Trade Flashcards
Five kinds of protectionism
Tariffs, Quotas, Embargoes, Subsidies, Administrative barriers
Reasons for protectionism
sunrise industries
sunset industries
strategic reasons
over-specialisation
Beggar-thy-neighbour policy
solving economic problems by worsening problems for others
“Most favoured nation rule”-WTO
Discrimination in tariffs is prohibited, same rates apply for all WTO countries
Economists against free trade
List
Stiglitz
Trade creation definition
Increase in economic welfare from joining a free trade area
What is “reciprocation”
Countries lowering tariffs as a result of liberalisation
Problems with trade creation
Domestic job losses are more obvious than gains in trade,
producer surplus,
government revenue,
balance of payments
Comparative advantage
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners.
Problems with comparative advantage
Cost of trade
New trade theory
Gravity theory
New trade theory
determinants of international trade are economies of scale and network effects
developed economies have similar opportunity cost
first mover advantage for industries
Paul Krugman 2008
Gravity theory
You only trade with countries close by
Definition of globalisation
The process of increased integration and cooperation of different national economies.
Does trade creation necessarily harm domestic producers
No- associated benefits from trade creation are dynamic effects-drive down costs- soften the impact on producer surplus
Gains from free trade for both countries depends on
mutually beneficial terms of trade
