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tariff
tax imposed by gvmt on imports
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imports
g&s bought domestically, produced in other countries
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exports
g&s produced domestically, sold in other countries
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since 1950 exports and imports have been
steadily increasing as a fraction of US GDP
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free trade
trade between countries without restrictions
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VER (voluntary export restraint)
agreement negotiated between two countries that places a good that can imported by one country from the other country
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barriers to trade
tariffs, quotas, health/safety requirements
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globalization
process where countries become more open to foreign trade & investment
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in international trade, a market perspective would say that a country exports its goods when its able to be the
lease cost provider in world markets
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gvmts influence international market trade by providing
export subsidies to their own firms or by imposing tax tariffs or quotas on foreign goods
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with downward slopping national demand curves and positively sloppling supply curve a country will
choose not to trade internationally when the world price is equal to its autarkic price
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autarkic price
price that would clear the domestic market in isolation from the rest of the world
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a country will decide to export a good if
the world price is above its domestic autarkic price
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a country wil decided to import a good if
the world price is below its domestic autarkic price
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in an ideal world that consisted of two countries then
goods would be exported by the country with the lower autarkic price and imported by the country with the higher autarkic price
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trade will continue until
world Qd matches world Qs, at the world market clearing price and all mutually beneficial trade have been exhausted
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the economist's story of trade according to comparative advantage is nothing more or less than the story of
the invisible hand working through ideal markets
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the labor theory of value to basically focusing on
(relative) differences in technology
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a country exports a good that has
a lower opportunity cost at home than abroad in terms of production of the other good given up
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differences in autarkic prices may come from differences in
relative abundance of factors of productio
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if per capita income is twice as high in country A than in country B then consumers in country A will
- tend to have a relatively higher demand for goods that ppl consume more of if they are richer
- have a higher autarkic price
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if markets were literally like the ideal market model, there would
be no need for multinational firms
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to understand the presence of multinational firms we must acknowledge that
world markets are less than ideally competitive
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transactions between subsidiaries of a multination firm may be influenced by
differences in national tax structures
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because people have a strong sense of national identity we might have negative views of
trading with hostile countries (north korea)
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introduce free trade to a country that was autarky, then in the exporting country, the price of the exportable good is __________ and in the importing country the price of the same good is likely to __________
thus...
- likely to rise to the new world market clearing price
- fall to the level of the level of the new world market clearing price
- thus net sellers of the good in the exporting country are better off (net buyers are worse off)
- in the importing country net sellers are worse off (net buyers are better off)
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in the ideal market model the winners
win more than the losers lose, country as a whole is better off
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perspective one
- - sees the world as an ideal system of markets
- - no issues of power
- - national boundaries are irrelevant
- - issue: provision of property rights
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perspective two
- - emerges from "political realism"
- - in a global society there are no police forces
- - centered on the notion that "power rules"
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perspective three
- - based on international cooperation for the common global good
- - attractive to europeans
- - used for war on terrorism
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situations to focus on the ideal market model
- 1. where international markets issues are totally independent of international relations....
- 2. where the issues of ideal markets are more important than issues of other perspectives
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