Free Trade Flashcards

1
Q

Beggar-Thy-Neighbour Trade Policies

A

Economic policies implemented by a country to improve its own economic condition at the expense of other countries, often leading to a reduction in global economic welfare.

Famously associated with the Great Depression (1930s), when countries imposed high tariffs (e.g., Smoot-Hawley Tariff Act) to protect domestic industries, exacerbating global economic contraction.

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2
Q

What´s the key role of the WTO

A

The WTO’s key role is in arbitrating trade disputes

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3
Q

retaliatory action

A

Vergeltungsaktion

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4
Q

what are quotas?

A

Quotas are government-imposed limits on the quantity or value of a specific good that can be imported or exported during a given time period.

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5
Q

what are voluntary export restraints (VER) ?

A

A VER is an agreement under which an exporting nation agrees “voluntarily” to limit the volume of goods exported by its domestic producers to any particular market, e.g. the EU automotive market.

It does this in an effort to avoid more stringent trade barriers being imposed on it

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6
Q

Covert or Non-Tariff Barriers (NTBs)?

A

Measures other than tariffs that restrict international trade, often, indirectly.
1. Quotas: Limits on import/export quantities.
2. Licensing Requirements: Restrict market entry through complex permits.
3. Standards and Regulations: Strict health, safety, or environmental standards that disadvantage foreign goods.
4. Subsidies: Financial support to domestic industries, making imports less competitive.
5. Customs Delays: Bureaucratic hurdles slowing imports, deliberately creating bureaucratic red
tape

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7
Q

What´s dumping?

A

firm sells products on the world market at prices below its production costs.
–> drive competitors out of the market and then raise prices

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8
Q

Summarize all trade barriers

A
  1. excise duties levied on imported goods (source of government revenue)
  2. quotas
  3. VER (voluntary exports restraints)
  4. non - tariff barriers
  5. export subsidies
  6. dumping
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9
Q

what are export subsidies for?

A

encourages exports, ruins prices in countries that
have an absolute advantage in the production of, say, sugar, but that are too poor to offer the level of government aid made available in richer countries

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10
Q

what´s the NAFTA?

A

North American Free Trade Agreement
phased out most tariffs on trade between Mexico, Canada and the United States
allowed US companies to move more labour intensive parts of their manufacturing operations to Mexico, where the combination of a fast-growing population, modest educational standards and institutional torpor (Schläfrigkeit) conspired to keep wages low
= cross - border supply chains, –> maquiladoras

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11
Q

name benefits/disadvantages of NAFTA

A

helped US manufacturers remain competitive in increasingly global product markets due to low unit labour costs

job loss and decreasing manufacturing employment

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12
Q

what are benefits of free trade?

A
  1. Economic Growth
    - Increased GDP: Free trade can boost a country’s economic output by allowing businesses to access larger markets = lower production costs (economies of scale)
    - Foreign Investment: Openness to trade often attracts foreign direct investment, spurring innovation and infrastructure development.
  2. Consumer Benefits
    - Lower Prices: Increased competition leads to lower prices for goods and services.
    - Greater Variety: Consumers have access to a wider range of products from around the world.
  3. Increased Efficiency
    - Specialization: Countries can specialize in producing goods where they have a comparative advantage, leading to more efficient resource use.
    - Competition: Companies innovate and improve productivity to remain competitive.
  4. Job creation
    - Export-Driven Employment: Industries that benefit from trade often create jobs, particularly in export-focused sectors.
  5. Innovation and Technology Transfer
    - Access to Advanced Technologies: Free trade encourages the spread of new technologies and ideas.
    - Collaboration: Global partnerships drive innovation and R&D.
    = research and development
  6. Poverty Reduction
    - Economic Opportunities: Trade can help lift developing countries by integrating them into the global economy.
    - Improved Living Standards: As economies grow, wages and living standards tend to rise.
  7. Strengthened International Relations
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13
Q

Name disadvantages of free trade

A

Job Losses: Domestic industries may struggle against cheaper imports.
Economic Dependency: Overreliance on foreign goods and markets.
Environmental Concerns: Increased production and transportation impact the environment.
Exploitation: Workers in developing countries may face poor conditions.
Trade Imbalances: Persistent deficits harm weaker economies.
Loss of Sovereignty: Domestic policies may be influenced by global trade rules.

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14
Q

what´s the china model?

A
  • refers to an economic and political system combining authoritarian governance with a market-oriented economy
  • emphasizing state-led development, innovation, and strategic industries
  • prioritizes political stability, centralized control, and long-term planning over democratic processes seen in Western models.
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