Unit III Important Terms and Concepts Flashcards
In these areas, members agree
to eliminate trade barriers among
themselves, but maintain individual barriers against non-members (ex., NAFTA).
Free-Trade Areas.
In these unions, members remove
trade barriers among themselves and form
common barriers among non-members
(ex., EU).
Customs Unions.
Whenever there is a shift in the pattern of
trade from low-cost world producers to
higher-cost FTA members; welfare-
reducing effect, it is called ____.
Trade Diversion.
Non-discriminatory basis of the World Trade Organization is known as _____.
Multilateralism.
Economic development is characterized by:
– High levels of consumption
– Broad-based educational achievement
– Adequate housing
– Access to high-quality health care, etc.
What is the Primary Export-Led
Development Strategy?
This strategy involves policies designed to
exploit natural comparative advantage by
increasing production of a few export goods
most closely related to the country’s
resource base.
- Country examples include Columbia (coffee),
Mexico and Nigeria (petroleum), and
Malaysia (rubber).
What are some of the advantages of Primary Export-Led Development Strategy?
This strategy would encourage more
intensive use of existing or abundant
resources.
- It could help attract foreign investment.
- It may provide linkage effects or benefits to other industries as a result of one industry expanding.
What are some of the disadvantages of Primary Export-Led Development Strategy?
Arguments Against Primary
Export-led Strategy
- Global markets for primary products do not grow fast enough to support this type of development.
- The prices of primary products relative to
the prices of manufactured goods will tend
to fall over time due to sluggish demand or
oversupply.
What is the Import-Substitution
Development Strategy?
These policies are designed to promote rapid industrialization and development by
erecting high barriers to foreign goods to
encourage local production.
What are the arguments against Import-Substitution Development Strategy?
Arguments Against Import-
substitution Strategy
- The high barriers to trade rarely come down.
- This strategy limits the development of
industries that supply inputs to the
protected industries. - Imported capital goods are used extensively
in local production, hence employment does
not grow as fast. - The strategy encourages citizens to spend
scarce resources to lobby or to bribe
government officials to protect their
industries.
What is the Outward-Looking Development
Strategy?
These policies involve government
identifying or targeting industries in which
the country has potential comparative
advantage.
Successful country examples include: China, Japan, Hong Kong, South Korea, Singapore, and Taiwan.
What are some negatives of the Outward-Looking Development Strategy?
Increased vulnerability: OLDS can make economies reliant on external demand, exposing them to global market fluctuations and leading to deindustrialization and currency volatility.
Social and environmental concerns: OLDS may lead to unequal benefit distribution, environmental degradation, and labor exploitation.
Loss of control and autonomy: OLDS can lead to foreign dominance, limited policy space, and vulnerability to external pressure.
Pro-trade biased growth entails what?
When growth occurs as a result of an
increase in the supply of the resource used intensively in the production of export goods, then the output of export goods will rise relative to the output of imported goods, and international trade will expand by more than the rate of growth of GDP.
More resources for exports = more exports compared to imports = trade grows faster than overall economy.
Conversely, what is anti-trade biased growth?
When growth occurs as a result of an
increase in the supply of the resource used intensively in the production of imported goods, then the output of import goods will rise relative to the output of export goods, and the international trade of this country
will fall.
More resources for imports = more imports compared to exports = trade falls.
Labor-saving (capital-saving)
technological change is what type of innovation?
An innovation that leads to a more than proportionate reduction in the use of labor (capital) relative to other factors in the production of a given level of output.
