TRƯỜNG ĐẠI HỌC KINH TẾ - ĐẠI HỌC QUỐC GIA HÀ NỘI

Khoa Kinh tế và Kinh doanh Quốc tế

……..***……..

Bù điểm Mid-term

Họ và tên sinh viên : Vũ An Khanh

Mã sinh viên : 21050893

Lớp : QH-2021-E KTQT CLC 2

Giảng viên hướng dẫn : Dr. Vu Thanh Huong

MSc. Tran Huong Linh

Hà Nội, 2024
 MỤC LỤC
Question 1:.....................................................................................................................................................1
1. Trade in goods........................................................................................................................................1
1.2. Imports............................................................................................................................................2
1.3. International Processing..................................................................................................................3
1.4. Re-export.........................................................................................................................................3
1.5. Border-gate transfers of goods (Switch trade)................................................................................3
1.6. On-the-spot exports (imports).........................................................................................................3
2. Trade in services....................................................................................................................................4
Question 2:.....................................................................................................................................................4
References:.....................................................................................................................................................8
Question 1:
Explain 6 activities of trade in goods and 4 modes of trade in services. With each
activities, give a specific real-life example.
1. Trade in goods includes 6 activities: Imports, Exports, International processing, Re-
export, Switch trade and on the spot exports (imports).
1.1. Exports
- Definition:
Exports are goods and services that are produced in one country and sold to buyers in
another. Goods are produced in domestic country and purchased by citizens of another
country. Exports are one of the oldest forms of economic transfer and occur on a large
scale between nations.
- Pros and opportunity:
Increasing foreign exchange reserves leads to the creation of more jobs. These jobs often
come with higher wages, which in turn improves the standard of living for the people. As
a result, the populace becomes happier and more supportive of national leaders.
+ Exporting helps businesses reach new markets, which can increase sales and profits.
+ Reduces the risk of relying too much on the home market.
+ By selling to more customers, businesses can produce more, lower their costs, and
become more efficient.
+ Being in international markets can also improve a brand’s reputation and
competitiveness and encourage new ideas and improvements.
+ Exporting allows countries to use their resources better, especially by selling extra
products that aren't needed at home, and it brings in foreign money, which can help the
country's economy grow.
- Cons and challenge:
+ Market Risks: Such as economic and political instability in the countries you export to,
and changes in exchange rates can affect profits.
+ Cost and Complexity: Exporting can be expensive and complicated, involving costs for
market research, following international rules, and handling shipping logistics.
+ Cultural and Language Barriers: Cultural and language differences can cause
misunderstandings and affect business relationships and marketing efforts.
+ Intellectual Property Risks: There's a risk of intellectual property theft in countries with
weak laws, which can lead to copying of products.
+ Logistical Challenges: Managing a global supply chain can be tough due to shipping
delays, customs problems, and differences in infrastructure quality.
+ Dependency on Export Markets: Relying too much on export markets can make
businesses vulnerable to economic changes and trade policies in other countries.
- Example:
Germany is well-known for exporting high-quality automobiles, such as those
manufactured by companies like BMW, Mercedes-Benz, and Volkswagen. These cars are
exported to numerous countries around the world, contributing significantly to Germany's
economy.

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1.2. Imports
- Definition:
An import is a good or service bought in one country that was produced in another.
Imports are the components of international trade. Countries are most likely to import
goods or services that their domestic industries cannot produce as efficiently or cheaply
as the exporting country.
- Pros and opportunity:
+ Access to Resources: Importing allows countries to access goods and resources that are
not available domestically, such as tropical fruits in colder climates or minerals that are
not found locally.
+ Cost Efficiency: Often, goods can be produced more cheaply abroad due to lower labor
costs or more efficient production processes, allowing consumers and businesses to
purchase products at lower prices.
+ Quality and Variety: Some countries may produce higher-quality goods due to better
technology, expertise, or resources. Importing goods increases the variety of products
available to consumers, enhancing their choice and satisfaction.
+ Market Competitiveness: Importing goods can increase competition in the domestic
market, which can drive innovation, improve quality, and lower prices. Consumers
benefit from a wider range of goods and services at competitive prices, improving their
standard of living.
+ Diplomatic Relations: Importing goods can strengthen diplomatic and economic ties
between countries, fostering cooperation and mutual economic growth.
- Cons and challenge:
+ Economic Dependency: Over-reliance on imports can make a country vulnerable to
supply chain disruptions and economic conditions in exporting countries. Excessive
importing can lead to a trade deficit, where the value of imports exceeds the value of
exports, potentially weakening the domestic economy.
+ Impact on Domestic Industries: Local businesses may struggle to compete with cheaper
or higher-quality imported goods, leading to closures and job losses. Dependence on
imports can result in the decline of domestic industries and loss of traditional skills and
knowledge.
+ Quality Concerns: Imported goods may not always meet the same quality or safety
standards as domestically produced products, posing risks to consumers. Ensuring
imported goods comply with local regulations can be complex and costly.
+ Environmental Impact: Importing goods, especially over long distances, contributes to
carbon emissions and environmental degradation. Reliance on imports can lead to
overexploitation of natural resources in exporting countries.
+ Economic Vulnerability: Changes in exchange rates can affect the cost of imports,
impacting pricing and profitability for businesses and consumers. Political instability or
changes in trade policies in exporting countries can disrupt supply chains and affect the
availability of imported goods.
- Example:

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Countries like the United States and many in Europe import a significant amount of
electronics from China, including smartphones, laptops, and televisions. Companies such
as Apple manufacture their products in China due to lower production costs.
1.3. International Processing
- Definition:
Processing is a method of producing goods where the outsourcer provides raw materials
and semi-finished products to the processor. The processor then manufactures and
delivers the final products as requested by the outsourcer and receives a processing fee.
+ Processor: Processing for foreign companies
+ Outsourcer: Hiring foreign companies to process
- Example:
+ Processor: A Chinese components company processes products for Apple – an
America’s company.
+ Outsourcer: Apple – a company in the US hires a components company in China to
process products.
1.4. Re-export
- Definition: To export again what has been imported but is not processed
domestically
- Example:
BMW exports 50 cars to its branch in Vietnam to attend an exhibition. Then all the cars
are exported back to BMW.
1.5. Border-gate transfers of goods (Switch trade)
- Definition: Goods are transported from one country to another through a third
country
- Example:
A company in Brazil produces electronics and sells them to a distributor in Singapore.
However, the end customer for these electronics is located in Nigeria. Instead of shipping
the goods directly from Brazil to Nigeria, the goods are first sent to Singapore.
1.6. On-the-spot exports (imports)
- Definition:
Goods exported or imported on the spot are goods produced in the home country by
domestic companies (including foreign-invested and export processing companies), the
goods are sold to foreign traders. However, instead of being exported out of the home
country's territory, these goods are delivered to other domestic enterprises as directed by
the foreign traders.
+ On-site exporting requires 3 elements:
1. Sales (export) to foreign traders
2. Delivery location in Vietnam
3. Consignee information provided by foreign buyers
- Example:
Toan Phat Packaging Company in Hung Yen sells goods to Taifeng Company of Taiwan,
and is assigned to deliver the shipment to Gia Loc Garment Company (processing for

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Taifeng) at the warehouse in Hai Duong. Thus, the goods are exported to foreign partners
(Taiwan), but delivered immediately in the territory of Vietnam (Hai Duong) as
designated by the foreign trader.
2. Trade in services: The GATS defines trade in services as the supply of service
through any of the four models
2.1. Mode 1. Cross-border supply: Services are supplied from the territory of one
country into the territory of another country.
- Example: FPT - a software development company based in Vietnam providing its
services to clients in the United States. The company offers a range of IT
solutions, including software development, website design, and technical support.
2.2. Model 2. Consumption abroad: Where a service consumer moves into another
country’s territory to obtain a service
- Example: India people go to Singapore for health care services.
2.3. Model 3. Commercial Presence: A service supplier of one country establishes a
territorial presence, including through ownership or lease of premises, in another
country’s territory to provide a service.
- Example: Lotte - a Korean company leases space to build a commercial center,
providing entertainment services in Vietnam
2.4. Model 4. Natural Person Presence: Person of one country temporarily entering the
territory of another country to supply a service.
- Example: Japan’s doctor move to Vietnam temporarily to provide their services.

Question 2: Explain and analyze the effects of tariff to a country in small- and
large-country cases. Compare the effects with export subsidies and import quotas.
Give some examples.

a. The effects of tariffs to a small country case

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Consider a market in a small importing country that encounters an international or
world price of Pw in free trade. The free trade equilibrium is depicted in the adjoining
diagram where Pw is the free trade equilibrium price. At that price, domestic demand
is given by D, domestic supply by S and imports by the different D – S (the blue line
in the figure).
When a country is small, tariffs have no effect on the foreign (world) price. So
foreign price will not fall and will remain at Pw. Home price will increase to Pt = Pw
+ t. And the difference between home price and world price is tariff. As a result of
tariffs, the quantity of imports demanded decrease from D1 - S1 to D2 - S2.
We can see costs and benefits of tariff on a small country case:
- Benefits:
Producer Surplus Increase: Domestic producers benefit from the higher price (Pt),
increasing their surplus. This is the area between Pw and Pt, from S1 to S2.
Government Revenue: The government collects revenue from the tariff, calculated
as the tariff (T) times the new quantity of imports (D2 – S2). This area is a rectangle
with height T and width (D2 – S2).
- Costs:
Consumer Surplus Decrease: Consumers face higher prices (Pt), reducing their
surplus. The loss in consumer surplus is the area between Pw and Pt, from D1 to D2.
Deadweight Loss (DWL): The tariff creates inefficiency in the market, resulting in a
loss of total surplus. This consists of two triangles:
+ The area between the domestic supply curve and Pw, from S1 to S2.
+ The area between the domestic demand curve and Pw, from D1 to D2.
Example: The USA, in its efforts to safeguard and bolster its domestic electronics
manufacturing industry, instituted high tariffs on imported electronic products,
encompassing smartphones, computers, and televisions.
Pre-Tariff Situation:
Import Dependency: Argentina imported $1 billion in electronics annually, mainly
from Asia and the U.S.
Cost: Imported smartphones cost $200 each, domestic ones $300.
Domestic Industry: Minimal local production due to high competition from cheaper
imports.
Post-Tariff Situation:
Tariff Imposed: A 35% tariff on imported electronics.
New Costs: Imported smartphones rose to $270; domestic ones remained $300.
- Effects:
Higher Consumer Prices:
+ Imported goods became more expensive, reducing their price advantage.
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+ Consumers faced higher costs whether choosing imports ($270) or local products
($300).
Government Revenue:
+ Significant revenue from tariffs; e.g., $189 million if 3 million units were imported.
Domestic Industry Boost:
+ Growth: Local electronics became more competitive, boosting production.
+ Employment: Increased jobs: 2,000 new jobs in a sector that initially had 10,000
employees.
Long-Term Considerations:
+ Market Adaptation: Local producers benefited but had to improve efficiency for
long-term success.
+ Trade Relations: Strained relations with exporting countries.

b. The effects of tariffs to a large country case

 Initial equilibrium (No Tariff)

+ The world price Pw is lower than the domestic price without trade.
+ At Pw, the quantity demanded is Qd, and the quantity supplied domestically is Qs.
The difference (Qd−Qs) is imported.
 When impose tariff
+ When impose tariff, the price raising to Pw+t.
+ New quantity demanded Qdt is lower due to the higher price.
+ New quantity supplied domestically Qst is higher because producers are willing to
supply more at the higher price.
+ Imports decrease to Qdt−Qst
 To be more specific, we can cost and benefits on a large country case:
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 For the importing country:
- A tariff raises the price of a good in the importing country to Pt
- Domestic producers should supply more at higher price so that they can get more
profits => Benefit producers
- Domestic consumers should demand less at higher price => Hurt consumers
- The quantity of imports falls from Qw to Qt
- Government revenue gain
=> Net cost of a tariff = Consumer loss - Producer gain - Government revenue
= e - (b + d)
For a large country, the welfare effect is ambiguous:
- If e > (b + d) => national welfare will increase under a tariff
- If e is lower than (b+d), national welfare will decrease.
Foreign:
- The price in Foreign falls to Pt*
- Domestic producers should supply less at lower price => Hurt producers
- Domestic consumers should demand more at lower price => Benefit consumers
Effects:
Domestic Steel Industry:
Benefit: U.S. steel producers experienced increased demand and higher prices. For
instance, U.S. Steel Corporation reopened mills and hired more workers.
Revenue Growth: Domestic steel companies reported higher profits due to reduced
foreign competition.
- Consumers:

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Increased Prices: Prices for products such as cars and appliances rose. The Peterson
Institute estimated that tariffs added $860 to the price of an average new car in the U.S.
Inflation: The higher costs contributed to overall inflation, impacting purchasing power.
International Trade:
Retaliation: Trade partners like the EU and China imposed retaliatory tariffs on U.S.
exports, affecting U.S. farmers and manufacturers. For example, China targeted
American soybeans and pork, leading to significant revenue losses for U.S. farmers.
Government Revenue:
Tariff Collection: The U.S. government collected additional revenue from tariffs, which
contributed to federal income but was offset by economic disruptions.

References:
1. Sumana Sarmah (2023), “Re-Export In International Shipping”
2. Troy Segal (2024) “What Are Exports?”
3. Troy Segal (2021) “Import: Definition, Examples, and Pros and Cons”
4. Vietnambiz (2020), “Xuất nhập khẩu tại chỗ (On-spot export and import) là gì?”