Trade Flashcards
When does protectionism occur
when countries opt to improve restrictions on imports of goods and services from abroad
Examples of protectionism
tariffs, quotas, intellectual property laws (patents), technical barriers to trade(product labelling rules), subsidies
What are tariffs
a tax or duty that raises the price of imported products
What are quotas
quantitative (volume) limits on the level of imports allowed into a country
When does economic integration occur
when countries agree amongst themselves to abolish some (or all) protectionist measures on trade between them
What are the 5 levels of economic integration
free trade area, customs union, single market, monetary union and economic union
What is a free trade area
countries agree to eliminate tariffs and quotas on trade in goods between themselves e.g. NAFTA
What is a customs union
free trade area and all members impose a common external tariff on non-member countries
What is a single market
all members allow free movement of goods, services, labour and capital between each other
What is a monetary union
when members of union agree to operate single currency in their respective economies e.g. the eurozone
What is a monetary union
when members of union agree to operate single currency in their respective economies e.g. the eurozone
What is an economic union
all members of the eurozone pursue a single monetary policy
what does economic integration give
its protectionist and gives member countries an advantage over non-members.
Why is protectionism good
‘infant industries’ (helps them develop), reduce negative externalities (internalize social cost), protect jobs and improve the balance of payments, protects strategic industries, discourages dumping
Why is protectionism bad
distorts the market (higher prices, allocative inefficiency), productive inefficiency (low incentive leading to higher AC and x-inefficiency), regressive tariffs, trade wars