International Trade
Trade Negotiations in the WTO are not:
static. they are evolving.
Mercosur is:
striving for full economic integration between member countries. alliance is also negotiating trade agreements between NAFTA, Japan, and The EU
Export Subsidies
subsidies are payments made by the government to encourage the export of specified products
Product Life-Cycle Theory
suggests that as a product matures, both the location of sales and optimal production location will change affecting the flow and direction of trade
world trade organization
the only global international organization dealing with the rules of free trade between countries
"Co-Decision"
the standard decision-making process used by the EU. European Parliament (elected by the people) has to approve EU legislation with the Council of the EU
Hecksher-Olin Theory
theory that argues the pattern for international trade is determined by differences in endowment factors. countries will export goods that make extensive use of their locally abundant resources. countries will import goods that are produced from resources that are locally scarce
goal of world trade organization
to help producers of goods and services, exporters, and importers conduct their business, while allowing governments to meet social and environmental objectives
Non-Tariff Barriers (NTBs)
trade barriers that restrict imports. include anti-dumping measures, countervailing duties,
EU GDP vs US GDP
EU GDP > US GDP. EU is also the biggest world Exporter and largest World Importer.
European Union as a Trader:
EU is the worlds biggest trader, accounting for 20% of the worlds imports and exports
Voluntary Export Restraints (VERs)
are arrangements between importing and exporting countries in which the exporting country agrees to limit the specific exports below a certain level
Import Quotas
are limitations on the quantity of goods that can be imported into a country during a specified period of time
Creation of the EU:
created after world war II. idea was simple - countries that are economically interdependent (trade together) are much less likely to engage in war.
European Economic Community
created in 1958. had six initial countries: Germany, France, Belgium, Luxembourg, Italy, and The Netherlands
North American Free Trade Agreement (NAFTA)
created in 1994. it is one of the worlds largest free trade zones fostering economic growth. Canada, Mexico, and the US.
Rules of NAFTA
each NAFTA country forgoes tariffs on imported goods from member countries
world trade organization rules have to be:
transparent, predictable, and inclusive
Three Main Institutions of EU Legislation
1. European Parliament 2. The Council of the EU 3. The European Commission
Four Key Factors of Porter's NCA
1. Factor Endowments 2. Domestic Demand Conditions 3. Relating and Supporting Industries 4. Firm Strategy, Structure, and Rivalry
5 Barriers to International Trade
1. Import Tariffs 2. Import Quotas 3. Voluntary Export Restraints 4. Export Subsidies 5. Non-Trade Barriers
Benefits of International Trade
1. specialization 2. efficiency 3. competitiveness 4. sales and profits 5. greater variety of products
Goals of APEC:
1. to raise living standards and education levels through sustainable economic growth 2. foster a sense of community and an appreciation of shared interests among Asia-Pacific countries.
Absolute Advantage
Adam Smith in 1776. A country has an absolute advantage in the production of a product when it is more efficient than any other country at producing that good.
Comparative Advantage
David Ricardo in 1817. is an economic theory about the potential gains from trade for individuals, firms, or nations that arise from differences in their factor endowments or technological progress.
Founding Principle of the EU:
Free Trade between member countries. committed to liberalizing world trade as well.
Comparative Advantage Continued
In an economic model, an agent has a comparative advantage over another in producing a particular good if he can produce that good at a lower relative opportunity cost or autarky price
ASEAN +3
Includes all 10 member states, plus Japan, South Korea, and China.
Interesting Fact about Mercosur:
Mercosur is the largest trading bloc in South America.
What NAFTA is:
NAFTA is a comprehensive trade agreement that sets the rules of tree trade and investment between US, Canada, and Mexico
National Competitive Advantage
Porter offers a diamond-shaped diagram to outline the framework of four key factors that can modify four ingredients to become more competitive.
Quick Synopsis of the Three Main Institutions of EU Legislation:
The Commission proposes new laws, and the Council and the Parliament adopt them.
Import Tariffs
a tax collected on imported goods. collected by the gvt.
world trade organization is:
an organization for free trading. forum for governments to negotiate trade agreements a place for countries to settle trade disputes
Main Goal of ASEAN:
accelerate economic growth, social progress, and sociocultural evolution among its members, protection of regional peace and stability, and opportunities for member countries to discuss differences peacefully.
Tariff-Rate Quotas
allow a specified quantity of goods to be imported at a reduced tariff rate during a specified quota period
Trade Negotiations in the WTO:
WTO agreements cover goods, services, and intellectual property
Dispute Settlement Understanding (DSU)
WTO's procedure for resolving trade quarrels is vital for enforcing rules and therefore ensuring trade agreements flow smoothly
New Trade Theory
a country can dominate in the export of a good simply because it was the first country to enter the industry. profitability in these types of industries will only exist for a small number of companies because of substantial economies of scale
Overriding function of the WTO:
help trade flow as freely as possible, so long as there are no undesirable economic effects
NAFTA has demonstrated:
how free trade increases wealth and competitiveness, delivering real benefits to families, farmers, workers, manufacturers, and consumers.
Mercantilism
idea of Thomas Mun. Maximize Exports, do not import.
APEC (Asia-Pacific Economic Cooperation)
is a forum for 21 Pacific Rim member economies that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region
Free-Trade
is a laissez-faire, with no restrictions on trade. no need to protect or promote, because the market will do so itself
ASEAN (Association of South-East Asian Nations)
is a political and economic organisation of ten Southeast Asian countries
What is the EU:
is a politico-economic union of 28 member states that are located primarily in Europe.
International Trade Definition
is the exchange of goods, services, and capital between countries
Goal of Mercosur:
its purpose is to promote free trade and the fluid movement of goods, people, and currency.
Specific Tariffs
levied as a fixed charge per unit of imports
Ad Valorem Tariffs
levied as a fixed percentage of the value of the commodity imported.
Absolute Quotas
limit the quantity of imports to a specified level during a specified period of time
Free Trade Commission (in NAFTA)
made up of ministerial representatives from the three NAFTA countries supervises the implementation and elaboration of the agreements made between countries. Also helps to resolve disputes arising from different interpretations of agreements.
Protectionism
regulation of international trade is important because it ensures that the market will function properly
European Parliament
represents the EU's citizens and is directly elected by them
The Council of the EU
represents the governments of the individual member countries.
European Commission
represents the interest of the union as a whole
Mercosur
s a sub-regional bloc comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela.
Import Quota
two types: Specific Tariffs and Ad Valorem Tariffs
Formation of ASEAN
was formed on 8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore, and Thailand
Goal of ASEAN:
works towards reducing trade barriers between member countries
