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Олон улсын худалдаа

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Олон улсын худалдаа

  1. 1. International Trade
  2. 2. The Gains from Trade <ul><li>The law of comparative advantage </li></ul><ul><ul><li>specialisation as the basis for trade </li></ul></ul><ul><ul><li>absolute advantage </li></ul></ul><ul><ul><li>comparative advantage </li></ul></ul><ul><ul><li>the gains from trade based on comparative advantage </li></ul></ul>
  3. 3. Production possibilities for two countries Pre-trade exchange ratios Less developed country: 2 wheat for 1 cloth Developed country: 1 wheat for 2 cloth International trade exchange ratios Less developed country: 1 wheat for 1 cloth Developed country: 1 wheat for 1 cloth (LDC exports wheat: DC exports cloth)
  4. 4. Production possibilities for two countries Pre-trade exchange ratios Less developed country: 2 wheat for 1 cloth Developed country: 1 wheat for 2 cloth International trade exchange ratios Less developed country: 1 wheat for 1 cloth Developed country: 1 wheat for 1 cloth (LDC exports wheat: DC exports cloth)
  5. 5. Production possibilities for two countries Pre-trade exchange ratios Less developed country: 2 wheat for 1 cloth Developed country: 1 wheat for 2 cloth International trade exchange ratios Less developed country: 1 wheat for 1 cloth Developed country: 1 wheat for 1 cloth (LDC exports wheat: DC exports cloth)
  6. 6. Production possibilities for two countries Pre-trade exchange ratios Less developed country: 2 wheat for 1 cloth Developed country: 1 wheat for 2 cloth International trade exchange ratios Less developed country: 1 wheat for 1 cloth Developed country: 1 wheat for 1 cloth (LDC exports wheat: DC exports cloth)
  7. 7. The Gains from Trade <ul><li>The limits to specialisation and trade </li></ul><ul><li>The terms of trade </li></ul><ul><ul><li>P X / P M </li></ul></ul><ul><li>Other reasons for gains from trade </li></ul><ul><ul><li>decreasing costs </li></ul></ul><ul><ul><li>differences in demand </li></ul></ul><ul><ul><li>increased competition </li></ul></ul><ul><ul><li>trade as an ‘engine of growth’ </li></ul></ul><ul><ul><li>non-economic advantages </li></ul></ul>
  8. 8. Arguments for Restricting Trade <ul><li>Methods of restricting trade </li></ul><ul><ul><li>tariffs </li></ul></ul><ul><ul><li>quotas </li></ul></ul><ul><ul><li>administrative barriers </li></ul></ul><ul><ul><li>other </li></ul></ul><ul><li>Arguments for restricting trade </li></ul><ul><ul><li>infant industry argument </li></ul></ul><ul><ul><li>changing comparative advantage </li></ul></ul><ul><ul><li>to prevent dumping </li></ul></ul>
  9. 9. Arguments for Restricting Trade <ul><li>Arguments for restricting trade (cont.) </li></ul><ul><ul><li>to prevent establishment of a foreign-based monopoly </li></ul></ul><ul><ul><li>to spread risks </li></ul></ul><ul><ul><li>externalities </li></ul></ul><ul><ul><li>pursuing national interests (but against world interests) </li></ul></ul><ul><ul><ul><li>exploiting monopoly power </li></ul></ul></ul><ul><ul><ul><li>protecting declining industries </li></ul></ul></ul><ul><ul><li>non-economic arguments </li></ul></ul>
  10. 10. Arguments for Restricting Trade <ul><li>Problems with protection </li></ul><ul><ul><li>protection as ‘second best’ </li></ul></ul><ul><ul><li>world multiplier effects </li></ul></ul><ul><ul><li>retaliation </li></ul></ul><ul><ul><li>cushions inefficiency </li></ul></ul><ul><ul><li>bureaucracy </li></ul></ul><ul><li>Measuring the efficiency loss from protection </li></ul>
  11. 11. The cost of protection O P Q S dom (= MC ) Q 1 Q 2 S world P W D dom
  12. 12. The cost of protection O P Q S dom (= MC ) S world + tariff S world a Q 1 Q 2 P W + t P W D dom Area edbc equals loss of consumer surplus d e c b Q 3 Q 4 Tariff
  13. 13. The cost of protection O P Q S dom (= MC ) S world + tariff S world a Q 1 Q 2 Q 3 Q 4 P W + t P W D dom Area 3 equals gain in tariff revenue Area 1 equals gain in producer surplus d e c b 1 2 3 4 Tariff
  14. 14. The cost of protection O P Q S dom (= MC ) S world + tariff S world a 1 2 3 4 Q 1 Q 2 Q 3 Q 4 P W + t P W D dom Areas 2 + 4 equals net loss d e c b Tariff
  15. 15. <ul><li>History of protection </li></ul><ul><ul><li>Pre-war growth in protection </li></ul></ul><ul><ul><li>Post-war reduction in protection and the role of GATT </li></ul></ul><ul><ul><ul><li>the growth in world trade </li></ul></ul></ul>World Attitudes towards Trade and Protection
  16. 16. Growth in world real GDP and world merchandise exports Source: Trade Statistics , WTO (www.wto.org)
  17. 17. Growth in world real GDP and world merchandise exports Growth in real GDP Source: Trade Statistics , WTO (www.wto.org)
  18. 18. Growth in world real GDP and world merchandise exports Growth in real GDP Growth in merchandise exports Source: Trade Statistics , WTO (www.wto.org)
  19. 19. <ul><li>Re-emergence of protectionism in 1980s </li></ul><ul><ul><li>the increasing use of non-tariff barriers </li></ul></ul><ul><li>The Uruguay Round </li></ul><ul><ul><li>aims of the negotiations </li></ul></ul><ul><ul><li>problems in reaching agreement </li></ul></ul><ul><ul><li>the agreement </li></ul></ul><ul><ul><li>assessing the agreement </li></ul></ul>World Attitudes towards Trade and Protection
  20. 20. <ul><li>The World Trade Organisation </li></ul><ul><ul><li>WTO more powerful than GATT </li></ul></ul><ul><ul><li>WTO rules </li></ul></ul><ul><ul><ul><li>non-discrimination </li></ul></ul></ul><ul><ul><ul><li>reciprocity </li></ul></ul></ul><ul><ul><ul><li>general prohibition of quotas </li></ul></ul></ul><ul><ul><ul><li>fair competition </li></ul></ul></ul><ul><ul><ul><li>binding tariffs </li></ul></ul></ul><ul><ul><li>attitudes of the WTO </li></ul></ul><ul><ul><li>WTO activity in recent years </li></ul></ul><ul><ul><ul><li>resistance from various groups to unfettered trade </li></ul></ul></ul>World Attitudes towards Trade and Protection
  21. 21. Trading Blocs <ul><li>Types of preferential trading arrangement </li></ul><ul><ul><li>free trade areas </li></ul></ul><ul><ul><li>customs unions </li></ul></ul><ul><ul><li>common markets </li></ul></ul><ul><ul><ul><li>features of a full common market </li></ul></ul></ul><ul><li>Direct effects of a customs union </li></ul><ul><ul><li>trade creation </li></ul></ul><ul><ul><li>trade diversion </li></ul></ul>
  22. 22. Trading Blocs <ul><li>Long-term effects of a customs union </li></ul><ul><ul><li>longer-term advantages </li></ul></ul><ul><ul><ul><li>internal economies of scale </li></ul></ul></ul><ul><ul><ul><li>external economies of scale </li></ul></ul></ul><ul><ul><ul><li>better terms of trade </li></ul></ul></ul><ul><ul><ul><li>increased competition between members </li></ul></ul></ul><ul><ul><li>longer-term disadvantages </li></ul></ul><ul><ul><ul><li>certain regions of the union may suffer </li></ul></ul></ul><ul><ul><ul><li>possibility of oligopolistic collusion </li></ul></ul></ul><ul><ul><ul><li>administrative costs </li></ul></ul></ul>
  23. 23. Preferential Trading in Practice <ul><li>Preferential trading in practice </li></ul><ul><ul><li>the EU </li></ul></ul><ul><ul><li>the EEA </li></ul></ul><ul><ul><li>NAFTA </li></ul></ul><ul><ul><ul><li>the advent of NAFTA </li></ul></ul></ul><ul><ul><ul><li>experience to date </li></ul></ul></ul><ul><ul><ul><li>proposals to extent to an all Americas free trade area </li></ul></ul></ul><ul><ul><li>the Asia-Pacific Economic Co-operation forum (APEC) </li></ul></ul><ul><ul><li>other free trade areas / customs unions </li></ul></ul>
  24. 24. The European Union <ul><li>Historical background </li></ul><ul><li>The economic nature of the EU </li></ul><ul><li>Development of common EU policies </li></ul><ul><ul><li>Common Agricultural Policy </li></ul></ul><ul><ul><li>regional policy </li></ul></ul><ul><ul><li>competition policy </li></ul></ul><ul><ul><li>tax harmonisation </li></ul></ul><ul><ul><li>social policy </li></ul></ul><ul><ul><li>trade policy </li></ul></ul>
  25. 25. The European Union <ul><li>The single market </li></ul><ul><ul><li>historical background </li></ul></ul><ul><ul><li>the Single European Act </li></ul></ul><ul><ul><li>completing the single market </li></ul></ul><ul><li>The benefits of the single market </li></ul><ul><ul><li>trade creation </li></ul></ul><ul><ul><li>reduction in the direct costs of barriers </li></ul></ul><ul><ul><li>economies of scale </li></ul></ul><ul><ul><li>greater competition </li></ul></ul>
  26. 26. The European Union <ul><li>Criticisms of the single market </li></ul><ul><ul><li>radical economic change is costly </li></ul></ul><ul><ul><li>adverse regional effects </li></ul></ul><ul><ul><li>development of monopoly / oligopoly power </li></ul></ul><ul><ul><li>trade diversion </li></ul></ul><ul><ul><li>political objections: loss of sovereignty </li></ul></ul><ul><li>Developments of the single market </li></ul><ul><ul><li>evidence of economic benefits </li></ul></ul><ul><ul><li>eliminating remaining barriers </li></ul></ul><ul><ul><ul><li>Internal Market scoreboard </li></ul></ul></ul><ul><ul><li>effects of expansion of the EU </li></ul></ul>
  27. 27. Trade and Developing Countries <ul><li>Trade strategies </li></ul><ul><ul><li>primary outward looking </li></ul></ul><ul><ul><li>secondary inward looking </li></ul></ul><ul><ul><ul><li>import-substituting industrialisation (ISI) </li></ul></ul></ul><ul><ul><li>secondary outward looking </li></ul></ul><ul><ul><ul><li>possibly complemented by primary inward looking </li></ul></ul></ul>
  28. 28. Trade and Developing Countries <ul><li>Approach 1: exporting primaries </li></ul><ul><ul><li>justification for exporting primaries </li></ul></ul><ul><ul><ul><li>exploits comparative advantage </li></ul></ul></ul><ul><ul><ul><li>a 'vent for surplus' </li></ul></ul></ul><ul><ul><ul><li>an 'engine for growth' </li></ul></ul></ul><ul><ul><li>problems with traditional trade theory </li></ul></ul><ul><ul><ul><li>comparative costs change over time </li></ul></ul></ul><ul><ul><ul><li>benefits may not flow to nationals </li></ul></ul></ul><ul><ul><ul><li>trade my lead to greater inequality </li></ul></ul></ul><ul><ul><ul><li>externalities from mines and plantations </li></ul></ul></ul>
  29. 29. Trade and Developing Countries <ul><li>Exporting primaries (cont.) </li></ul><ul><ul><li>long-term problems for primary exporting countries </li></ul></ul><ul><ul><ul><li>low income elasticity of demand </li></ul></ul></ul><ul><ul><ul><li>protection in advanced countries </li></ul></ul></ul><ul><ul><ul><li>technological developments </li></ul></ul></ul><ul><ul><ul><ul><li>synthetic substitutes </li></ul></ul></ul></ul><ul><ul><ul><ul><li>miniaturisation </li></ul></ul></ul></ul><ul><ul><ul><li>rapid growth in imports </li></ul></ul></ul><ul><ul><ul><li>adverse movements in terms of trade </li></ul></ul></ul>
  30. 30. World primary commodity prices (1990 = 100)
  31. 31. World primary commodity prices (1990 = 100)
  32. 32. World primary commodity prices (1990 = 100)
  33. 33. World primary commodity prices (1990 = 100)
  34. 34. Average annual changes in prices of various products
  35. 35. Average annual changes in prices of various products
  36. 36. Trade and Developing Countries <ul><li>Approach 2: ISI </li></ul><ul><ul><li>justifications </li></ul></ul><ul><ul><ul><li>problems of primary exporting </li></ul></ul></ul><ul><ul><ul><li>dynamic potential in manufacturing </li></ul></ul></ul><ul><ul><ul><ul><li>infant industries </li></ul></ul></ul></ul><ul><ul><ul><ul><li>rapid technological advance </li></ul></ul></ul></ul><ul><ul><li>patterns of protection </li></ul></ul><ul><ul><ul><li>selecting industries for protection </li></ul></ul></ul><ul><ul><ul><li>tariff and quota escalation </li></ul></ul></ul><ul><ul><ul><li>attracting multinational investment </li></ul></ul></ul>
  37. 37. Trade and Developing Countries <ul><li>Approach 2: ISI (cont.) </li></ul><ul><ul><li>adverse effects of ISI </li></ul></ul><ul><ul><ul><li>often counter to comparative advantage </li></ul></ul></ul><ul><ul><ul><li>tends to cushion inefficiency </li></ul></ul></ul><ul><ul><ul><ul><li>encourages establishment of monopolies </li></ul></ul></ul></ul><ul><ul><ul><li>artificially low interest rates </li></ul></ul></ul><ul><ul><ul><ul><li>use of capital-intensive techniques </li></ul></ul></ul></ul><ul><ul><ul><li>encourages rural–urban migration </li></ul></ul></ul><ul><ul><ul><li>adverse effects on rural sector </li></ul></ul></ul><ul><ul><ul><li>leads to greater inequality </li></ul></ul></ul><ul><ul><ul><li>environmental problems </li></ul></ul></ul><ul><ul><ul><li>limit to home market </li></ul></ul></ul>
  38. 38. Trade and Developing Countries <ul><li>Approach 3: exporting manufactures </li></ul><ul><ul><li>transition from inward-looking to outward-looking industrialisation </li></ul></ul><ul><ul><ul><li>a neutral trade approach </li></ul></ul></ul><ul><ul><ul><li>active promotion of manufactured exports </li></ul></ul></ul><ul><ul><li>benefits from exporting manufactures </li></ul></ul><ul><ul><ul><li>conforms more closely with comparative advantage </li></ul></ul></ul><ul><ul><ul><li>increased competition </li></ul></ul></ul><ul><ul><ul><li>increased investment </li></ul></ul></ul><ul><ul><ul><li>more employment and greater equality </li></ul></ul></ul>
  39. 39. Growth rates and export performance of selected secondary outward-looking countries
  40. 40. Growth rates and export performance of selected secondary outward-looking countries
  41. 41. Growth rates and export performance of selected secondary outward-looking countries
  42. 42. Growth rates and export performance of selected secondary outward-looking countries
  43. 43. Growth rates and export performance of selected secondary outward-looking countries
  44. 44. Trade and Developing Countries <ul><li>Approach 3: exporting manufactures (cont.) </li></ul><ul><ul><li>drawbacks of exporting manufactures </li></ul></ul><ul><ul><ul><li>possible retaliation from advanced countries </li></ul></ul></ul><ul><ul><ul><ul><li>but attitudes of WTO </li></ul></ul></ul></ul><ul><ul><ul><li>competition from other developing countries </li></ul></ul></ul><ul><ul><ul><li>vulnerability to world fluctuations </li></ul></ul></ul><ul><ul><ul><ul><li>world recessions </li></ul></ul></ul></ul><ul><ul><ul><ul><li>speculation </li></ul></ul></ul></ul><ul><ul><li>trade between developing countries </li></ul></ul><ul><ul><ul><li>trade blocs of developing countries </li></ul></ul></ul>

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