CFA L1 / Econ / M6. International Trade
Module 6 · Economics

International Trade

EN: Comparative advantage, balance of payments, and trade restrictions.
VN: Lợi thế so sánh, cán cân thanh toán, rào cản thương mại.

1. Trade Theories Concept

About: Absolute advantage (Smith) — produce what you make most efficiently. Comparative advantage (Ricardo) — produce what has lowest opportunity cost. Heckscher-Ohlin — trade based on factor abundance.Tóm tắt: Lợi thế tuyệt đối (Smith), so sánh (Ricardo, theo chi phí cơ hội), Heckscher-Ohlin (theo yếu tố sản xuất).
  • Absolute Country produces more of a good with fewer resources (Adam Smith).
  • Comparative Country has lower opportunity cost (Ricardo) — basis for modern trade theory.
  • Heckscher–Ohlin Countries export goods that use abundant factors of production intensively.

2. Balance of Payments Core

About: Tracks all transactions between residents and rest of world. Three accounts (current + capital + financial) sum to zero by construction. CA deficit must be financed by financial inflows.Tóm tắt: Theo dõi giao dịch giữa cư dân và phần còn lại thế giới. 3 tài khoản tổng = 0. CA thâm hụt phải bù bằng dòng tài chính.
\[ \text{Current} + \text{Capital} + \text{Financial} = 0 \]

Three accounts

  • Current Goods + services + income + transfers.
  • Capital Capital transfers (small).
  • Financial FDI + portfolio + reserve flows.
Practice problem

Current account = −$50B, financial account = +$60B. What is the capital account (assuming BoP balances)?

Show solution
CA + KA + FA = 0 → KA = −(−50) − 60
Capital account = −$10B

3. Current-Account Identity Core

About: CA = (S − I) + (T − G). A current account deficit means the country borrows from abroad. Twin-deficit hypothesis: gov deficit often paired with trade deficit.Tóm tắt: CA = (S−I) + (T−G). Thâm hụt CA = vay nước ngoài. Twin-deficit: thâm hụt CP thường kèm thâm hụt thương mại.
\[ CA = (S - I) + (T - G) \]

Components

  • S − I Private saving minus investment.
  • T − G Government surplus (taxes − spending).

Twin-deficit: a current-account deficit usually accompanies a government deficit.

Practice problem

Private savings = $300B, investment = $400B, government surplus = $50B. Compute current account.

Show solution
CA = (S − I) + (T − G) = (300 − 400) + 50
= −100 + 50
CA = −$50B (deficit)

4. Trade Restrictions Concept

About: Tariffs (taxes on imports) raise prices, generate revenue. Quotas limit quantities, no revenue. VERs are exporter-imposed quotas. Subsidies aid domestic producers, distort prices.Tóm tắt: Thuế quan, hạn ngạch, VER (hạn ngạch tự nguyện), trợ cấp — đều bóp méo giá.
  • Tariff Tax on imports — raises domestic price, gov collects revenue.
  • Quota Quantity limit — domestic producers benefit, no gov revenue.
  • VER Voluntary export restraint — quota imposed by exporter.
  • Subsidy Cash to domestic producers — distorts prices.

Practice problem Practice

Practice problem

Country A produces 100 units of wine OR 50 units of cloth with one unit of labor. Country B produces 80 wine OR 60 cloth. Which country has comparative advantage in cloth?

Show solution
Opportunity cost of 1 cloth in A: 100/50 = 2 wine.
Opportunity cost of 1 cloth in B: 80/60 \(\approx\) 1.33 wine.
B sacrifices less wine per unit of cloth.
Country B has comparative advantage in cloth.