Assignment 2. Fill in the blanks in the following extracts

1. If a company exports a product at ________ lower than the price it normally charges on its own home market (referred to as ________), it is said to be ‘dumping’ the product.

2. Dumping can harm the domestic industry by reducing its ________and market shares, as well as its sales prices. This in turn can result in decline in profitability, job losses and, in the worst case, in the domestic industry going out of business.

3. Over the past 25 years countries have increasingly turned to _______, a trade policy that has emerged as the most serious impediment to international trade, in order to offer protection to________. Antidumping is a trade policy where the institutional process surrounding the investigation and determinations has significant impacts beyond the antidumping duty. There are 3 different phases of the ________: 1) pre-investigation, 2) investigation, and 3) post-investigation.

4. Although intended to protect a country’s economy from foreign competitors, protectionism usually makes the protected country worse off than if it allowed international trade to proceed without hindrance from trade barriers such as ________.

5. ________can cause foreign producers to become more profitable, mitigating their desired effect. This happens because quotas artificially restrict supply, so it is unable to meet demand; as a result the foreign producer can command a _______ for its products. These increased profits are known as quota rents.

Assignment 3. Scan the following summary of a research on free trade focusing on the benefits gained through trade liberalisation.

The idea that international trade can facilitate economic growth by expanding the size of the market is as old as the economics profession itself. It can be traced to Adam Smith's 1776 discourse on the gains from specialization that trade promotes and the linkages between specialization, productivity, trade, and market expansion. One set of gains results from the increased efficiency with which a nation's capital and labor resources can be used in a more open market. Additional gains result from the higher rate of growth in a nation's GDP as well as greater saving and investment. Evidence from numerous empirical analyses completed over the last quarter-century documents the argument that free trade promotes economic growth.

Dr Gary Clyde Hufbauer and Mr Bruce E. Stokes of the Council on Foreign Relations focus on the benefits gained through trade liberalization, and the inadequacy of economic sanctions as a policy lever for bringing about change in other countries. Their research provides further evidence of the benefits of trade and the costs of protection and thus reaffirms the work of earlier scholars.

The study shows that at the level of the individual firm, jobs are created up to 18.5% faster in companies that export than in companies that have never exported or have stopped exporting. Moreover, exporting enterprises are less likely to go out of business.

In addition, the Hufbauer/Stokes study demonstrates that exposure to the world market has led to major improvements across a range of US industries. Productivity in American plants that export is almost 40% higher on average for plants of all sizes, locations, and industries, than for plants that produce only for the domestic US market.

Tariffs, import quotas, and other forms of protection impose costs on a range of economic actors throughout the economy. Among those most notably "taxed" are exporters and domestic consumers-both intermediate industries and households-who pay higher prices for inputs to production or for goods and services purchased for consumption.

The United States has a relatively open economy, Dr Hufbauer and Mr Stokes note, but it still maintains many costly trade barriers. US tariffs and quantitative import restrictions cost American consumers an estimated $70 billion in 1990, or 1.3% of GDP.

Furthermore, in recent years it has become increasingly popular for governments-especially the US government-to interfere with trade and foreign investment as a means of punishing other countries for their political views and actions. Yet despite the high-minded rhetoric that often accompanies the imposition of sanctions, their history suggests they usually do not work. For example, Dr Hufbauer and Mr Stokes cite a recent study analyzing the effectiveness and costs of 116 cases of economic sanctions between 1915 and 1990, which found that only 34% of such actions achieved their intended goals.

(Source: http://www.accf.org/publications/books/freetrade-protect.html)

Assignment 4. In groups of 3 or 4, discuss the questions below.

1. What are the sets of gains resulting from trade liberalization identified by the authors?

2. In what way is politics related to foreign trade and investment policies?

3. How can exposure to the world market foster economic growth?

4. Could you provide similar factual data related to other countries?

Assignment 5. Hold a brainstorming session and expand the list of advantages of trade liberalisation.

ü increased efficiency in the use of a nation's capital and labor resources

ü higher rate of growth in a nation's GDP

ü greater saving and investment

ü

ü

Assignment 6. Study the table below and make a short report on Economic Freedom Indices in different countries. While working on your report, you might want to use the following expressions:

- to rank at the top/to stand at the top/to retain the highest rating/to occupy the top position(s)

- X’s scores are high

- to be closely followed by…

- to be tied for the X^th place

- the rankings of other economies are…

- to receive a score of…

- to have the best record in…

- to rank X^th

- to rank low

- to be at the other end of the spectrum

The most ambitious attempt to quantify economic freedom is the Economic Freedom Index (EFI) reported annually in Economic Freedom of the World (the data can be found at http://www.freetheworld.com). The EFI is a means of measuring the degree of economic freedom by including thirty-seven components divided into five groups: (1) size of government: expenditures, taxes, and enterprises; (2) legal structure and security of property rights; (3) access to sound money; (4) freedom to exchange with foreigners; and (5) regulation of credit, labor, and business. Each component is measured from 0 (“no economic freedom”) to 10 (“full economic freedom”). The index is calculated using arithmetic averages

(Source: The Benefits of Economic Freedom by N.Berggren)