Globalization Flashcards
What is free trade
Free trade is a system that promotes competition, innovation, and specialization among companies by removing barriers like tariffs or regulations.
What is fair trade?
Fair trade is an economic idea that supports regulating markets to protect producers in poorer countries. It aims for fair prices, improved living conditions, and the removal of unfair trade practices.
What is the Washington Consensus?
Neoliberal economic policy, supported by institutions like the World Bank and IMF, advocates for free trade, privatization, and minimal government intervention in the economy.
What is the “comparative advantage” in trade
This is when a country specializes in products with the lowest opportunity cost, allowing it to trade for other goods and benefits from efficiency as per David Ricardo’s theory
How does free trade lead to increased productivity
Free trade fosters competition, which drives innovation and higher productivity, resulting in lower prices or higher wages.
What is meant by “anything that inhibits trade is discouraged” in free trade?
Free trade discourages tariffs, quotas, non-tariff barriers, and policies like minimum wages and environmental regulations that limit international competitiveness.
What is the core argument of fair trade advocates?
Fair trade advocates argue that historically, rich nations protected their markets, restricting poor nations from competing fairly, and that markets should be regulated to support poorer producers.
What does “dependency theory” suggest about fair trade?
Dependency theory posits that the global trade system is structured to keep developing nations dependent on developed ones by trading lower-cost goods for higher-cost industrial goods.
What is “absolute advantage”?
Absolute advantage refers to a country’s ability to produce goods more efficiently (using fewer resources) than other nations, often due to natural resources, population, or policies
What does the heterodox economic argument say about developing nations?
It argues for trade protection and institutional reforms to promote industrial development, skill upgrades, and protect infant industrie
What were the Commodity Control Schemes?
These schemes, developed by the UN, allowed countries to withhold products from the market to stabilize prices, though they faced political challenges and were not fully successful.
What are compensatory finance schemes?
These schemes provide financial support to rural producers when prices fall below a set target, as seen in the STABEX system adopted by the European Community.
Name some principles of fair trade.
Fair trade principles include state intervention in market rules, sustainable development, full employment, food security, local prosperity, and prohibiting child labor.
What are some criticisms of fair trade?
Critics argue fair trade operates within a neoliberal framework, supporting competitive markets and free trade, but often fails to address core political structures and inequalities in international trade.
What is South-to-South trade?
South-to-South trade is trade between developing countries, growing from 8% in 1980 to 26% in 2011, with significant involvement from China and other BRICS nations.
What was the impact of the Preferential system on St. Vincent and the Grenadines?
The system allowed the Caribbean nation to engage in banana production but led to a crisis when dismantled, prompting the government to boost public spending and join alternative alliances.
What is the concept of “dynamic comparative advantage”?
This concept argues that successful economies rely on government policies to encourage manufacturing, R&D, and technological advancement, rather than fixed comparative advantage.
How did the COVID-19 pandemic affect global trade?
The pandemic disrupted supply chains, led to order cancellations, job losses, and a boom in digital technology, while also prompting a focus on re-shoring essential goods.
