International Trade Flashcards
Absolute advantage
Occurs when a country can produce a product using fewer fop than another.
Comparative advantage
A country should specialise in the g/s it can produce at the lowest oppo cost and trade with another
Enables to produce beyond PPF
Mutual benefit
Index of term of trade
Index of export p/ index of import p
Trading bloc
A grp of countries that have signed an agreement to reduce or eliminate tariffs, quotas and other protectionist barriers bet themselves
Trade creation
Welfare gain of joining of customs union
Low tariff
The switch from purchasing products from a high-cost producer to a lower-cost producer
Trade diversion
Welfare loss of joining customs union
Common ext tariff
Optimum currency A
A grp of countries where efficiency would be maximized by sharing a common currency
Preferential trading A
Lower barrier
FTA
Free trade, own tariff against non-member
Customs union
Common external tariff
Common mkt
Free movement of fop
Eco union
Harmonization of eco policy
Protectionism
When a country take actions to protect its own industries by restricting trade with other countries
Key word: trade restriction
Dumping
Sales of goods at less than cost price by foreign producers in domestic market
Quota
Physical limit on the quantity of an imported grp
expenditure reducing (reduce ça deficit
D level of consumption and AD
Expenditure switching (reduce ça deficit
Switch D away for imports towards domestic g/a
Globalization
Growing integration and interdependence of the world eco
Infant industry
Rationale for protecting domestic firms fr foreign competition until they have grown large enough to achieve Eos to match rival firms
Hot money
Money in search of highest sr rate of return available internationally
Floating er
Determined solely by the forces of D/S
Fixed er
Fix er to the p of another country
Managed er
Primarily determined by D/S but the gov may intervene on occasion to influence the er
Revaluation
Fixed: upwards adjustment
Devaluation
Fixed: downwards adjustment
Appreciation
Floating er I
Depreciation
Floating er d
Transactions D(er
D for currency derives from ppl wishing to buy g/s from that country
Speculative D(er
Higher ir attracts speculators to U.K. Banks in order to achieve a higher return
Marshall-Lerner condition
Devaluation/depreciation of the er will only improve a CA deficit/increase in net X if the sum of the PEDs for X and M is greater than 1
PEDx+PEDy>1
J curve
Depreciation leads to SR d in CA and and LR i in CA
Poverty/earning trap
An indi is little better off or worse off when gaining an i in wages bc of the combined effect of increased tax and bene withdrawal
Labour mkt flexibility
The degree to which d/s in a labour mkt respond to external changes to return the mkt to equil
Interventionist pol
Correct mkt failure
Mkt-based pol
Reduce barriers to the free mkt
FDI
Spending by firms on productive capacity in other country
Purchase of foreign company/setting up of plants
FDI Outflow
Debit on financial a
But may lead to inflow on CA
What makes up the bop?
Financial a
Cap à
Current a
What makes up financial a?
FDI
Hot money
Portfolio I
Gov i
Eva of FDI
Repatriation of profits (investment income)
Eva of ça
Primary product dependency
Productivity
Output per worker per hour worked
competitiveness
List factors that determine non-p and p compe
A country’s ad/disadvantage in selling exports in international markets
ULC: prod, NMW, flexibility( labour laws, TUs
Px:infrastructure, corp tax, inf
Quality
ULC
Total wage/ unit output
E.g. Of expenditure switching
Protectionism and devaluation
E.g. Of expenditure reducing
Contractionary
J curve
SR fall in BOP following a devaluation Before LR elastic PED for M and X leads to rise
crowding out
Public sector spending reduce private sector i
Real er
The p of a country’s goods relative to abroad when expressed in a common currency
AN Containérisation
Easily transferred bet diff modes of transport
Reduce cost: less labour=>higher labour productivity
Container principle
WTO and its aims
Supervise and libéralisé international trade
Libéralisation, rules, dispute settlement
Factors that encourages FDI
Infrastructure Labourforce skill X tariff X mkt Exchange control
Ad of fixed er
P stability
WTO roles
Anti dumping
Anti protectionism
