W8

Question 1

Has globalisation been constantly rising?

Answer 1

NO

there have been declines cuased by world wars etc. and covid

Question 2

Why is there trade?

Answer 2

competitive advantage

specialization

more efficient to mass produce

net exporters and importers - equilibrium is hard to break out of - don’t necessarily import and export the same goods

transport has become cheaper - Suez Cannal

Communication for global this has been critical

Question 3

What is globalisation?

Answer 3

a process by which the economies of the world become increasingly integrated

by the freer flow across national boundaries

of goods, investment, finance and labour

also more broadly applied to ideas, culture, and disease

Question 4

When did globalisation begin according to O’Rourke and Williamson?

Answer 4

they differentiated between

trade expansion driven by booming supply and demand
vs

trade expansion driven by integration of markets - as signalled by converging prices in different markets

they find that globalisation began in the late 19th cent

Question 5

What is the idea of trade and surplus?

Answer 5

Need to produce enough in order to have a surplus to trade

• this reduced the gap in prices

Question 6

What is the big mac index?

Answer 6

looks at purchasing power - compare a basket of goods between countries and looks at the exchange rate and therefore the different prices of each good

Question 7

What is a driver of trade? (3)

Answer 7

specialisation

capability

resource endowments vary across countries

Question 8

What is a barrier of trade?

Answer 8

transport costs

communication costs

tariff barriers (regulations that need to be followed before trade can begin - impact on how much trade acc. happens)

non-tariff barriers

Question 9

What are some technological changes that could impact trade?

Answer 9

specailisation, capabilities increase

trnsport or communication costs reduced

Question 10

What are institutional changes that can impact trade?

Answer 10

tarrif barriers and non-tarrif barriers

putting up limits on trade or complying with regulations - high regulations may impact how many countries would be willing to conform to these regulations and thus much they would trade with you

Question 11

In terms of trade what is an absolute advantage?

Answer 11

a country that can produce somethign more cheaply than others, and so exports it
eg. natural resources are involved - it may be impossible for other countries to produce it

Question 12

in terms of trade what is a comparative advantage?

Answer 12

a country may be more productive acorss the board than its trading partners, but exports those products where its relative advantage is greatest

Question 13

How do you know if you have a comparative advantage?

Answer 13

if in an absence of trade it is relatively cheaper to produce a good

when the opportunity costs of producing a good is less - can be measured in relative prices in terms of the ratios of goods

i.e how many apples do we have to give up to produce a unit of wheat

Question 14

What are some sources of comparative advatnage?

Answer 14

factor endowments
- agricultural production need the right climate and soil

• oil exporting needs oil reserves
• countries with little capital goods (machines) export labour-intensive products - eg. textiles and assembled iPhones
  (idea of hisotircla investments in cap. inputs - machinery allows us to do something)
• countries with skilled labour export skill-intensive products eg. aircraft engines and iPhone designs

Learn by doing
- the first companies in an industry may be able to stay ahead because costs fall with cumulative output

Question 15

After trade and specialisation what would a dotted red line above the current production line mean?

Answer 15

it would be the feasible frontier after specialistion - how much more could be produced - it would start at the same min point and then go out at an angle

Question 16

how do you measure intra-industry trade?

Answer 16

intra-industry trade =

1- (exports-imports)/exports+imports

T ranges from 1-0
when 0 = nation only imports or exports goods
when 1 exports=imports

Question 17

How would intra-industry trade impact trade generally?

Answer 17

additional driver - lack of variety in conjunction with increasing returns to scale

Question 18

Why is trade good for cliamte change?

Answer 18

• resource efficiency - richer countries are more environmentally friendly in general
• access to cheaper low-carbon tech eg. chinese solar pannels
• exchange of knowledge and ideas - current cc risks and therefore mitigation and adaption
• can use the surplus gained from trade to invest in good public services or finding new fields to transition to

Question 19

why is trade bad for cc ?

Answer 19

• trade expands production = more co2 emisions
• trade can lead to specialisation of carbon-intensive production in less environmentally regulated regions eg. production of iron and steel in china
• trade requires often carbon-intensive transport
• exploitation of countries not paying high wages - exploitation and coercion

Question 20

What is the relationship of wealth of nations and embodied emissions of trade?

Answer 20

poor countries are exporting CO2

richer countries are importing Co2 - don’t produce products therefore have lower Co2 3missions but consumer of the product

Question 21

What is spill over in abatement?

Answer 21

the abatement effort in one country can spillover to the rest of the world through common tangible or intangible carbon reducing assets

but the carbon price cannot be too high

Question 22

What is carbon leakage?

Answer 22

the subset of trade embodied emissions that are specifically caused by climate policy asymmetries

• concern that when one country decides to implement ambitious policies to encourage industries to transition to carbon0neutral production - compliance costs are passed to the consumer or absorbed by the companies
• might be undercut by importers that have not paid the equivalent carbon prices leading to leakage

Question 23

What is a border tax adjustment?

Answer 23

impose carbon tax on imports from countries with no (lower) carbon tax/price

give rebate to domestic exporters to countries with no/low carbon tax/price
(or just give a tax on importers)

idea that it would prevent leakage - but there is no concrete proposal by the Eu yet

Question 24

What is the problem with border tax adjustment?

Answer 24

could increase leakage

could use up lots of political good will

administrative burdens

interference with trading rules eg. the WTO

how do you compute relevant emissions - direct or indirect emissions

maybe its becoming less urgent due to carbon pricing efforts everywhere