15 Flashcards
(27 cards)
What is the primary benefit of international trade?
Access to goods that countries cannot produce efficiently.
What percentage of world GDP was international trade in 1960?
25%
What percentage of world GDP was international trade by 2007?
60%
What are the main categories of merchandise exports?
- Manufactured goods (70% of exports)
- Fuels/mining products (20%)
- Agricultural goods (10%)
What does comparative advantage refer to?
Lower opportunity cost in producing a good.
What is absolute advantage?
Producing goods with fewer resources.
What does trade allow countries to do?
Export surpluses and import what they lack.
What is the infant industry argument?
New industries need protection to grow and achieve scale.
What are tariffs?
Taxes on imports that raise prices of foreign goods.
What is the strategic trade theory?
Protecting key industries can foster global competition.
What is dumping in the context of international trade?
Selling exports at artificially low prices to outcompete foreign producers.
What are administrative barriers in trade?
Paperwork and customs delays that discourage imports.
What is the terms of trade?
Average price of exports divided by average price of imports.
What is one non-economic motive for trade protection?
National security (self-sufficiency in food/arms).
What is a quota in international trade?
A limit on the quantity of goods that can be imported.
True or False: Trade strengthens political, cultural, and social ties between nations.
True.
Fill in the blank: A country has a comparative advantage in good X if it can produce _______.
more X relative to Y than other countries.
What is the effect of tariffs on consumer prices?
Tariffs raise consumer prices and reduce imports.
What was the GATT, and when was it established?
General Agreement on Tariffs and Trade, established in 1947.
What is the most favored nation clause?
Exports from favored nations will be subject to lower tariffs than from other nations.
What is the Doha Round focused on?
Fairer trade, developing countries, and environment.
What is a key disadvantage of trade protection?
It can lead to global net losses.
What is the primary goal of the World Trade Organization (WTO)?
To enforce trade rules and authorize retaliation.
What does specialization in trade allow countries to do?
Focus on what they do best.
