International trade and economic integration

Country A produces $1\ \text{kg}$ of cheese with $2$ hours of work and country B, with $4$ hours.

1. a) Which country has an absolute advantage in cheese? Justify your answer.
2. b) According to the theory of absolute advantage, what does it recommend each country do? Explain the logic of specialisation.

The country Vega produces wheat with half the labour of Olma, and Olma produces wine with half the labour of Vega.

1. a) Explain what absolute advantage is and who has it for each product.
2. b) Reason why both countries can benefit if they specialise and trade with each other.

With one hour of work, the country Norte produces $6$ metres of cloth or $2$ litres of wine; the country Sur produces $4$ metres of cloth or $4$ litres of wine.

1. a) Who has an absolute advantage in each product?
2. b) Calculate the opportunity cost of producing one litre of wine in each country (in metres of cloth) and state who has a comparative advantage in wine.
3. c) Explain how specialisation according to comparative advantage can benefit both countries.

Define exports and imports and explain what the balance of trade is. When do we say that a country has a trade deficit or a trade surplus?

A country exports goods worth $300.000$ million euros and imports goods worth $350.000$ million.

1. a) Calculate its trade balance.
2. b) Does it have a trade deficit or a trade surplus? Explain what that sign means.

A country has a goods trade deficit of $40.000$ million euros and a services surplus (tourism, transport) of $25.000$ million.

1. a) Calculate the total balance of goods and services and state its sign.
2. b) Explain which sectors drive each balance in a country like Spain and what "offsetting" the goods deficit with tourism means.

Explain the difference between free trade and protectionism. Then solve: a pair of imported trainers costs $50\ \text{€}$ and the country applies a tariff of $20\ \%$, what final price do consumers pay?

Besides tariffs, there is the import quota: a limit on the quantity of a product that can enter the country. Explain the difference between taxing an imported product with a tariff and putting a quota on it, and reason what effect each one has on the price and the available quantity.

A country sells its steel abroad below the cost of production, subsidised by its government, and sinks the steel mills of competing countries.

1. a) What is "dumping" and why is it considered unfair competition?
2. b) What response do the affected countries usually give (anti-dumping duties) and what risk of trade escalation is there?

The European Union is a customs union: inside it there are no tariffs and outside it the same common tariff applies. Explain with an example what that means for a Valencian orange travelling to Germany, as opposed to an orange from a third country entering through the port of Valencia.

Explain what belonging to the European Single Market means for a Spanish company when selling to France compared to selling to a country outside the EU. Mention tariffs, common standards, and the free movement of goods.

An exporter from Valencia sells oranges to Germany and to a country outside the eurozone.

1. a) Explain what advantages the euro gives it when selling to Germany.
2. b) What additional problem does it face when selling to the other country? Explain what exchange rate risk is.

The government of a country decides to levy a 20% tariff on steel imports to protect its domestic steel mills, whose market share has fallen in the face of cheaper foreign imports.

1. a) Using surplus analysis (consumers, producers, and the State), predict the consequences of this measure on overall economic welfare and explain why domestic car manufacturers are radically opposed to it.
2. b) The main steel-exporting country decides not to appeal to the WTO and prepares immediate retaliation. If you were its Trade Minister, would you tax the steel sold to you by the first country, or would you choose other strategic goods from politically sensitive sectors? Design and justify a retaliatory strategy and predict the dynamic of the protectionist spiral that would be triggered.

A latest-generation smartphone costs 900 € in the European market. Its value-added breakdown per unit is as follows: R&D and design in the US (350 €), screen and processor manufactured in South Korea and Taiwan (280 €), optical components from Germany (70 €), final assembly in Vietnam (50 €), and marketing margin in Europe (150 €).

1. a) The EU decides to apply a 20% tariff to electronic devices "originating in Vietnam". Interpret which value this tariff would be applied to under traditional customs regulations and predict the unintended harmful consequences that European businesses and consumers, or those from allied countries, would suffer.
2. b) Trade agreements establish "rules of origin" requiring, for example, that at least 50% of the value added be generated in the exporting country to obtain a tariff exemption. Demonstrate whether this smartphone would meet that rule to be considered from Vietnam, and deduce what logistical decision the multinational would make to circumvent the tariff if it does not exceed that threshold.

In the face of recent supply chain crises and geopolitical tensions, Western economies are reconsidering offshoring (producing where costs are lowest) to bet on nearshoring (relocating to neighbouring countries) and friendshoring (trading preferentially with allied countries).

1. a) Analyse the economic dilemma or trade-off underlying this reconfiguration: what efficiency losses (comparative advantage and economies of scale) are accepted in exchange for mitigating strategic risks? Predict the structural impact of this shift on prices and the inflation rate in the medium term.
2. b) If the Spanish State had limited public funds to subsidise the relocation of strategic sectors, choose and contrast two of the following fields: advanced microelectronics (chips), basic active pharmaceutical ingredients, textile assembly, or solar panel production. Justify which one you would prioritise based on the difficulty of substitution in the event of a crisis and the opportunity cost of the invested capital.