Exercises: International trade and economic integration

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?

Explain the difference between free trade and protectionism. Then solve: a pair of imported sneakers costs $\$1\,000$ and the country applies a tariff of $20\ \%$, what final price do consumers pay?

The figure shows the exports and imports of an imaginary country over three years, in billions of pesos.

1. a) Calculate the trade balance for each year.
2. b) In which years was there a deficit, and in which years a surplus?

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

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.

A European country imposes tariffs on imported steel to protect its steel mills.

1. a) Analyze the winners and losers within the country: steelmakers, car manufacturers, consumers, and the Treasury.
2. b) How might the affected exporting country respond, and what risk of escalation exists? Explain what a trade war is.

A textile company in Puebla cannot match the prices of clothing imported from countries with very low wages.

1. a) Analyze which strategies it can use to survive without competing on price (quality, design, speed, branding).
2. b) Would you defend a tariff on imported clothing? Argue the pros and cons.

Analyze the following statement: "International trade increases the overall economic pie, but the way it is distributed can ruin entire regions."

1. a) Drawing on the comparative advantage model and the imperfect mobility of labor, justify why trade liberalization can simultaneously generate net gains at the macroeconomic level and prolonged structural unemployment in single-industry regions (for example, regions dedicated to ceramics or footwear).
2. b) Design a package of two economic policies to compensate workers harmed by import competition without resorting to protectionist barriers. Assess the budgetary difficulties of financing these policies with taxes collected from the domestic exporting sectors that have gained from trade.