Chapter 34 - International Trade, Comparative Advantage, and Protectionism Flashcards Preview

Principles of Economic > Chapter 34 - International Trade, Comparative Advantage, and Protectionism > Flashcards

Flashcards in Chapter 34 - International Trade, Comparative Advantage, and Protectionism Deck (22):
1

Corn Laws

The tariffs, subsidies, and restrictions enacted by the British Parliament in the early nineteenth century to discourage imports and encourage exports of grain.

2

Theory of comparative advantage

Ricardo’s theory that specialization and free trade will benefit all trading partners (real wages will rise), even those that may be absolutely less efficient producers.

3

absolute advantage

The advantage in the production of a good enjoyed by one country over another when it uses fewer resources to produce that good than the other country does.

4

comparative advantage

The advantage in the production of a good enjoyed by one country over another when that good can be produced at lower cost in terms of other goods than it could be in the other country.

5

Terms of trade

The ratio at which a country can trade domestic products for imported products.

6

Exchange rate

The ratio at which two currencies are traded. The price of one currency in terms of another.

7

Factor endowments

The quantity and quality of labor,
land, and natural resources of a country.

8

Heckscher-Ohlin theorem

A theory that explains the existence of a country’s comparative advantage by its factor endowments: A country has a comparative advantage in the production of a product if that country is relatively well endowed with inputs used intensively in the production of that product.

9

Protection

The practice of shielding a sector of the economy from foreign competition.

10

tariff

A tax on imports.

11

export subsidies

Government payments made to domestic firms to encourage exports.

12

Dumping

A firm’s or an industry’s sale of products on the world market at prices below its own cost of production.

13

Quota

A limit on the quantity of imports.

14

Smoot-Hawley tariff

The U.S. tariff law of the 1930s,
which set the highest tariffs in U.S. history (60 percent). It set off an international trade war and caused the decline in trade that is often considered one of the causes of the worldwide depression of the 1930s.

15

General Agreement on Tariffs and Trade (GATT)

An international agreement signed by the United States and
22 other countries in 1947 to promote the liberalization of foreign trade.

16

World Trade Organization (WTO)

A negotiating forum dealing with rules of trade across nations.

17

Doha Development Agenda

An initiative of the World Trade Organization focused on issues of trade and development.

18

economic integration

Occurs when two or more nations join to form a free- trade zone.

19

European Union (EU)

The European trading bloc composed of 27 countries (of the 27 countries in the EU, 16 have the same currency— the euro).

20

U.S.-Canadian Free Trade Agreement

An agreement in which the United States and Canada agreed to eliminate all barriers to trade between the two countries by 1998.

21

North American Free Trade Agreement (NAFTA)

An agreement signed by the United States, Mexico, and Canada in which the three countries agreed to establish all North America as a free- trade zone.

22

Infant industry

A young industry that may need
temporary protection from competition from the established industries of other countries to develop an acquired comparative advantage.