📖 国际贸易综合练习

Economics

I. Lesson Focus

This lesson integrates all major international trade concepts required for CFA Level I: comparative advantage, gains from trade, the welfare effects of tariffs and quotas, trade triangles, terms of trade, the relationship between current account balances and exchange rates, and the Marshall-Lerner condition. Candidates must be able to calculate changes in consumer surplus, producer surplus, government revenue, deadweight loss, and overall national welfare, and distinguish between small-country and large-country effects.

II. The Problem

A country faces a higher domestic opportunity cost of producing automobiles than the world market price, while another country has a comparative advantage in textiles. The government is considering imposing a tariff or quota on imported cars. Firms want to know the exact impact on domestic price, output, consumer surplus, producer surplus, government revenue, and total welfare. In addition, exam questions frequently test the link between current-account deficits and currency depreciation, as well as the harmful effects of deteriorating terms of trade on small developing economies. Common mistakes—confusing absolute with comparative advantage, mislabeling welfare areas, or reversing the causality between trade balances and exchange rates—lead to lost points on both calculation and scenario-based questions.

III. Core Concepts in International Trade

The foundation of trade is comparative advantage: a country has a comparative advantage in a good if it can produce it at a lower opportunity cost than its trading partner. Even if one country has absolute advantage in every product, mutually beneficial trade is still possible as long as opportunity costs differ.

Gains from trade arise from: - Production specialization: resources move toward sectors with comparative advantage. - Expanded consumption possibilities: the consumption bundle lies outside the domestic production possibility frontier (PPF).

The trade triangle is formed by the quantities exported, quantities imported, and the terms of trade (export price ÷ import price).

IV. Economic Effects of Trade Policy Tools

1. Tariffs

A tax on imports. Can be specific (fixed amount per unit) or ad valorem (percentage of value).

Small-country tariff effects (importing country is a price taker): - Domestic price rises to world price + tariff. - Domestic production increases, consumption decreases. - Imports = consumption – production fall. - Consumer surplus falls by areas a + b + c + d. - Producer surplus rises by area a. - Government tariff revenue = area c (tariff × new import volume). - Net welfare loss (deadweight loss) = area b (production) + area d (consumption).

2. Import Quotas

Government sets a maximum import quantity. The distribution of quota rents determines the welfare outcome: - If rents accrue to foreign exporters, importing country loses areas b + c + d. - If rents accrue to domestic importers, importing country loses only b + d (c becomes rent).

3. Voluntary Export Restraints (VER)

Exporting country “voluntarily” limits exports; rents usually go to exporters, making the welfare loss to the importing country larger than an equivalent tariff.

4. Export Subsidies

Raise domestic prices in the exporting country, benefit foreign consumers with cheaper goods, but impose a fiscal cost on exporting-country taxpayers.

V. Trade Balances, Capital Flows, and Exchange Rates

Current Account + Capital Account ≈ 0 (ignoring statistical discrepancy).

A current-account deficit equals a capital-account surplus: the country is a net borrower from the rest of the world.

Long-run exchange-rate relationships: - Relative Purchasing Power Parity (PPP): %ΔS ≈ inflation_domestic – inflation_foreign. - Interest Rate Parity: currencies with higher nominal interest rates tend to depreciate.

Trade balance and exchange rates: currency depreciation usually improves the trade balance provided the Marshall-Lerner condition holds (|ε_X| + |ε_M| > 1). The J-curve effect may cause an initial deterioration due to lagged contracts.

VI. Terms of Trade and Developing Countries

A secular decline in terms of trade (export prices fall relative to import prices) hurts primary-commodity exporters and can lead to “immiserizing growth.”

Worked Cases

Case 1: Small-Country Tariff Welfare Analysis

World price of cars = $20,000. A small country imposes a $5,000 specific tariff. Pre-tariff equilibrium: production 100,000 units, consumption 250,000 units, imports 150,000 units. After tariff, domestic price = $25,000, production rises to 140,000, consumption falls to 210,000.

Calculations: - Loss in consumer surplus (a+b+c+d) ≈ $120 million. - Gain in producer surplus (a) = $40 million. - Government revenue (c) = $5,000 × 70,000 = $35 million. - Net welfare loss (b+d) = $120m – $40m – $35m = $45 million.

Case 2: Comparative Advantage and Trade Triangle

U.S. opportunity cost of 1 wheat = 2 cloth; U.K. opportunity cost of 1 wheat = 0.5 cloth. The U.K. has comparative advantage in cloth; the U.S. has comparative advantage in wheat.

Pre-trade: U.S. produces 50 wheat + 0 cloth; U.K. produces 0 wheat + 30 cloth. After complete specialization and trade at 1 wheat : 1.2 cloth, the U.S. exports 40 wheat and imports 48 cloth; the U.K. exports 48 cloth and imports 40 wheat. Both countries consume beyond their PPF; the area of the trade triangles represents mutual gains.

Case 3: Quota versus Tariff

A country imposes a quota of 1 million tons of steel. Domestic equilibrium price without trade = $600/ton, world price = $400/ton. Quota raises domestic price to $550/ton. If quota rents are captured by domestic importers, government receives no revenue but importers gain $150 × 1m = $150 million in rents. Net welfare loss equals only the production and consumption deadweight-loss triangles. If rents go to foreign producers, the importing country loses the rent rectangle as well, resulting in a larger total loss than an equivalent tariff.

Traps

Key Formulas

• Comparative advantage determined by lower opportunity cost
• Terms of Trade = $P_{exports} / P_{imports}$
• Small-country tariff deadweight loss = $\frac12 \times \Delta Q_{prod} \times t + \frac12 \times \Delta Q_{cons} \times t$
• Current Account + Capital Account ≈ 0
• Relative PPP: $\%\Delta S \approx \pi_{domestic} - \pi_{foreign}$
• Marshall-Lerner condition: $|\varepsilon_X| + |\varepsilon_M| > 1$
• Optimal tariff (large country) = $1 / $ export supply elasticity (in absolute value)

Practice Questions

Q1. Country A’s opportunity cost of 1 unit of grain is 3 units of cloth; Country B’s is 1.5 units of cloth. Which statement is correct?
A. A has comparative advantage in grain
B. B has comparative advantage in cloth
C. A has comparative advantage in cloth
D. Neither has comparative advantage

Q2. In a small country, the net welfare loss from a tariff consists of:
A. Producer-surplus gain plus government revenue
B. Production deadweight loss plus consumption deadweight loss
C. The entire consumer-surplus loss
D. Quota rents plus subsidies

Q3. When quota rents are captured by foreign exporters rather than by an equivalent tariff, the importing country’s welfare is:
A. Higher
B. The same
C. Lower
D. Cannot be compared

Q4. According to relative PPP, if domestic inflation is 5% and foreign inflation is 2%, the domestic currency should:
A. Appreciate by about 3%
B. Depreciate by about 3%
C. Remain unchanged
D. Depreciate by about 7%

Q5. Export price index rises from 100 to 110; import price index rises from 100 to 120. The change in terms of trade is:
A. Improvement of 10%
B. Deterioration of 8.33%
C. Deterioration of 16.67%
D. Unchanged

Q6. When the Marshall-Lerner condition holds, currency depreciation usually:
A. Immediately worsens the trade balance
B. Improves the trade balance in the long run
C. Always worsens the trade balance
D. Has no relation to the trade balance

Q7. A large country may enjoy a net welfare gain from a tariff because it can:
A. Improve its terms of trade
B. Always make government revenue exceed deadweight loss
C. Maximize producer-surplus gain
D. Prevent consumer surplus from falling

Q8. Which of the following is NOT a direct gain from trade?
A. Consumption possibilities lying outside the PPF
B. Reallocation of domestic resources according to comparative advantage
C. Domestic price always equaling world price
D. Scale economies from specialization

Answers

Takeaways

• Comparative advantage rests on opportunity cost, not absolute productivity, and is the basis for mutual gains from trade.
• Small-country tariff net loss = triangles b + d; quota-rent ownership determines whether the importing country loses the rectangle c.
• A current-account deficit is matched by capital-account surplus; currency depreciation is driven by relative inflation or interest-rate differentials.
• Terms of trade = P_export / P_import; secular deterioration harms primary-commodity exporters.
• Large countries may have a positive optimal tariff; small countries’ optimal tariff is zero.
• Memorizing the standard welfare-area labels (a = producer gain, c = government revenue or rent, b+d = net loss) is essential for quick exam solutions.