E-Geopolitics + International Trade Flashcards
(16 cards)
How can geopolitics be viewed through a cooperation vs. competition perspective?
Geopolitics can be analyzed as the tension between countries acting in cooperation (e.g., forming alliances, trade agreements) and in competition (e.g., territorial disputes, trade wars). This lens helps explain international behaviors and policy decisions.
What is the relationship between geopolitics and globalization?
Globalization increases interdependence among nations, which can reduce some geopolitical tensions through economic ties, but also creates vulnerabilities and strategic concerns over supply chains, technology, and capital flows.
What are the four main archetypes of globalization and cooperation?
- Multilateralism (Globalization+cooperation) international goal
- Bilateralism (Nationalist+cooperation)Some arrangement goal
3.Autarky (Nationalist+non-cooperation) Self-sufficient goal
4.Hegemony(Globalization+non-cooperation) Influence Goal
What are the main functions and objectives of international organizations like the World Bank, IMF, and WTO?
- The World Bank provides long-term loans and grants for developing countries. (financial and technical assistance)
- IMF offers short-term financial and technical assistance and monitors economic stability.
- WTO facilitates global trade by enforcing rules and resolving disputes (LEGAL)
What are the 3 types of geopolitical risk?
- Event Risk: Events about which we know the timing but not the outcome (elections)
- Exogenous Risk: unanticipated events, such as outbreaks or war
- Thematic Risk: Known factors that have effects over long periods, such as human migration patterns or cyber risks.
Describe the 3 dimensions of the geopolitical risk framework
- Probability (likelihood)
- Magnitude (impact)
- Velocity (speed at which it will be reflected on investment values)
What are the main tools of geopolitics, and how do they impact regions and economies?
- National Security Tools
Definition: Instruments used to protect a nation’s sovereignty and physical safety.
Examples: Armed conflict (war, military intervention), Espionage (intelligence gathering) - Economic Tools
Definition: Tools that influence trade and production via cooperation or restriction.
Cooperative Examples: Free trade areas, Common markets
Noncooperative Examples: Domestic content requirements - Financial Tools
Definition: Instruments that regulate or influence capital and currency movements.
Examples: Allowing or restricting foreign investment
What are the benefits of international trade?
Trade allows countries to specialize in goods with comparative advantage, increasing total output and efficiency. Gains also come from economies of scale, greater variety, more competition, and reduced monopolistic pricing.
What are the costs of international trade?
Short-term costs include job losses in uncompetitive industries, wage suppression, and income inequality. Adjustment costs may include retraining and shifting resources.
What are the main types of trade restrictions?
1) Tariffs – taxes on imports;
2) Quotas – quantity limits on imports;
3) Export subsidies – payments to domestic exporters;
4) Minimum domestic content – requires % from local inputs;
5) Voluntary export restraints – country limits exports voluntarily.
What are the economic effects of tariffs and quotas?
-Tariffs raise domestic prices, reduce imports, benefit domestic producers(producer surplus), increase domestic quantity supplied, and harm consumers (decrease surplus).
-Quotas restrict quantity, increase prices, reduce consumer surplus, and may provide quota rents.
What are the valid and weak arguments for trade restrictions?
Valid: Protect infant industries from foreign competition, safeguard national security.
Weak: Protect jobs, retaliate, raise revenue, or support inefficient industries.
What is quota rent, and who can benefit from it?
Quota rent is the economic profit that arises when an import quota raises the domestic price above the world price. It reflects the value of the restricted access to a profitable market. (QuotaRentperUnit=DomesticPrice−WorldPrice)
👥Who benefits from quota rent?
- Domestic Government: If it auctions or sells import licenses, the government captures the rent as revenue.
- Domestic Importers: If licenses are given for free, local firms that receive them can buy goods at world price and resell at the higher domestic price.
- Foreign Exporters: Under Voluntary Export Restraints (VERs) or foreign-administered quotas, exporting firms keep the rent.
What are the types of regional trade agreements (from least to most integrated)?
1) Free Trade Area – removes internal trade barriers for members;
2) Customs Union – adds a common set of trade restrictions to non-members;
3) Common Market – adds free movement of capital and labor for members;
4) Economic Union – harmonizes policies and institutions;
5) Monetary Union – shares a single currency.
What are the pros and cons of trading blocs (agreements between countries)?
Pros: Increased welfare via comparative advantage, larger markets, and lower prices. Cons: Transitional costs, structural unemployment, and possible inefficiency if trade is diverted from low-cost nonmembers to high-cost members.
What is economic welfare in trade, and how do trade restrictions like tariffs and quotas affect consumer surplus, producer surplus, and total welfare?
Economic welfare in international trade is the total benefit to society, typically measured as the sum of consumer surplus and producer surplus. It reflects how resources are allocated and how gains from trade are distributed.
