Benefits of international trade

Introduction

This lesson introduces the concept of international benefit and looks at the benefits of international trade.  I would advise you to begin this lesson by starting with the question: how do your students believe their own country has benefited from international trade?   Another activity is to ask your class to list all of the goods they currently have with them - clothes, shoes, mobile phone e.t.c.  Then separate these goods into domestically produced and imported goods.  They may be surprised at just how many of their possessions are imported from overseas.

Enquiry question

What are the benefits of international trade?

Lesson time: 40 minutes

Lesson objectives:

Explain that gains from trade include lower prices for consumers, greater choice for consumers, the ability of producers to benefit from economies of scale, the ability to acquire needed resources, a more efficient allocation of resources, increased competition, and a source of foreign exchange.

Teacher notes:

1. Beginning activity - begin with the prezi and the opening question and then discuss this as a class.  (Allow 5 minutes in total)

2. Processes - technical vocabulary - the students can learn the background information from the videos, activity 1 and the list of key terms.  (10 minutes)

3. Applying the theory - activity 2 is more paper three in type, graphing and short answer responses. (15 minutes)

4. Developing the theory - activity 3 involves a discussion of the strengths and weaknesses of trading.  (15 minutes)

5. Activity 4 contains a short video which your classes will enjoy.  (5 minutes)

Key terms:

International trade - the exchange of all goods and services between one country and another.

Free trade - a trade policy that does not restrict imports or exports; it can also be understood as the free market idea applied to international trade.

Opportunity cost - the next best option foregone, so if a nation decides to specialise in the production of one good or service, they use up resources which will prevent them from using them in the production of another.

Comparative advantage - an economic term that refers to an economy's ability to produce goods and services at a lower opportunity cost than that of trade partners.

The activities on this page are available as a PDF file at:  Benefits of international trade

Opening activity

Begin by showing the following presentation before completing a short brainstorming session with the following titles:  International trade

What benefits has your country gained from international trade?

How many of the possessions that you are currently wearing or carrying were made in your own country?  How many were produced overseas?  Include your telephone, clothing and the items in your pencil case?

Activity 1: Benefits of international trade

Watch the following video, providing an overview of the history of free trade, its strengths and weaknesses. and then answer the questions below.  

(a) Why do countries trade?

It allows nations to trade those items where they have a surplus and purchase the ones they cannot produce themselves.

(b) Describe the benefits enjoyed by the following stakeholders of international trading:

i. Domestic consumers

Greater range of products to purchase at a lower cost.

ii. Domestic businesses

  • greater levels of competition which drives down prices and forces up efficiency
  • economies of scale for those businesses able to market their products overseas
  • potential loss of customers from cheaper / better quality imported goods and services.

iii. The world economy as a whole

Allows nations to make the best use of their resources and stabilises prices

(c) Trade between nations depends on which factors?

Demand for a countries goods and services, political stability and interest rate.

(d) What weaknesses did the video highlight of international trade?

Contrary to what some critics argue international trade does not cost jobs in the industrialised world but it does shuffle them around.  

The benefits of increased free trade include:

  • the gains through increased levels of specialisation through trade
  • specifically it allows nations to benefit, by producing those goods and services where they enjoy a comparative advantage
  • consumers also benefit from lower prices and a greater variety of goods and services
  • producers benefit from increased levels of competition as well as the gains which arise from having access to a much larger consumer market, providing greater opportunities for economies of scale.

The threats posed by trade:

  • groups of workers left behind e.g. farm workers in 19th century England or production workers in USA.
  • risks of greater inequality through greater powers enjoyed by monopolies

Activity 2: National income and trade

Examine the following table which illustrates the relationship between national income and trade.  All figures relate to 2018:

CountryGDP rankGDP billion $ Rank by export levelExport billion $
USA120,494,05022,157,000
China213,407,39811,576,000
Japan34,971,9294683,000
Germany44,000,38631,401,000
UK52,828,6449436,500
France62,775,2526551,800
India72,716,74618303,400
Italy82,072,2018499,100
Brazil91,868,18424217,200
Canada101,711,38710433,000

1. Using a piece of graph paper plot a graph with GDP rank on one axis and export rank on the other.  Using a line of best fit plot the relationship between the two variables.

2. Describe the relationship between the two variables?

There is clearly a direct correlation between the two variables with the wealthiest nations being the most active in international trade.  The question though is 'are the wealthiest nations rich because they benefit from international trade' or

'Do the wealthiest nations trade more simply because they can and their success is not greatly connected to the level of trade?'

Activity 3

One of the largest container ports in the world is Amsterdam airport.  Watch the following short video which shows a 24 hour period, condensed into 1 and a half minutes.

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