ACJC International Trade Tutorial

©ACJC Econs Dept/2023/International Economics Tutorial 1 Anglo-Chinese Junior College Department of Economics H2 International Trade TUTORIAL WORKSHEET Section A: Discussion Questions Question 1: International Trade Research Activity [Inquiry- Based Learning (IBL)] This is a group research activity aims to explore how different countries approach trade. The group’s research will be presented through google slides before sharing with your classmates. 1. Each group (4-5 students) to select one of the following countries: • Singapore • China • US • UK • United Arab Emirates • Germany • India • South Korea 2. Refer to the following website (or scan the QR code below) to find out the composition of GDP for your chosen country. Present the data in a chart on one slide (e.g. pie chart, bar chart) https://www.cia.gov/the-world-factbook/field/gdp-composition-by- end-use/ 3. Using a search engine, identify the top 10 exported goods and services of your selected country. Present the list of exported goods and services on one slide. 4. Using Gemini, a generative artificial intelligence chatbot, and type in the prompt “What is the [your selected country]’s policy approach to international trade?” Summarise the group’s findings into one slide. 5. Consider whether how the country’s composition of GDP may have affected their chosen policy approach and/or vice versa. Present your group’s response in one slide.

©ACJC Econs Dept/2023/International Economics Tutorial 2 Question 2: The Theory of Comparative Advantage Let us assume 2 countries, Vietnam and China, make 2 goods, bamboo baskets and necklaces. The table below shows how much of each product they could produce for a given volume of resources. Bamboo baskets weaved Necklaces made Vietnam 12 20 China 16 32 (a) Explain how free trade based on comparative advantage would allow both Vietnam and China to enjoy higher consumption of both products. (b) Suggest a way for the country with comparative disadvantage in necklaces to acquire the comparative advantage in this product. Question 3: Terms of Trade Figure 1: China’s terms of trade Figure 2: RMB to 1 USD With reference to Figures 1 and 2: (i) Define terms of trade. (ii) Describe the trend in China’s Terms of trade over the period Jan 2016 to Jan 2017. (iii) Explain one reason for the trend identified in (ii).

©ACJC Econs Dept/2023/International Economics Tutorial 3 Question 4: Protectionism EU hikes tariffs on India, Indonesia stainless steel imports The European Union will increase tariffs on stainless steel products from India and Indonesia after determining they benefited from unfair subsidies, including some from China under its Belt and Road investment programme. The European Commission, which conducted the investigation, has set the anti-subsidy duties on stainless steel cold-rolled flat products at rates of between 4.3% and 21.4%, the EU official journal said on Wednesday. This will add to anti-dumping tariffs already in place. The Commission said the subsidies took the form of preferential loans, duty exemptions and cheap provision of raw materials, partly because of export restrictions for those materials. Indonesia also benefited from subsidies to help build up its stainless steel industry from China, which in return benefited from taking up a larger share of Indonesia's nickel ore exports. This is the European Union's second investigation into trans -national Chinese subsidies. In 2020, the bloc imposed duties on glass fibre fabrics and pr oducts from Chinese companies on joint venture operations in Egypt. The Commission said that the new tariffs, to take effect from Thursday, aim to remedy damage caused to EU producers. Source: Reuters, 17 March 2022 (a) Explain why the EU uses anti-dumping tariffs. (b) With the aid of a diagram, explain the impact of the EU’s tariff on steel imports on: (i) EU producers – Total revenue and producer surplus (ii) EU consumers – Total expenditure consumer surplus (iii) EU government – Tax revenue and budget position (c) Comment on whether the tariffs imposed are overall beneficial to the EU economy.

©ACJC Econs Dept/2023/International Economics Tutorial 4 Question 5: Protectionism Indonesia wants to be a global electric vehicle hub In December 2022, Indonesia’s President Joko Widodo announced an export ban on bauxite, to take effect in June 2023. This had followed an earlier export ban on another metal, nickel. Prior to the ban, Indonesia was the world’s largest exporter of nickel ore, traditionally used in the production of st ainless steel and, more recently, in electric vehicle (EV) batteries. Indonesia has the world’s largest nickel reserves, at 22 per cent, followed by Australia at 21 per cent. While only 6 per cent of the world’s nickel production is currently used in EV battery manufacturing, it is estimated that by 2030, the figure will have reached over 30 per cent, highlighting the metal’s future strategic importance. The European Union had challenged the ban, arguing that it threatened the nickel supply for EU’s stainless steel industry. The bauxite ban speaks of not just Indonesia’s ambitions for its metals processing sector, but also the President’s dreams of Indonesia becoming a global production hub for electric vehicles. Bauxite is a primary alloy in the manufacture of aluminium, a ke y component in EV technology. The country is the world’s fifth-largest reserves of bauxite. Indonesia is no longer satisfied with being just an exporter of metal ores. It sees export bans as a way to compel foreign investors to build smelters in the country, thereby adding value to its metal exports and creating more jobs. The President had said before that, save lithium, Indonesia had all the natural resources to create an integrated EV battery ecosystem, namely nickel, copper, bauxite and tin. If all goes well, 60 per cent of all EVs in the world would run on Indonesian-produced batteries in the future, he said. The country is determined to attract investments from big electric automakers into the country. Indonesia has a huge population of two-wheelers. On average, each of the country’s 70 million plus households has at least one motorcycle. In March, 2023, the Indonesian government announced subsidies of up to seven million rupiah (S$623) each for electric two - wheelers. This translates into a potential discount of at least 25 per cent off a motorbike’s price. It has plans to shell out 1.8 trillion rupiah in 2023 to subsidise sales of up to 200,000 electric motorcycles as well as more than 30,000 four -wheelers. The benefits are aimed at lower-income consumers running small businesses and limited to models with parts made in Indonesia that account for 40 per cent of the vehicle’s value. The subsidy, though welcomed, falls far short of turbocharging demand for EVs in a country where petrol – thanks to official price caps – is half the price per litre compared with countries like Singapore. Steep EV prices and having few places to charge ba tteries have also hurt domestic demand, which is partly deterring foreign investors, say analysts. Source: The Straits Times, 10 Jan & 5 April 2023 Questions (a) Explain how Indonesia’s export bans on nickle and bauxite are meant to lead to the development of new areas of comparative advantage for the country. (b) Discuss whether the use of subsidy is appropriate for Indonesia to achieve its aim of becoming a global production centre of EV industries.

©ACJC Econs Dept/2023/International Economics Tutorial 5 Section B: Case Studies Question 1: Looming Threats to Globalisation Extract 1: The potential impacts of Brexit on the global economy The markets were caught off guard by the UK’s vote to leave the European Union (EU) on 23 June. The immediate reaction in the financial marke