international trade
Terms
undefined, object
copy deck
- national security argument
- argument is made by reps. of industry rather than the defense establishment.companies have an incentive to exaggerate thei rrole in national defnse to obtain protection from foreign competition. a nations generals may see things very differently.
- exporting country
- domestic producers of the good are better off, and domestic consumers of the good are worse off. trade raises the economic well being of a nation in the sense that the gains of the winners exceed the losses of the losers.
- exporter
- a low domestic price indicates that the country has a comparative adv. in producing the good
- tariff
- a government tax on imports or exports
- importer
- a high doemstic price indicates that the rest of the world has a comparative adv. in producing the good
- protection as a bargaining chip argument
- policymakers claim that the threat of a trade restriction can help remove a trade restriction already imposed by a foreign govt. problem is that the threat may not work. if it doesn't work, country has a diff. choice. it can carry out its threat and implement the trade restriction, which would reduce its own economic welfare. or it can back down from the threat , which would cause it to lose prestige in international affairs. faced with this choice, country would probably wish that it had never made the threat in the first place
- importing country
- domestic consumers of the good are better off, and domestic producers of that good are worse off. trade raises the economic well being of a nation in the sense that the gains of the winners exceed the loss of the losers.
- effects of free trade
- comparing the domestic price without trade to the world price
- infant industry argument
- primary reason is that this argument is difficult 2 implement in practice. to apply protection successfully, the govt. would need to decided which industries will eventualy be profitable and decide whether the benefits of establishing these industries exceed the costs to consumers of protection. and once a powerful industry is protected from a foreign competition, the "temporary" policy is sometimes hard to remove. protection isnt necessary for an industry to grow. firms in various industries incur temporary losses in the hope of growing & becoming profitable in the future. and many of them succeed, even without protection from foreign completion.
- benefits of international trade
- increased variety of goods, lower costs through economies of scale, increased competition, enhanced flow of ideas
- job argument
- free trade creates jobs at the same time that it destroys them.even if one country is better than another country at producing everything, each country can still gain from trading w/ the other. workers in each country will eventually find jobs in the industry in which that country has a comparative advantage.
- price takers
- market participants that cant influence the price so they view the price as given
- world price
- the int'l market price of a good determined by world supply and demand