Chapter 13 Flashcards
terms of trade
quantity of exports required to pay for one unit of imports
- must be between each trader’s local opp costs
- comparative advantage allows for mutually beneficial gains from specializing and trading
winners
canadian consumers, canadian exporters and workers in exporting industries
losers
canadian businesses and workers in import competing industries
government responses to protect losers from freer trade include
tariffs, important quotas, and subsidies to domestic producers
unequal distribution of gains and losses produces political pressure for protectionism to help the losers
- many consumers gain from free trade but gain for each is small
- few businesses and workers in import competing industries lose from free trade but loss for each is large
protectionism
- leaves canadians as a whole worse off
- protecting national security and cultural identity are valid
- protectionism creates risk of retaliation, triggering trade wars that make all countries worse off
economic globalization
integration of economic activies, across borders through markets
- speeding up due to falling transportation and communication costs, elimination of gov barriers to trade
anti globalization groups view international trade as causing problems in developing countries and target
world banks and IMF
What did Joseph Stighitz and hands on economists want
a social safety net to support those left behind by trade and markets
- gov should help loser from expanded trade in import competing industries
- risk is gov gives into political pressure for protectionism
the economist magazine and hands off economists argue
that the harm poor countries suffer from globalization is caused by government protectionist policies not by market forces
- leave markets alone to produce economic growth that eventually benefits all
- risk is losers in import competing industries get no assistance in adjusting
