Ints 463 Midterm

Front 1

Specialization

Back 1

countries tend to specialize in different types of products; exchanges of goods and services among individuals enables them to specialize in what they do best (trade offers the benefits of specialization, more efficiency and individuals can produce more than they could without trade and increasing the living standards for all)

Front 2

exchange rate

Back 2

is the price of one currency in terms of another

Front 3

export subsidy

Back 3

where a govt pays exporters a sum of money for each unit of the product they export in order to make them more competitive abroad

Front 4

Tariff

Back 4

tax on an imported commodity

Front 5

import quota

Back 5

places a maximum limitation on the amount of the commodity that may enter the country

Front 6

voluntary export restraint (VER)

Back 6

is an agreement b/t an exporting and an importing country of a cetain commodity, under which the first agrees to resrict exports to the 2nd country. B/c it restricts supply, it raises the price in the importing country. VERs are being phased out under a WTO agreement.

Front 7

nontraded goods

Back 7

makes up a substantial part of the GDP such as construction activities and personal services, which never enter intl trade; accounts for disaggregation

Front 8

export industries

Back 8

> 15 to 20 % of the ratio of exports to output; aircraft, chemicals, and computers are examples in the US

Front 9

import-competing industries

Back 9

> 15 to 20 % of the ratio of imports to consumption; steel and motor vechicles are examples in the US

Front 10

exchange control

Back 10

where a country (India) restricts the ability of its citzens to convert their money (rupees) to foreign currencies, such as the US dollar

Front 11

service transactions

Back 11

are expanding rapidly; services make up over 2/3 of the GDP in the industrial countries; the US is the leading importer and exporter of commercial services - shipping, tourism, travel, banking & insurance, communications, pro services

Front 12

the euro

Back 12

a currency of 12 European countries

Front 13

international economics

Back 13

deals with flows across natl boundaries of goods, services, capital, and labor. It is the conduct of trade, rather than the benefits that flow from it, that distinguishes intl from domestic transactions

Front 14

commercial policies

Back 14

are governmental measures designed to influence the country's intl economics

Front 15

Examples of commercial policies

Back 15

tariffs, import quotas, export subsidies, exchange controls

Front 16

globalization

Back 16

describes a process by which a country, its businesses, and citizens become integrated into the intl econ. One manifestation is that intl trade and direct foreign investment are expanding faster than global output.

Front 17

The WTO

Back 17

multilateral trade organization provides a framework for trade negotiatons and lays down ground rules for the conduct of intl trade; superseded the GATT in 1995; 147 member countries

Front 18

IMF

Back 18

makes financial resources available to members in need and supervises the intl currency system; 184 member countries

Front 19

World Bank

Back 19

intl financial institution offers lonas for development to LDCs from subsciption capital as well as from funds raised on the word's capital markets; it is NOT an intl central bank

Front 20

The European Union (EU)

Back 20

cohesive regional grouping of 25 Euro countires w/ a population of 450 million and a GDP equal to that of the US. Headquartered in Brussels, Belgium. 12 of its members formed the European Money Union (EMU) and have euro as common currency.

Front 21

Group of Ten

Back 21

10 major industrial countires that pursue consulations on economic matters and attempts to coordinated economic policies. US, UK, Japan, Germany, France, (G5) Italy, Canada, (G7) Belgium, Netherlands, Sweden

Front 22

The UNCTAD

Back 22

concerns intl matters of trade and development

Front 23

Organization for Economic Cooperation & Development (OECD)

Back 23

30 developed countries in N.A., Western Europe, Japan, Korea, Oceania, and Mexico; adresses economic matters

Front 24

NAFTA

Back 24

regional FTA b/t the US, Canada, & MX

Front 25

direct foreign investment

Back 25

the establishment of manufacturing plants in foreign countries

Front 26

Comparative advantage

Back 26

refers to the degree of advantage. Country A can have an absolute advantage over B in commodities X and Y. But if the degree of advantage is greater in X, we say that it has a comparative adv in X, and comparative disadv in Y. The opposite is true for Country B.

Front 27

country "in isolation"

Back 27

without trade; when the 2 domestic cost ratios are equal there are no advantages to trade.

Front 28

terms of trade

Back 28

is the export price divided by the import price.

Front 29

demand consideration

Back 29

Production costs determine the limits, while the reciprocal demand determines what the actual exchange ratios will be within these limits. The further apart the 2 domestic cost ratios, the more room there is for mutually advantageous trade, and the larger the benefits that can be derived from trade by both countries.

Front 30

relative wage rates

Front 31

anti-inflationary trade

Back 31

far from being inflationary, trade is anti-inflationary when the prices of imports as well as exports are considered.

Front 32

absolute advantage

Back 32

Country A has an absolute advantage over Country B if it can produce the commodity cheaper.

Front 33

static gains from trade

Back 33

reallocating an unchanged quantity of resources

Front 34

dynamic gains from trade

Back 34

a country that is integrated into the econ is likely to enjoy the benefits of technological spillover from inventions developed in other countries; economies of scale; innovation is often held back when competition is lacking

Front 35

opportunity cost

Back 35

the price ratio of one good to the other within each country, is a guide to comparative advantage. It requires only a comparison of the internal cost ratios between the 2 countries.

Front 36

direction of trade

Back 36

C.A. determines the directions of trade and the limits to mutually beneficial trade.

Front 37

mercantilism

Back 37

calls for the promotion of exports to acquire gold. Trade cannot benefit both countries.

Front 38

complete specialization

Back 38

means that the country produces only its export good and none of its imported commodity.

Front 39

differentiated products

Back 39

each commodity has various gradations of quality, siz, flavor, and so on, and even differences in packaging & brand names are important. In such circumstances it is no longer true that identical cost ratios would result in no trade. Gains from increased variety may be large.

Front 40

unit production cost

Back 40

measured in currency, is the inverse of productivity

Front 41

relative opportunity COST

Back 41

shows the direction of trade and the limits to mutually beneficial exchange

Front 42

sustainable exchange rate

Back 42

C.A. can be expressed in terms of the currencies of both countries (namely opp cost), thereby embodying labor as well as other production costs. This yields the limits to a sustainable exchange rate.

Front 43

ranked internally

Back 43

all goods produced by each country are ranked in this manner in the order of their domestic costs.

Front 44

rank

Back 44

rank all commodities by degree of C.A.; once ranked in that order, the exchange rate determines which commodities are exported and which are imported

Front 45

auto and steel (example)

Back 45

the US lost C.A. in steel and autos as these commodities dropped in the inverse ranking by labor production costs of US industries

Front 46

trade & income distribution

Back 46

trade redistributes income in society

Front 47

Corollary of the Factor Proportions Model

Back 47

Domestic income distribution: trade benefits the country's abundant factor & harms the scarce factor. But the benefit exceeds the damage. Intl factor price equalization: trade equalizes factor prices b/t countries.

Front 48

factor proportions (or endowment) theory

Back 48

introduced by Heckscher & Ohlin; under the FEM, each country exports the commodity that is intensive in its relatively abundant factor

Front 49

capital-intensive products

Back 49

one that requires a higher capital/labor ratio for its manufacture (wheat) relative to another commodity such as textiles.

Front 50

capital-abundant country

Back 50

when a country has a higher capital to labor ratio

Front 51

labor intensive-products

Back 51

one that requires a higher labor/capital ratio for its manufacture (textiles) relative to another commodity such as wheat.

Front 52

labor-abundant country

Back 52

is one that possesses larger endowment ratio of labor to capital than the endowment of another country (US)

Front 53

interindustry trade

Back 53

an exchange b/t countries of totally different products; explained by the factor-endowment theory

Front 54

intraindustry trade

Back 54

an exchange b/t countries of highly similar goods; explained by the economies of scale model and yields a dual benefit to consumer: cheaper goods & greater variety

Front 55

direct foreign investment

Back 55

when a country (US) establishes factories and produces within other countries they can bypass the tariff wall

Front 56

product cycle

Back 56

stresses the standardization process of products. According to this hypothesis, highly sophisticated economies are expected to export nonstandardized goods (most research is done in US, Germany, and Japan), while less sophisticated countries specialize in more sophisticated goods.

Front 57

product variety

Back 57

results from economies of scale and monopolistic competition.

Front 58

monopolistic competition

Back 58

industry structure characterized by many firms producing differentiated products, ensuring that economic profits will be zero in the long run. Expansion of the market has 2 beneficial effects for consumers: it produced a larger # of firms producing a wider range of varieties of the (differentiated product); and b/c each firm would produce a large output, at a lower avg. cost, each variety would be available at a lower price.

Front 59

dynamic changes in C.A.

Back 59

C.A of a country changes as its factor endowment and/or tech change. Application: industrialization of LDCs. Changes in Japan: Japan's postwar development is an example of the dynamic nature of C.A.: it changed from labor-intensive to capital-intensive to high-tech products.

Front 60

factor price equalization

Back 60

markets raise earnings of the migrating factor in the land of departure (source country) and lower it in the land of arrival (host country)

Front 61

Leontief scarce-factor paradox

Back 61

refers to the discovery that US exports relatively labor-intensive products and imports relatively-capital intensive products. Since the U.S is relatively capital abundant, this contradicts the factor-endowment model.

Front 62

export-biased growth

Back 62

if the growth is disproportionately large in direction of the country's exports, the country's terms of trade would deteriorate (pg 54)

Front 63

sector-specific model

Back 63

2 sectors: agriculture (land is fixed, labor is variable) & manufacturing (captial is fixed, labor); labor is mobile across industries: W = MPL

Front 64

import-biased growth

Back 64

if the production possibilities curve expands disproportionately in the direction of the country's imports, the country's terms of trade would improve (pg 54)

Front 65

resource endowment

Back 65

Example: Since the US possesses a higher capital to labor ratio than Germany, it is the relatively capital-abundant country while Germany is the relatively labor-abundant country

Front 66

economies of scale

Back 66

means that cost per unit of output declines as the scale of operations (all inputs increase).

Front 67

terms of trade

Back 67

if your terms of trade goes up, that is good; means your trade position improves

Front 68

nontariff barriers (NTBs)

Back 68

NTBs are more harmful to the national economy than tariffs. And w/in NTBs, VERs are more harmful than import quotas.

Front 69

import quotas

Back 69

sets an absolute limit on the quantity of a proudct that may enter the country. Quotas are common in developing countries; & on agricultural products in industrial countries.

Front 70

quota rents

Back 70

The price increase caused by the quota times the quantity of imports admitted under the quota. Unless the gov't auctions the imports licenses the rents accrue to the importers.

Front 71

auctioning import licenses

Back 71

Only by auctioning the import license can the government recoup the rents.

Front 72

equivalence of a tariff & a quota

Back 72

A quota and a tariff are equivalent if demand and supply are stationary, perfect competition exists in all markets, & the gov't auctions the import licenses.

Front 73

primary and secondary boycotts (FN3)

Front 74

quality upgrading

Back 74

describes a tendency by exporters to switch to a higher-quality version of the product. It is caused by import quotas &/or VERs

Front 75

cost per job saved

Back 75

Protection is an expensive way to save jobs. (One reason for the increased use of VERs and other NTBs is the desire of politicians to save domestic jobs that would otherwise be destroyed by imports).

Front 76

Int'l Commodity Agreements (ICAs)

Back 76

is an accord b/t the producing and consuming countries of a commodity to stabilize its price or otherwise interfere w/ market forces. The most common type is a buffer stock.

Front 77

buffer stocks

Back 77

an ICA which tries to stabilized a commodity price (it sets a min and max price) by buying and selling out of central stocks. This systmes creates inefficiencies and is beset with problems.

Front 78

compensatory financing

Back 78

is a mechanism by which the IMF compensates countries for an abrupt decline in their export earnings.

Front 79

Multifibre Agreement

Back 79

is an agreement b/t textile producing and consuming countries to restrict trade in textile. It was abolished on Jan 1, 2005. Example of an ICA that was over 50 countires.

Front 80

Int'l Cartel

Back 80

is a group of corporations located in dif't countries or a group of gov'ts that agree to restrict trade in a commodity. It includes only suppliers.

Front 81

Organization of Petroleum Exporting Countries (OPEC)

Back 81

is a cartel of oil exporting countries.

Front 82

local content requirement

Back 82

specify a minimum portion of the value of a product that must be produced domestically.

Front 83

indirect taxes

Back 83

are those levied on the product at some stage of its manufacture or sale, such as the excise or sales taxes in American states and the value-added taxes. The tax is levied directly on products, & only in an indirect manner is it shifted to individuals. Although the WTO forbids export subsidies (including rebates of domestic taxes), it allows rebate of indirect taxes to exporters (export rebates).

Front 84

border tax adjustment

Back 84

consist of a tax on import of a commodity, & a rebate (subsidy) on its export, which equal the domestic indirect taxes.

Front 85

value-added tax (VAT)

Front 86

dumping

Back 86

is the sale of a commodity abroad at a price lower than what it fetches in the home country. Often it is a result of a monopolist discriminating b/t the domestic & foreign markets.

Front 87

sporadic dumping

Back 87

is disposal on foreign markets of an occasional surplus or overstock; its effects are neglible.

Front 88

predatory dumping

Back 88

occurs when a large homebased firm sells abroad at a reduced price in order to drive out competitors & gain control over the market, at which time it intends to reintroduce higher prices and use its newly acquired monopoly power to exploit that market. Potential rivals may then be discouraged from entering the field by the fear of a repeat performance on the part of the monopolist. Most harmful form

Front 89

persistent (long-run) dumping

Back 89

direct outgrowth of profit-maximizing behavior by monopolists. To maximize his overall net return, he would charge a lower price abroad where he must meet competition than that charged at home where competitive pressure is lacking. Such dumping is harmful to the producers in the country receiving the dumped product, but this damage may be more than offset by the benefit to its consumers from the lower price.

Front 90

dumping margin

Back 90

is the price differential b/t the home & foreign markets.

Front 91

antidumping duty

Back 91

which equals the dumping margin, is a special duty that the importing country may impose to offset dumping.

Front 92

export subsidy

Back 92

is a payment by a gov't to a domestic firm for each unit of the product that it exports. (2 types of losses; 1 deadweight welfare loss caused by the distortion in the ranking by C.A.; 2 if the subsidizing country is large, it incurs an added cost: the increase in its net exports reduces the world price, & hence its terms of trade deteriorate). Can take the form of low interest loans to the foreign purchaser. Farm-product exports are often subsidized.

Front 93

countervailing duties

Back 93

is the special tariff the importing country may impose to offset a subsidy by the exporting country. It is distinguishable from antidumping duty in that it is limited to offsetting a gov't subsidy.

Front 94

strategic trade policy

Back 94

consists of gov't taxes &/or subsides designed to increase the global market share of the country's own oligoplistic firms, so as to increase their oligopoly profit at the expense of the foreign firms. Oligoply is a market structure in which a few firms make up the industry & where economic profits are attained & maintained

Front 95

monopoly rents

Front 96

tariff equivalent of NTBs

Back 96

The excess of domestic over foreign price can be regarded as the implicit tariff equivalent of the nontariff barrier. (P domestic- P foreign)/P Foreign

Front 97

tariff quota

Back 97

one tariff rate imposed up to a certain quantity of imports and a higher rate on imports above that level

Front 98

quota effects

Back 98

b/c it makes the commodity scare, a quota raises price in the importing country in a way similar to a tariff. And the % increase in price is the tariff equivalent of the quota.

Front 99

shifts in D & S

Back 99

If domestic demand rises or supply declines, the welfare loss (measured by the deadweight triangles) under a quota is greater than under a tariff.

Front 100

Monopoly Effect

Back 100

A domestic monopolist can cause more harm to the economy under a quota than under a tariff.

Front 101

Discrimination under VERs

Back 101

VERs tend to discriminate b/t sources of supply. Their effects are similar to those of a quota except that the exports receives the rents.

Front 102

Multilateral contracts

Back 102

specify a maximum price at which producing countries are obliged to sell stipulated quantities to consuming countries & a min price at which consuming countries are obliged to purchase stipulated quantities from producing countries.

Front 103

tariff protection

Front 104

revenue tariff

Back 104

most tariffs provide protection to the domestic industry & yield govt revenue

Front 105

ad valorem tariff

Back 105

a tariff calculated as a % of price; fixed % of the value of the commodity, as when imported cars are taxed as 5% of value

Front 106

specific tariff

Back 106

is a fixed # of dollars per unit of the product.

Front 107

compound tariff

Back 107

a combination of the 2, as when a car is taxed at $50 per unit plus 2% of value

Front 108

F.O.B. Price

Back 108

free on board & indicates the price of the commodity on board ship at the port of embarkation (if shiploading coats, are excluded we obtain the F.A.S. or free alongside price). The US uses the F.O.B. price for computing the tariff, while most European countries employ the C.I.F. value.

Front 109

C.I.F. Price

Back 109

cost, insurance, and freight and covers the cost of the commodity up to the port of entry. It includes ocan freight & other intercountry transportation costs, which the F.O.B. price excludese.

Front 110

small country

Back 110

defined as a country that cannot, by its own action, affect world market prices and hence its terms of trade. In a small country, the domestic price rises by the full amount of the tariff. Its tariff does not change its terms of trade.

Front 111

large country

Back 111

a country that can, by its own action, affect world market prices and hence its terms of trade. The US is one of the only large countries. The domestic price rises by a portion of its tariff, the other portion is a decline in foreign export price. Its tariff improves its terms of trade by the amount of the duty paid by foreigners.

Front 112

effective tariff

Front 113

tariff escalation

Back 113

steep escalation of effective rates in industrial countries by degree of processing discourages industrialization of developing countries.

Front 114

deepening of production

Back 114

the country begins to deepen domestic production by manufacturing the inputs at home & according them high protection. What the gov't often does not realize is the fact that by imposing tariffs on imported inputs it actually lowers the level of effective protection accorded the final product. By that very action it may render the final assembly plant unprofitable.

Front 115

export rebate

Back 115

To compensate the producers for the increased cost of input caused by the tariff would require that the producers receive an export subsidy. Such subsidies (that is, rebates of the tariff paid on imported materials) are often practiced in the developing countries to protect their export position.

Front 116

domestic resource cost (DRC)

Back 116

of foreign exchange earned by exports or saved by import substitution. Every dollar so earned (or saved) by a developing country costs a certain amount in domestic currency (representing a bundle of domestic resources) expended on processing & other activities. The activities that should be supported are those in which the cost of a dollar eanred or saved is least. The ranking of the industries from the high to low domestic currency cost per dollar earned would produce an ordering roughtly similar to the ranking from hihg to low effective protection. In both cases, it is the low-ranking industries that deserve support & encouragement to expand.

Front 117

"scientific" tariff

Back 117

is a rate that would equalize wage rates across countries. It makes no allowance for productivity differentials; hence, there is nothing scientific about it. The US says they cannot compete w/ countries in which wage rates are a fraction of its own.

Front 118

"The Petition of the Candlemakers"

Back 118

is a satire about the cost of keeping out cheap imports.

Front 119

"Petition of the Mathmeticians"

Front 120

WTO

Back 120

is a global organization that sets ground rules for intl trade & provides a framework for liberalzing trade. One of its rule is non-discrimination b/t sources of supply known as the MFN.

Front 121

customs union

Back 121

involves 2 ore more countries abolishing trade restrictions among themselves & setting up a common & uniform tariff against outsiders.

Front 122

consumers' surplus

Back 122

the difference b/t what consumers would have been willing to pay and the market price they actually pay

Front 123

volume of trade

Back 123

when you have a tariff, this will reduce the volume of trade; sometimes it can actually improve the terms of trade for large countries, but never for small countries.

Front 124

producers' surplus

Back 124

the difference b/t the price that sellers would have required to part with the product, and the market price they actually receive

Front 125

welfare triangles

Front 126

deadweight loss

Back 126

the net welfare loss from the tariff is therefore equal to the sum of the areas of the welfare triangles. Apart from this net loss, the tariff results in income distribution away from the consumers to the govt and the producers of the protected commodity.

Front 127

optimum tariff

Back 127

is the tariff rate that maximizes the difference b/t the gain from improved terms of trade & the loss from reduced volume of trade. For a small country, the optimum tariff is 0 b/c there is no improvement in trade.

Front 128

nominal tariff rate

Front 129

free-trade area (FTA)

Back 129

both Cus

Front 130

EU or European Community (EC)

Back 130

CU of 25 countries & trade among members is free of restrictions, nonmembers must pay the common external tariff

Front 131

NAFTA

Back 131

involves 2 ore more countries abolishing trade restrictions among themselves but each keeping its own tariff rates against outsiders.

Front 132

trade creation

Back 132

in a CU is displacement of inefficient production in a member country by imports from another member; is favorable to world welfare b/c it rationally reorganizes the production within the union.

Front 133

trade diversion

Back 133

is a displacemtn of imports from a nonmember by imports from a member country; is unfavorable, b/c it reorganizes world production less efficiently. Production shifts from the most effectient locations in C to less efficient ones inside the union. The larger the CU, the smaller is the scope for trade diversion & the better is the chance that the CU will have a favorable efffect.

Front 134

consumption effect

Back 134

is a static effect of a CU that represents the increase in domestic consumption

Front 135

infant industry

Back 135

argument for protection suggest that an industry should be protected to allow it to grow in size at which point it can compete. In practice it is often abused.

Front 136

unconditional Most Favored Nation (MFN) Principle

Front 137

"New" products

Front 138

2002 US tariff on steel

Back 138

the tariff on steel products was up to 30%; enraged foreign exporters & the WTO; protected domestic steel producers enabling them to raise prices; but it harmed the domestic steel-using industries, such as automobiles, by forcing them to pay higher prices for steel inputs

Front 139

Reciprocal Trade Agreements Act

Back 139

has been the cornerstone of American commercial polcy since 1934. On one hand, it has permitted the continual tariff reductions on US imports. On the other hand, most extensions of the law embody measures to "safeguard" the interest of domestic industry.

Front 140

safeguard provisions

Back 140

a mechanism which prevents shifts of resources from inefficient import-competing industries into those with a competitive advantage. By protecting industries from import competition, they perpetuate allocative inefficiency & are therefore in direct conflict w/ what the act first sets out to accomplish.

Front 141

escape clause

Back 141

But the country must offer (import) liberalization of some other products to offset this action.

Front 142

national security clause

Back 142

permits withdrawal of concessions inc cases where the affected domestic industry is essential to natl security.

Front 143

trade-adjustment assistance (TAA)

Back 143

a govt program that assists workers & businesses hurt by import competition to shift to new lines of production.

Front 144

offshore assmebly provision

Back 144

products assembled abroad out of parts exported from the US, and then reimported into the US, pay tariff only on the value added abroad.

Front 145

Generalized System of Preferences (GSP)

Back 145

part of the Trade Expansion Act of 1962 offered to developing countries. It granted duty-free entry to the exports of manufactures, semimanufactures, & selected other products from developing countries & territories. Purpose was to help promote the exports and economic development of developing countries.

Front 146

301 provison

Back 146

controversial item of the US trade legislation that requires the administration to publish once a year a list of countries that trade unfairly with the US and negotiate the removal of such practices.

Front 147

political economy of protectionism

Back 147

explains why protection from foreign competition is so common. Despite the damage it inflicts, protectionism is common b/c the gains from protection are concentrated, & the benefits to each gainer are sizable & visible; while the losses (although larger in total than the gains) are diffused and hidden.

Front 148

industrial policy

Back 148

is a policy designed to move resources to industries which the govt considers important. It is not practiced widely in the US b/c the market is viewed as a better guide than the govt to "the industries of the future."

Front 149

trade promotion provision

Back 149

All us trade negotiations are conducted under this. Congress votes on a negotiated trade agreement (up or down) w/o introducing amendments.

Front 150

mutual recognition

Back 150

each EU member recognizes the product standards applied by other member countries. It cannot bar a product from its marked just b/c these standards are different from its own. In US-EU relations, inspection, testing, and certification of IT & telecommunications are mutually recognized.

Front 151

transition economies

Back 151

after a decline of several years, real GDP in the "transition economies" is now on a growth path, & several of them joined the EU. Emplyed 2 types of strategies: 1) shock therapy 2) gradual approach

Front 152

shock therapy vs. gradualism

Back 152

shock: prices & trade were liberalized fast, inflation was chocked by tight monetary policy, & the privatization and demonopolization of industry was started quickly (Poland, Czech Rebup, Estonia); gradual (Russia & China); W/in Euro it appeas that countries following the shock therapy approach suffered smaller falls in output & returend to growht more quickly than the "gradualists."

Front 153

WTO & the envt

Back 153

There are areas in which envmental and WTO rules conflict. This often causes public resentment against the WTO, & requires attempts to harmonize these sets of intl rules.

Front 154

reciprocity

Back 154

"our" country will treat "your" country's firms in the same way that "your" country will treat "our" country's firms.

Front 155

intl environmental agreements

Back 155

The WTO rules may conflict with intl envtmental agreemtns. Or otherwise prevent the enforcement of envtmental measures when trade is involved. 3 ways in which the envt issues become intlized include the impact of envtmental policies on 1) intl competitiveness 2) the assertion of jurisdiction over the other nations' envt policies, and 3) the transborder spillover of pollution into another country or the global commons.

Front 156

Keiretsu & chaebols

Back 156

Issues that remain involved include the domestic anticompetitive practices that also restrict imports. Clusters of companies in Japan (keiretsu) and Korea (chaebols) control much economic activity. Companies w/in a cluster buy from each other, to the exclusion of other, foreign as wel as domestic suppliers. Should the WTO est. rules to limit or outlaw such exclusionary practices?

Front 157

trade promotion

Back 157

the US Congress votes on negotiated trade agreements "up or down" w/o amendments (known as "fast track" rule), last granted to the Bush II administration.

Front 158

privatization

Back 158

less gov't intervention in business

Front 159

Natl treatment

Back 159

requires a counry to treat foreign firms operating within its borders in the same manner it treats its own firms.

Front 160

Uruguay & Doha rounds

Back 160

UR went well beyond tariff reductions & covered agricultural liberalization, phase-out of the Multifibre Agreement, trade-related investment rules, etc. It also est the WTO to replace the GATT.

Front 161

Kyoto treaty

Back 161

an intl treaty mandates signatories to reduce pollution below the 1990 level. The US did not ratify it, and several Euro countries will fail to meet their obligation under the treaty.

Front 162

import substitution

Back 162

a development strategy that has failed. When a country imposes high tariffs and nontariff barriers to imports, & behind this shelter it expands domestic production to replace imports. Fails b/c much capital is invested in industries that could not have survived w/o protection.

Front 163

export-promotion

Back 163

a development strategy that has succeeded in stimulating investment, employment, and GDP growth.

Front 164

UNCTAD

Back 164

is a UN forum where developing countries press their demands in the areas of trade & development.

Front 165

short-run commodity price fluctuations

Back 165

developing countries are concerned about violent short-run price fluctuations in their exports, which in turn generated wide swings in export earnings & in domestic economic activity. Economic growth is said to be the casualty.

Front 166

integrated commodity program (or common fund)

Back 166

developing countries request that the prices of primary commodities (which they export) be stabilized by means of intl commodity agreements lumped into 1 program called the "ICP". Several industrial countries are opposed.

Front 167

beneficiary & donor countries

Back 167

the trade-creation effect: tariffs are reduced on imports from the beneficiary (receiving) countries, which then displace some inefficient domestic production in the donor (giving) country.

Front 168

Generalized System of Preferences (GSP)

Back 168

in the area of manufactured exports the developing countries receive preferential access to the markets of the industrial countries. But the GSP scheme of each industrial country (the US, EU, Japan, etc.) contains severe restrictions on the free or preferential access.

Front 169

rules of origin

Back 169

mandates that the product be wholly manufactured w/in the beneficiary country; or, if imported material & components are used, these must undergo "substantial transformation" in that country - a requirement that the value added must account for at least 35% of the value of the finished proudct

Front 170

polarization

Back 170

refers to the tendency of economic activity within an integrating region to gravitate toward the most developed cities in the region

Front 171

developments in China & India

Back 171

As both countries adopted market economies, they have been growing rapidly.

Front 172

tariff

Back 172

is a tax leving on a commodity when it crosses an intl border. Mostly, it is imposed on an imported good: it is designed to rasie the price of the imports, thereby making the domestic industry producing a similar good more competitive.

Front 173

effective rate of protection

Back 173

is the protection accorded to the domestic value added: It depends on the tariff rates levied on the final product & on the imported inputs & on the share of the imported inputs in the final product.

Front 174

Guides to C.A.

Back 174

Ranking industries by effective protection is inversely related to their ranking by C.A. Another guide to C.A. is ranking industries by the domestic resource cost (DRC) of a dollar earned by exports or saved by imports.