Ch 6- Political Economy of INTERNATIONAL trade

Question 1

Trade and World Output: what are the precentages?

Answer 1

80% merchandise
20% services

Question 2

Define Trade Surplus

Answer 2

trade surplus exists when a countries exports are greater than > imports

Question 3

Define Trade Deficit

Answer 3

trade deficit exists when a country’s imports greater than > exports (points to the smaller value)

Question 4

what it the main goal of a Free Trade Deal?

Answer 4

Seek to remove barriers to trade between member countries. The
most common barrier to trade is the tariff

Canada’s most important trade deal is the USMCA Free trade deal.
(United States, Mexico, Canada). Formerly known as NAFTA.

Question 5

What are Advantages of Free Trade Deals?

Answer 5

Advantages
* Lower prices for consumers
* Increase the amount of product choice for consumers
* Make it easier for Canadian exporters to expand internationally

Question 6

What are the disadvantages of free trade deals?

Answer 6

Disadvantages
* Increases competition for domestic companies
* Can result in job losses in Canadian industries that are not globally
competitive
* Can impact Canadian sovereignty and culture- opens up boarders for foreign investors

Question 7

Political Reality Of International Trade

Answer 7

restricting imports of goods and services into their nation

adopt policies that promote exports

Question 8

Define Tariffs and what do they do?

Answer 8

Taxes levied on imports that effectively raise the cost of imported products
relative to domestic products

increase government revenues
* force consumers to pay more for certain imports
* are pro-producer and anti-consumer
* reduce the overall efficiency of the world econom

Question 9

What are the two types of tariffs used?

Answer 9

Specific tariffs
* levied as a fixed charge for each unit of a good imported (oil barrels)

Ad valorem tariffs
* levied as a percentage of the value of the imported good (clothing)

Question 10

What are Subsidies

Answer 10

Are Government payments to domestic producers
* Subsidies help domestic producers
* compete against low-cost foreign imports
* gain export markets
*
They can be in the form of:
* Cash grants
* Low-interest loans
* Tax breaks
* Government equity participation in the company