|
|
|
You are here: Educators > HE Resources > Threshold Concepts > Trade patterns and the Benefits from Trade |
|
|
Trade Patterns and the Benefits from Trade - Teachers' WorksheetLearning FocusDeveloping an understanding of the role of comparative advantage in evaluating the relative gains from trade Threshold ConceptsThese are pivotal to this learning:
TeachingQuestion 1Give students the data in Table 1. Ask them to work in pairs to decide whether the US gets a net benefit from its trade with Canada. CommentaryThe trade between these two countries suggests some specialisation that can be related to familiar associations with the two countries, e.g. Canada as a source of timber and paper. As such, it provides some basis for starting to think about absolute and comparative advantage. The US exports precision instruments and pharmaceuticals to Canada and imports far more 'wood and paper' products from Canada than it exports to Canada. Even in the sphere of a product (lumber) for which Canada is famous, the flow of trade is not in a simple one-way fashion. It is clear enough to see a pattern, reflecting an idea, but it is sufficiently muddy to convey the idea that making sense of trade patterns is not simply a case of seeing the theory of comparative advantage operating in practice. There is also some hint of the relative size of the economies. Canada exports more vehicles to the USA than it imports from the USA but this needs to be interpreted in the light of the relative size of the two economies. Question 2Give students a copy of the extract 'Lumbering towards a better standard of living?' Ask them to work in groups to decide the likely effects of Senator Smith's proposal on the different sectors of industry in the US and Canada. CommentaryThe rationale for this task is to encourage students to think about the knock-on effects of the proposal. How would the proposal affect consumers of wood products in the USA? How would a reduction in Canadian exports of lumber affect Canadian demand for US exports? How would the proposal affect the existing importers of the Canadian lumber products? etc. Try to get the students to think of the questions that economists use opportunity cost and general equilibrium to address. Question 3Ask students to write down how they worked out their answer - what sequence did their discussion follow? What did they consider? What did they reject? Why did they arrive at the conclusion they did? CommentaryThis task is included to get students thinking about the way in which they set about trying to answer a problem like this, so they can later compare it with the way a professional economist might approach a similar problem. Table: Leading Sectors in US Goods Trade with Canada,2000-2003
Source: Bureau of the Census Lumbering towards a better standard of living?WASHINGTON DC: Today, (March 5th 2003) Senator Gordon Smith (R-OR) urged U.S. Trade Representative Robert Zoellick to pursue a strong and enforceable trade agreement that ensures fair marketing opportunities for lumber producers. Smith raised his concerns at a Senate Finance Committee hearing. Yesterday, Smith met personally with Ambassador Zoellick to stress the importance of trade laws and remedies with regard to the U.S.-Canadian softwood lumber trade. "The Bush Administration must reach a quick and acceptable settlement with Canada so that our mills stay open, jobs are protected, and a free market is restored," said Smith. "The Canadian government provides anti-competitive supports for its lumber industry which put American producers at an unfair disadvantage. No matter how it is characterized by either side, the US and Canada have very different systems for marketing public timber to private industry." From Gordon Smith - US Senator's press release |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
