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36 Cards in this Set

  • Front
  • Back

Trade is...

- "theoretically" beneficial


- voluntary exchange between producers &


consumers


- expansion of business


- consumers get cheaper goods


- each actor concentrates on what they do well


- self-sufficient substitutes


(swap what they do well)

2 Types of Trade Preferences

1. Stolper-Samuelson


2. Ricardo-Viner

What is the "Stolper-Samuelson" Approach?

* trade preference *




- Trade protection benefits the scarce factor of production




- Labor-scarce country:


1. labor benefits from protection


2. labor loses from trade liberalization

What is the "Ricardo-Viner" Model?

* trade preference *




- Some factors of production tied to their industry ARE SPECIFIC to their industry


- Relevant actors are industrial sectors


- Based on principle: "factors of production are not mobile"


- NOTE EASY for labor or capital to shift uses

Ways to Restrict Trade (9)

1. Tariffs


2. Subsidies


3. Sanctions


4. Health/Safety Bans


5. Ethical Bans


6. Legislative Preference/Local Legis. Preferences


7. Local Legislative Preference


8. Volume Restrictions


9. Prohibitions on Military Tech

Hecksher-Ohlin Trade Theory

* way to boost developing economies *




Developing countries:


- Rich in unskilled labor? Utilize manufactured goods to boost economy




*MUST be in a labor-rich environment


ex: Indonesia

Comparative Advantage

- ability of a country or firm to produce a


particular good/service more efficiently than


other goods/services


(in comparison to the efficient production of other economic activities the state may engage in)




- its resources are most efficiently employed in this activity




-

Law of Comparative Advantage

Produce what you can produce best, given


whatever resources are available to you




*what you must do to be successful*

Open Markets

Consumers pay less




Preferred by consumers




Increases competition




* Everyone wants more consumers to sell to, but no one wants to open their consumers to other markets.

Closed Markets

Less competition




Charge @ producers' discretion




Costly to the consumers




Preferred by producers

Who has the most influence in trade policy?

Small Groups/Organizations:


- small sectors = more likely to have


organizational advantage - have focused agenda




- WHY? Problem w/ Collective Action: the more people involved = the LESS likely they are to get attention

Trends of Trade (3)

1. Democracy vs. Authoritarian Regime




2. POTUS vs. Congress:


- POTUS = more nationalist


- Congress = more protectionist




3. Larger States Check Power of Small States




~Labor Unions:


- Local Sector: protectionist (balance narrow scope)


- National Sector: more nationalist



Compensation for Unemployment (2)

1. Worker Retraining Programs


2. Unemployment Packages

True/False:




Trade policies in State A may be less dependent on domestic policies & more


dependent on foreign states.

TRUE:




Policies may be dependent on other states.




Look @ global & economic conditions.

PRISONER'S DILEMMA OF MARKETS:


1. State A & State B = BOTH Closed Markets




2. State A = Closed Mark. ; State B = Open Mark.




3. State A = Open Mark. ; State B = Closed Mark.




4. State A & State B = BOTH Open Markets

Prisoner's Dilemma Market Options:




1. 3rd Best Option


2. State A = Worst Option ; State B = Best Option


3. State A = Best Option ; State B = Worst Option


4. 2nd Best Option




* NOT much incentive to defect.

Ways to Increase Int'l IPE Cooperation (6)

1. Diplomatic Channels


2. Interaction b/w BIG & small nations


3. Fewer states involved = easy to get coop.


4. Tying mulitple industries together


5. Spur cooperation for future cooperation


6. ANY global institutions helping facilitate trade




* More interaction w/ states = increase trust

GATT stands for...?


What is GATT?

General Agreement on Trade & Tariff




- 1st move for a Global Trade Initiative


- lowered trade barriers


- stopped short of liberalization


- system of negotiating agreements in hopes it would generate cooperation


*KIND OF FAILED - DIDN'T GO FAR ENOUGH

WTO stands for...?


What is the WTO?

- replaced GATT


- 80% of world trade is regulated by WTO


- Increased enforcement mechanisms


- Monitors compliance


- GOAL: COMPLETE LIBERALIZATION ; open


borders of trade


- Succeeded where GATT failed (esp. w/ agricul.)


- Helps w/ some non-tariff barriers

What to Regional Trade Organizations do?

- Seek to fix things they see wrong with the WTO




- Deal w/ narrowed base

"What Do Undergrads Need to Know About Trade?"




Misconceptions of Trade (5):

1. Int'l Trade is about Competition


2. Purpose of Trade = Imports


3. Exports = Means to Get Imports Needed


4. Strive for Productivity: high productivity allows for domestic consumption


5. High Revenue from Trade IS NOT Beneficial for Individuals

"The Concern for Competitiveness"




TRUE/FALSE:




It is better to have US-owned companies based internationally w/ foreign workers than to have foreign-owned companies using YOUR workers.

TRUE: Ultimately what you want is a flourishing American encomony.

Poor Countries Tend to Have... (4)

1. Less material wealth (income, GDP per capita)


2. Migration from rural to urban areas


3. Lack of domestic investment in infrastructure


4. Young or rapidly growing populations

What leads to economic inequality?

1. Gov. Policies


2. Ethnicity, Gender


3. Gov. Builidng Infrastructure


4. Gov. Dynasties


5. Arable Land


6. Oppression by Colonizers

The Resource Curse

- countries rich in natural resources are typically poorer countries, regardless of their success & abundance (exception: Saudi Arabia)




- Rich Countries: export maunfactured goods


- Poor Countries: export resource-based goods




* specialize in what you do well *

The Problem w/ Depending on a Produced Good

1. Country produces something the world wants


2. Country's economy becomes dependent


3. Economy = AT RISK if the demand for the good falls

Single Economic Resources & Control

1. Those who control the economically efficient resources in a state also control the economy.


2. Eliminates competing markets


3. Little willingness to expand


4. Money goes to rich, not the poor


ex: South African diamonds

Import Substituting Industrialization (ISI)

- encourage domestic industry


-replaces imports


- high tariffs & import barriers


- state controls foreign exchange & banking

Winners from Import Substituting


Industrialization (ISI) (4)

1. Manufacturing Companies


2. Middle-Upper Classes


3. ANY Domestic Industry


4. Urban Areas

Losers from Import Substitution Industrialization (ISI) (3)

1. Consumers


2. Agriculture


3. Foreign Banks & Industries

Export Oriented Industrialization (EOI)

- state-focused good exportation


- build domestic industry


- make $ by selling


- urban workers do poorly

Washington Consensus

policy encouraging capital input


removes trade barriers


privatizes state-owned industry


VERY liberalized banking system


lower gov. spending & gov. debt

Winners in the Washington Consensus (3)

1. corporations


2. agricultural exports


3. state-specific industries


4. consumers (** in the long run)

Losers in Washington Consensus

1. Non-competitive industry


2. Consumers (** in the short run)


3. Natioanl business


4. Urban workers

State Capitalism

- free trade controlled by state


- state controls manufacturing to exporting


- free trade w/ other states


- EASILY CORRUPTED




* little analysis *

Winners of State Capitalism (3)

1. Gov (ex: Russia & China)


2. Niche Businesses


3. Foreign Traders & Captialists (trade is up)

State Capitalism Losers (2)

1. Workers


2. General Population