    equipment (-70.5%); mineral fuels, lubricants, and related materials (-56.9%); and iron and steel (-
    40.9%).

    You might also like