CM 2 Flashcards

1
Q

Ancient plea for free trade

A

17th C. “Classical” English liberal philosophers argued to open borders of trade & ideas

superior virtues of laissez-faire - “laissez faire les hommes, laissez passer les merchandises”

French authors - only legitimate mission of State is to protect individual freedoms

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2
Q

Montesquieu’s beliefs

A

Freedom of trade is the condition of peace between nations

‘De l’esprit des lois”

trading predisposes to dynamism & economic growth - Latin “negotium,” in negation with idleness

unions based on mutual needs

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3
Q

Recent pleas for free trade - Yagdish Bhagwati

A

free trade promotes global economic development

opposing it does not better protect social rights & environment

protectionist temptations (antimondialisation) to detriment of prosperity in all countries

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4
Q

Recent pleas for free trade - Paul Samuelson

A

free trade creates a shareable global surplus of wealth

only area that pits all economists against all politicians

all economists for it, even those who seek to amend traditional theories of international trade

free trade allows better allocation of resources - Ricardo’s model

poorer, less productive countries can gain from trade liberalisation

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5
Q

practitioner’s point of view - Pascal Lamy

A

trade creates continuity between underdevelopment & development

2012: developing exceeds developed countries trade

‘mondialisation’ has lifted billions from poverty, but growing inequality

irrelevance of protectionism & economic patriotism

the share of foreign components in the national product sold abroad was at 20% twenty years ago, 40% today, 60% in future

if economic patriotism means wanting to consume & export as much national product as possible - no longer makes sense

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6
Q

2030 - developing countries GDP

A

will represent almost 60% of global GDP

due to ‘mondialisation’ of economy & financial/economic crisis encouraging global economy’s transformation

consequence of participation & influence in global economy

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7
Q

pleas against freedom of trade - enrichment of nation by protectionism

A

Trade as a war for for money/another way of waging war

Colbertism : based on mercantilism’s objective to allow State dominance

Mercantilist doctrine legitimises prohibitionist practices, like ban on importation of foreign finished products

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8
Q

pleas against freedom of trade - ‘mondialisation’ penalises rich countries

A

competition between unequal countries negative for developed market economy countries

due difference in wage & social protection levels

favour establishment of negotiated protections, social, & environmental standards

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9
Q

virtues of free trade are exaggerated - Dani Rodrik

A

‘comparative advantage” (international specialisation) locates exchange gains at import level

function of export only to finance import (giving up domestic production)

assumes all countries play the game by importing in proportion to national wealth

liberalisation expected to boost exports, wealth, & job creation

assumes all countries simultaneously manage to export

countries that manage to increase exports gain

trade agreements create jobs in certain countries at the cost of destroying them in others

free trade assumes trade grows in a strong & balanced manner

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10
Q

free trade as instrument of Southern enslavement

A

reality of trade is exploitation of nations by other nations

Samir Amin

colonialism & capitalism fundamentally inseparable

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11
Q

Free trade enriches & improve efficiency

A

increase production efficiency

each country develops more productive activities & abandons those less so

result is greater management of global available resources

improves well-being

supports growth and generation of distributable wealth surplus

increases welfare in participating countries

productivity - division of labour - efficiency - growth - jobs/income

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12
Q

free trade fortifies well-being & social justice

A

benefits consumers

stimulates competitions with increased variety of goods & lower prices

losses of certain companies/sectors offset by other gains, esp. consumers

corrects international inequalities

distribution of trading gains take place spontaneously, to benefit of the poorest countries

rich countries receive smaller gain due to importance of their demand increasing the price of imported goods

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13
Q

free trade frees us from risk of “capture of public authorities”

A

serves the general interest, non-discriminatory

restrictions limit import & export

limited supply artificially raises prices allowing abnormally high profits

protectionism serves particular interests, risking “capture by public authorities”

Bastiat’s petition from the candle makers asking for protection against unfair competition form the sun

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14
Q

free trade pacifies relations between nations & protects environment

A

ensures social peace

in event of recession, improvement of one social class in detriment to another - conflictual wealth distribution

growth facilitates reconciliation of interests

free trade promotes growth & distributable surplus

guarantees better environmental protection

poverty exerts strong pressure on planet’s resources, not prosperity

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15
Q

protectionism strengthens nation’s cohesion & independence

A

free trade as the gateway to trade wars

international relations remain conflictual

free movement implies that producers of goods may choose the countries where they sell/invest, i.e. where work is cheap & tax standards are low

perfect mobility of goods leads to competition of workers & economic systems, allowing “best economic & ecological” countries

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16
Q

protectionism serves nation in crisis periods

A

serves national interests

promoting exports/curbing imports stimulates activity in decline, preserving jobs

alternation between phases of protection & liberalisation explained by alternating phases of prosperity & crisis

larger the country, more effective the protection

reduction in larger countries’ imports weigh on world market

decline it its’ demand lowers global price of goods

make foreign producers pay part of customs duties

duties paid by consumers in protecting country decrease as demand decreases

17
Q

educative protectionism is springboard to industrialisation

A

“industries in infancy” argument

F. List’s theory of “infant industries”

importance of fixed costs & learning effects in industrial activities that advance industrially superior countries - first mover advantage

countries who enter late have higher production costs, preventing the emergence of their industries

free trade accentuates international disparities

must protect by isolating the “infant industries” from foreign competition

18
Q

protectionism can help national industry adapt in crisis

A

“aging industries” argument

protection/public aid can help industry to overcome difficulties, modernise, or redeploy

ensuring rehabilitation

delicate intervention : nationality of firms called into question, as global mobility of companies intensifies

19
Q

international openness & domination of rich countries

A

unequal exchange

third world in an impasse

20
Q

protecting social standards of PDEMs threatened by Southern competition

A

disparities in social systems can cost advanced countries, due to differences in social protection

origin of proposal to establish social standards

emerging economies main targets of proposal

see it as a selfish protection by interests of rich countries under guise as defence of human rights

21
Q

protection can provide greater benefits than free trade

A

strategic trade policy argument developed in 1980s In US by Brander & Spencer

free trade not optimal in sectors with significant economies of scale & oligopolistic competition

subsidies can provide greater national benefits

22
Q

free trade neglects environmental protection

A

free trade increases energy consumption and
intensive use of natural resources

stimulates migration of polluting activities to “lower bidder” countries

encourages “environmental dumping”

proliferation garbage ships, oil spills, disappearance of resources fuels anti-free trade movements

environmental impact complicated

23
Q

Why tightening of US trade policy ?

A

American economic decline since 1978

facing rise of new powers

comeback of neo-protectionist current

attack blind supporters of “laissez-faire” who dismantle the US industry

doubt superiority of free trade

internationally trade as a zero-sum game - advocates self-limitation agreements

24
Q

Trumponomics

A

diplomacy of distrust

Independent American foreign policy

since 2017 : fear of retrenchment could generate trade wars

Trump initiated foreign policy - impose primacy of US domestic economic & financial interests on world

withdraw from trade agreements and surtax imports

supports Brexit

25
Q

Europe & the UK

A

1957 : tensions with European project, the Common Market

UK’s foreign trade gained rapid momentum after joining European Community

since 1990 : more import than export, EU account balance becoming structurally negative

26
Q

UK after Brexit

A

economy weakened by uncertainty over Brexit outcome

by 2030 : GDP 5% lower than in 2016 and significant ‘Brexit tax’ on households

magnitude of effects depend on exit conditions