topic 1: globalisation Flashcards
REASONS FOR TRADE (2)
- specialisation
- factor endowments
factor endowments definition
quality and quantity of the country’s supply of resources (FOP - CELL)
globalisation meaning
removal of barriers to rest of the world
- transforms the economy
BENEFITS OF GLOBALISATION (5)
- output (trade+specialisation)
- jobs (based on skill)
- productivity
- incomes
- choices (+SOL)
ECONOMIC BENEFITS OF FREE TRADE (4)
- international competitiveness increase
+ technical efficiency through specialisation - increase standards of living
- increased efficiency in resource allocation
+ via specialisation and comparative advantages - increased employment
NEGATIVE OF FREE TRADE (5)
- growing inequality
- structural UE
- financial contagion
+ dependency on other countries - loss of sovereignty
+ immigration policies, ‘imposed’ restrictions eg - environmental damage
VALID ARGUMENTS - REASONS FOR PROTECTION (4)
- INFANT INDUSTRY
+ EOS - DIVERSIFICATION OF ECONOMIC BASE
–> argument for: increase employment, technology and more use of high skilled workers
–> argument against: fluctuations in global demand lead to fluctuations in prices of major exports, leading to unstable export revenue, result falling incomes - NATIONAL SECURITY
- ANTI-DUMPING
QUESTIONABLE ARGUMENTS - REASONS FOR PROTECTION (4)
- protection of domestic jobs
- parallel importation restrictions
- reducing current account deficit
- prevent greater externalities
protection definition:
any government action with the aim to either hinder foreign competitors of domestic firms or provide an advantage to domestic exporters and/or domestic import-competing firms
tariff definition
government tax paid by the importer on imported goods
subsidy definition
cash property made by the government to domestic producers to offset higher production costs
- increase fiscal spending
subsidy arguments (preferred over tariffs) (8)
- consumer don’t pay higher prices
- lower domestic price
- can be short temp. gov. policy
- lower costs of domestic production
- makes domestic export producers more competitive internationally
- no change in consumption if there is a WP
- redistributes income via tax given to producers (gov rev)
- tariffs are regressive
quota define
physical restriction limiting the quantity or number of goods imported into a country
- increase of quota results in less protection
local content rules (example)
- manufacturing
: trade regulations insist certain % of parts have to be sourced/made in that country rather than imported - broadcasting services act
: 55% of aus programs between 6am-midnight on primary channel
economic integration
liberalisation of trade between countries
BRICS + AEIOU
Brazil, Russia, India, China, and South Africa
+ Argentina. Ethiopia, Egypt, Iran, Oil-rich Saudi Arabia, United Arab Emirates
- AIM: become more representative of developing nations (counter developed countries)
AUSFTA
- permits 10,000 aus professionals (and spouses) to live and work in the US without restrictions and can be renewed indefinitely
- allows aus to bypass the pool of hundreds of thousands of applicant competing for right to work in America
2018: around 5,600 aus are currently in scene
CLOSER ECONOMIC INTEGRATION
- trade agreements
- free trade area
- customs union
- common market
- monetary union
trade agreement definition
bilateral, regional, and multilateral agreement to bring down barriers to trade between signatory countries
- AUSFTA (bi), CERTA (bi), ASEAN (regional), APEC (regional), WTO (multi)
bilateral free trade agreement definition
between 2 countries
- limited scope (don’t involve trade diversification)
- aus has 13 ftas
multilateral free trade agreement definition
MORE THAN TWO countries
- large amt of members
PLURALATERAL
FTA with up few dozen members
- AANZFTA: with ASEAN and NZ
DISADVANTAGES OF BILATERAL FREE TRADE AGREEMENTS + FREE TRADE (6)
- inefficiencies: if the most efficient supplier is not in the FTA and attracts a higher tariff, then aus will buy from FTA partner
- secrecy: negotiated behind closed doors, can favour TNCs over consumers
- loss of gov. rev
- greater regulation: rules of origin monitoring
- diverting trade to less efficient members
- administrative paperwork on ‘rules of origin’
- costly monitoring
CUSTOMS UNION - SINGLE TRADE POLICY
- EU members trade without customs duties, taxes or tariffs between themselves and charge the same tariffs on imports from outside EU
- members cannot negotiate their own trade deals outside the EU, which is why leaving it has been one of the UK government’s BREXIT goals
COMMON MARKET - SINGLE MARKET
- aims to remove fiscal barriers to trade (tariffs) but also the physical and technical barriers by allowing the freest possible movement of goods, capitals, services and people
- treating 27 members in EU as single trading territory
ASEAN - FORUM
- association of southeast asian nations
- dreams of moving towards and EU model
- regional group of 10 developing countries in region where economic disparities and political, social and cultural diversity are extremely large, making further integration difficult
- STUCK BETWEEN AUS AND CHINA
TRANS PACIFIC PARTNERSHIP
FTA - liberalisation push
ISSUES:
- focus on weakening state owned enterprises
- classifying gov domestic procurement as form of protection
- intellectual property - obliging signatory states to amend their laws to grant virtual monopoly to such holders
- restrict capital and speculative financial controls
- investor-state dispute settlement (ISDS) tribunal
RCEP - REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP
- china’s regional comprehensive economic partnership signed by 15 countries by AUS, CHINA, JP, KOREA, NZ and 10 members of ASEAN
- USA dropped out of TTP in 2017 (trump) – CHINA stepped up – USA LOCKED OUT OF PACIFIC LARGEST FREE-TRADE CLUB
- includes chapters covering trade in goods, trade in services, investment, economic and technical cooperation, creates new rules for electronic commerce, intellectual property, gov procurement, competition, and small and medium sized enterprises
- EU STYLE BLOC
embargo
gov order that restricts commerce/exchange with specific country
TNC
transnational corporations
opportunity cost formula
sacrifice / gain
absolute advantage
a country can produce ONE good with fewer resources than another
comparative advantage
where country can produce BOTH goods at a lower cost – sacrifices less resources in production of both areas
OR
situation enjoyed by a country if the opportunity cost of producing a good is lower in that country than it is in a second country
