Specialisation and free trade
| English | Chinese | Pinyin |
|---|---|---|
| trade | 贸易 | mào yì |
| specialisation | 专业化 | zhuān yè huà |
| free trade | 自由贸易 | zì yóu mào yì |
| economies of scale | 规模经济 | guī mó jīng jì |
| over-dependence | 过度依赖 | guò dù yī lài |
| domestic industries | 国内产业 | guó nèi chǎn yè |
Why countries trade 贸易
- No country makes everything it needs. Japan imports food; Saudi Arabia imports cars; everyone trades.
- The reason is specialisation 专业化 — and it makes the whole world richer.
Specialisation means a country concentrates on producing:
It focuses on its most efficient products and trades for the rest.
After specialising, countries ______ with each other to get the rest of what they need.
Specialisation only works alongside trade.
Specialisation
- Specialisation means concentrating on what you produce best (most efficiently).
- Countries specialise, then trade for the rest — just as workers specialise in jobs.
A container port: countries specialise and trade huge volumes of goods by sea
Each country makes what it is best at, then trades
Specialisation and trade
By specialising where its opportunity cost is lowest and trading, a country can consume beyond its own frontier.
Which are gains from free trade? (Select all that apply.)
Trade lowers prices and widens choice; higher prices is not a gain.
Specialisation and trade can make both trading countries better off.
Each gets more than it could by producing everything alone.
The gains from free trade 自由贸易
- Lower prices and more choice for consumers.
- Bigger markets and economies of scale 规模经济 for producers.
- Access to resources and technology a country lacks at home.
Worked example. A country with ideal coffee-growing land specialises in coffee and trades it for cars it cannot make cheaply. Both it and its trading partner end up with more of both goods than if each made everything alone.
Cargo ships carry goods between countries — international trade in goods
A risk of specialising heavily in one export is:
Relying on one export is dangerous if its world price falls.
The risks
- Over-dependence 过度依赖 on one export or one partner is risky if prices crash.
- Some domestic industries 国内产业 and jobs may be lost to foreign competition.
Specialise where you're relatively best, not at everything. Even a country good at making everything gains by specialising in what it does most efficiently and trading for the rest.
The four main methods of trade protection: tariff, quota, subsidy and embargo
You've got it
- specialisation = concentrate on what you produce best, then trade
- free trade brings lower prices, more choice and economies of scale
- risks: over-dependence and lost domestic industries