International Trade Flashcards
What is international trade?
Exchanges of goods and services across national borders
Who are the main actors in international trade?
Producers / corporations
Consumers
Governments
How would governments implement trade protections?
Using government policies to discriminate against foreign producers, in favor domestic producers
How would governments restrict imports?
Tariffs: taxes on imports
Quotas: limiting quantities
Product standard
How would governments promote exports?
Subsidies: financial supports
Undervalued currency
What is an absolute advantage in production?
Compares 2 different countries in terms of 1 product
When does a country have an absolute advantage?
A country has an absolute advantage if it can produce more of a given product (or produce it at lower cost) than another country
What is a comparative advantage in production?
Compare 2 different countries in terms of 2 different products
When does a country have a comparative advantage?
A country has a comparative advantage in a particular country when its opportunity cost for producing that product is lower than another country’s
What is the General Agreement on Tariffs and Trade (GATT, 1947)?
Set of rules about what constitutes free trade
Promote free trade through trade negotiations
What is the World Trade Organization (WTO, 1995)?
Signed in 1994, ratified in 1995
164 members as of 2016
What is the structure of the WTO?
Secretariat in Geneva, led by Director-General
Ministerial conference (every 2 years)
General Council
Dispute settlement body & appellate body
What is the core principle of the WTO and GATT?
Based on principle of non-discrimination
Exceptions (Generalized System of Preferences (GSP), Regional Trading Agreements (RTAs))
What is a regional trading agreement?
Reciprocal preferential trade agreements between two or more partners
What is MFN and National Treatment?
MFN: treat all members equally
National Treatment: treat all “like producers” equally
