Week 4.1 International Trade Overview

Question 1

What is Mercantilism?

Answer 1

Economic system of trade. Mercantilism was based on the principle that the world’s wealth was static, that is that the supply of gold and silver was finite. Consequently, governments had to regulate trade to build their wealth and national power.

Question 2

What years did Mercantilism span?

Answer 2

Mercantilism was an economic system of trade that spanned the 16th century to the 18th century.

Question 3

What was the rule of mercantilism?

Answer 3

Countries must regulate their trade to keep as much of the gold and silver as they can, depriving other countries of it. There are various methods in which they can achieve this (ie. a colonial system)

Question 4

True or False Mercantilism was based on the idea that a nation’s wealth and power were best served by increasing exports and reducing imports.

Answer 4

True

Question 5

What tools did mercantislim use ?

Answer 5

Dominant economic idea that used tariffs and military force as tools.

Question 6

Who were the most abundant users of mercantilism?

Answer 6

European Colonial powers

Question 7

What idea did mercantilism revolve around?

Answer 7

They embraced the idea that economic strength came from reducing imports and emphasizing exports in order to hold on to and increase their gold supply

Question 8

How did nations facilitate mercantilism?

Answer 8

they strove to develop colonial systems that would allow them to extract resources

Question 9

——- was very important with mercantilism.

Answer 9

Colonialism was a very important within mercantilism.

Question 10

The most abundant users of mercantilism included….

Answer 10

Large trading countries such as England, France, Dutch and Spain.

Question 11

“the triangle of trade”

Answer 11

The imperial power constructs a system in which all economic activity is conducted with the purpose of extracting resources from the colony to benefit the “mother country”.

Question 12

How does mercantilism work?

Answer 12

The Need to Maintain a Trade Surplus
The Importance of a large population (rep wealth)

Question 13

Greater EXPORTS than IMPORTS

or

Greater IMPORTS than
EXPORTS

Answer 13

Greater EXPORTS than IMPORTS

Question 14

In order to make mercantilism work, need strong domestic labour force and army
Nations must use regulations to protect their national economy from outside rivals. This includes making it so that their colonies cannot independently trade with European powers.

Question 15

The Navigation Acts from 1660
What was the navigation act.

Answer 15

England passed the Navigation Acts which prevented their colonies from selling directly to other European countries

Question 16

True or false Navigation Acts encouraged colonies to deal directly with European countries.

Answer 16

False
Navigation Acts prevented colonies from dealing directly with European countries.

Question 17

For the colonists, this stripped away any notion of free trade and restricted their markets severely.

Answer 17

The First Navigation Act forced other European nations to buy goods in England - they couldn’t go to the American colonies seeking goods or raw materials.

Question 18

Why were colonial powers’ ability to develop their own markets and economies were severely restricted.

Answer 18

due to the fact that the purpose of the colonial system was only to benefit the mother country (aka England)

Question 19

What was the navigation Act 1600, a primary causing factors of ?

Answer 19

the American Revolution

Question 20

Corn Laws
From the late 1700s until 1848 England placed tariffs on the import of grains and other foodstuffs to protect domestic producers. Eventually they gave preferential rates to colonies like Canada but maintained their protection

Answer 20

By the late 1840s it had become clear to many that food was too expensive. People were going hungry. The Robert Peel government repeated the Corn laws to let more inexpensive food into Britain

Question 21

Goal of mercantilism…

Answer 21

Goal of mercantilism was to restrict the ability of other countries to ship food into the United Kingdom, Britain and England in order to protect the livelihood of British farmers. British farmers had a difficult time growing enough food at a low enough price to feed a rapidly growing population in the United Kingdom.

Question 22

British conflict: do we let in cheap food from around the world and our own farmers suffer or do we protect our own farmers
In the 1840s, British farmers could not succeed in feeding the entire population. Beneficial tariffs were given to Canada and Australia, however, this did not solve the problem.
The Robert Peel Government abolished the Corn Laws and eventually the Navigation Act in order to introduce free trade in Britain, and bring in inexpensive food.

Answer 22

The Economist Newspaper has its origins in this period of 1848, as a paper that campaigned against the corn laws and argued in favour of the repeal. They regularly celebrate their success of 1848. This meant less expensive bread and people were able to eat again. Hunger became less of an issue in Britain.

Question 23

When did the decline of mercantilism come about?

Answer 23

The Decline of Mercantilism
By the beginning of the 1800s the Adam Smith idea that trade helped everyone more than protection was taking hold.
The U.K. moved towards free trade, helped by the fact that they were an established and powerful economy.
Adam Smith
Adam Smith and many others believed mercantilism was based on a false premise and believed that they could generate much more wealth with more trade. Both partners of a trade agreement benefit, rather than just the mother country. This led to significant economic success.