L3:
Gains from trade: trade is based on comparative advantages, rather than absolute advantages.
World development:that the world has been evolving towards a more
Liberalized global market, reducing proctetionism and creating free trade
Areas. It’s not only that tariffs and restrictions
Have been reduced, but as well this same fact has led to the “vertical
Disintegration” of the production. Nowadays, a products has been “produced” in
Several countries. Some parts in China, others in India, assembled in Spain but
Designed in Norway.
The idea of globalization with little restrictions to the movement of
Goods and money has been celebrated by some and criticized by others. To
Certain individuals within a country trade can, indeed, make them worse off.
Think
About the farmers who are producing vegetables, if we can import vegetables at
Lower rates, what can they do? What are their legitimate expectations? The
Country is better off by paying lower prices, but definitely not them.
World trade without restrictions:-Higher
price.-Less
Consumer choices.
World trade with restrictions:-Protect
National defence and citizens´health.-Protect
Against
dumping.-Lower
Price for the consumers.
Trade
Barriers reduce the possible quantity of goods that can be consumed and
Produced within an economy. Prices will be higher, and there will be fewer
Choices with regards to consumer goods.
Arguments in favor of trade restrictions include:
- National
Defense - Foreign producers should not be relied
Upon for production of defense goods, even if the goods can be produced at
A lower cost abroad.
- Infant
Industries - Start-up industries in a country may not
Be able to effectively compete against foreign producers because of their
Small size. An argument can be made that these industries should be
Protected until suitable economies of scale can be achieved. If the
Economies of scale are such that the domestic industry achieves a
Comparative advantage over foreign companies, the temporary protection
Will help to achieve better economic efficiency
Anti-Dumping - The term dumping is
Applied when foreign producers are thought to be selling goods at prices below
Their production costs, or below the prices charged in their home market.
Retaliatory measures may include the imposition of tariffs, quotas or fines
Against foreign producers. The fear is that this "unfair" practice
Will drive domestic producers out of business and that the foreign producers
Will then impose monopoly pricing. One argument against this fear is that when
Prices are raised at a later time, domestic producers can reenter the market.
Deliberately driving other producers out by selling at a loss usually does not
Work. Another argument against "anti-dumping"is that the country as a
Whole benefits when foreign-made goods are sold at lower prices than domestic
Ones. Elements in the world trade:
GATT:was a multilateral agreement regulating
International trade. According to its preamble, its purpose was the
"substantial reduction of tariffs and other trade barriers and the
Elimination of preferences.
WTO:is an intergovernmental organization which
Regulates international trade.The WTO deals with regulation of trade between
Participating countries by providing a framework for negotiating trade
Agreements and a dispute resolution process aimed at enforcing participants'
Adherence to WTO agreements, which are signed by representatives of member
Governments and ratified by their parliaments
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