IPE Terms

Question 1

Mercantilism

Answer 1

An economic system that prioritizes exports as opposed to input. Often requires more government intervention in a nation’s economy.
sig: During the colonial era, European countries adopted high tariffs on imports which allowed them to have steep capital gains. This then led to them developing infrastructure, a more educated workforce etc. Many developing countries can not do the same to develop their economy because of ‘free trade.’

Question 2

Realism

Answer 2

Relative gains, a pretty Machiavellian view of humanity, people need a ‘shepherd’ or central authority to give them structure.
sig: Shapes how many approach problem-solving in politics/econ: Views others as a competitor.

Question 3

Liberalism

Answer 3

opposed to government intervention in the economy and markets except in cases of market failure, property rights, or contracts.
sig: differs heavily from mercantilism, and is often pushed on to developing countries.

Question 4

Comparative Advantage

Answer 4

ability to produce goods for the least amount of money per unit compared to other competitors.
sig: Those with the competitive advantage will likely be more likely to succeed in a market.

Question 5

Absolute Advantage

Answer 5

Ability to produce a greater volume of goods compared to another producer.
Sig: If a producer with a competitive advantage cannot keep up with the demand, those with an absolute advantage become more important and can occupy a sector of a market in this way.

Question 6

Tariff

Answer 6

A tax on an import or export.
sig: Can change how an entire nation’s economy plays out.
Infant economies, political pressure, force a nation to domestically produce a product rather than continuing to import it, etc.

Question 7

NTB/ non tariff barrier

Answer 7

A restriction on trade aside from tariffs. Can be through the form of subsidies, customs delays, import quotas, blah
sig: Technically not breaking WTO rules for ‘free trade’ but still an economic pressure countries can leverage on each other.

Question 8

VER/ Voluntary export restraint

Answer 8

a self-imposed limit on the quantity of a good that an exporting country is allowed to export.

Question 9

Quota

Answer 9

government-imposed trade restriction that limits the number or monetary value of goods that a country can import or export during a particular period.
sig: Countries use quotas in international trade to help regulate the volume of trade between them and other countries.

Question 10

Subsidy

Answer 10

direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government or a targeted tax cut.
sig: can be used to offset market failures and externalities to achieve greater economic efficiency.

Question 11

AD duties

Answer 11

protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value.
sig:many countries impose duties on products they believe are being dumped in their national market; this is done with the rationale that these products have the potential to undercut local businesses and the local economy

Question 12

Health/ safety regulations

Answer 12

Regulations that prevent the trade of certain things that a country bans in the name of health/safety
sig: can be used as NTB

Question 13

Factor price equalization

Answer 13

the prices of identical factors of production, such as the wage rate or the rent of capital, will be equalized across countries as a result of international trade in commodities.

Question 14

Smoot Hawley Tariff

Answer 14

US protectionist tariff that impose trade restrictions on tons of items in 1930
sig: it worsened the conditions of the great depression. increased tariffs further stressed struggling nations—including those in debt to the U.S.—and caused other nations to retaliate by imposing their own tariffs.

Question 15

Reciprocal Trade Agreements Act(RTAA)

Answer 15

The Act served as an institutional reform intended to authorize the president to negotiate with foreign nations to reduce tariffs in return for reciprocal reductions in tariffs in the United States by up to 50%.
sig: Response to Smoot Hawley

Question 16

Repeal of Corn Laws(UK)

Answer 16

The Corn Laws blocked the import of cheap corn, initially by simply forbidding importation below a set price, and later by imposing steep import duties, making it too expensive to import it from abroad, even when food supplies were short.
sig: repeal of the Corn Laws as a decisive shift toward free trade in Britain bc benefitted the bottom 90% of income earners while causing income losses for the top 10%.

Question 17

collective action problem

Answer 17

Collective action occurs when a number of people work together to achieve some common objective. However, it has long been recognized that individuals often fail to work together to achieve some group goal or common good
sig: Results in tragedy of the commons

Question 18

public goods

Answer 18

a commodity or service that is provided (without profit) to all members of a society.

Question 19

Free riding

Answer 19

Using and/or abusing a public good without taking responsibility for a public good

Question 20

Logrolling

Answer 20

trading of favors, or quid pro quo, such as vote trading by legislative members to obtain passage of actions of interest to each legislative member.

Question 21

Factor endownment

Answer 21

amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing.
sig: Countries with a large endowment of resources tend to be more prosperous than those with a small endowment if all other things are equal. The development of sound institutions to access and equitably distribute these resources, however, is necessary in order for a country to obtain the greatest benefit from its factor endowment.

Question 22

import competing sector

Answer 22

Import-competing industries produce goods and services which are also imported into the country. sig: When a country’s international trade increases, the production of exporting industries increases and that of import-competing industries declines. prefer high tariffs

Question 23

export oriented sector

Answer 23

trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage. prefers low tariffs

Question 24

The Heckscher-Ohlin theorem

Answer 24

states that if two countries produce two goods and use two factors of production (say, labour and capital) to produce these goods, each will export the good that makes the most use of the factor that is most abundant.

Question 25

Ricardo Viner Model

Answer 25

The economy in this model consists of two countries, two goods and three factors of production. The two countries can only trade goods, not factors of production. Here only the mobile production factor (labor) can be used in the production of both goods and can therefore move between sectors.
sig: explains the migration of workers from the rural to urban areas after the Industrial Revolution in the 1820s

Question 26

Stolper-Samuleson theorem

Answer 26

states that there are winners and losers from the liberalization of international trade. Losses, according to the framework, are in the form of lower wages for workers employed in import-competing sectors.

Question 27

asset specificity

Answer 27

the extent to which the value of an asset is lost when it is utilized outside of a certain context.
sig: a good may be more useful in a changing/ less plentiful environment if it can be used in many different ways, and vice versa.

Question 28

Factor Mobility

Answer 28

measures the extent to which factor inputs such as land, labour and capital can easily switch between alternative uses with no loss of efficiency.

Question 29

Proportional representation

Answer 29

type of electoral system under which subgroups of an electorate are reflected proportionately in the elected body.

Question 30

Majoritarian System

Answer 30

an electoral system where the candidate with the most votes takes the seat using the winner-takes-all principle and in this way provides majoritarian representation.

Question 31

District Magnitude

Answer 31

refers to the number of seats assigned to each district, and thus the easiness to be elected, as the threshold de facto decreases in proportion.

Question 32

Veto Player

Answer 32

a veto player is one who can stop a change from the status quo. This is analogous to players in a bargaining game where all players must reach an agreement.
sig: that policy stability is the effect of a constellation of “veto players”

Question 33

nondiscrimination; reciprocity

Answer 33

WTO rules/standards to prevent favoritism and increase global free trade

Question 34

Strategic Trade policy

Answer 34

trade policy that affects the outcome of strategic interactions between firms in an actual or potential international oligopoly. A main idea is that trade policies can raise domestic welfare by shifting profits from foreign to domestic firms.

Question 35

economies of scale

Answer 35

cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs. This happens because costs are spread over a larger number of goods.

Question 36

Oligopoly

Answer 36

a small group of powerful people in charge of an institution.
sig: not good representation! soooo crazy

Question 37

Rents

Answer 37

an amount of money earned that exceeds that which is economically or socially necessary.

Question 38

State strength

Answer 38

the level of advantage in violence, territorial integrity, and conceptions of legitimacy - and the extent to which they are present in a particular state.

Question 39

Backwards linkages

Answer 39

characterizes the relationship of an industry or institution with its supply chain. An Industry has significant backward linkages when its production of output requires substantial Intermediate Inputs from many other industries within the same study area.

Question 40

forward linkages

Answer 40

The interconnection of an Industry to other Industries to which it sells its Outputs. An Industry has significant forward linkages when a substantial amount of its Output is used by other Industries as Intermediate Inputs to their production.

Question 41

Industrial policy

Answer 41

government intervention in a specific sector which is designed to boost the growth prospects of that sector and to promote development of the wider economy.

Question 42

GATT

Answer 42

aimed “substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis”, so that the economic recovery after World War II can be boosted. Although the GATT is a legal agreement, it functions as an organization.
sig: endorsed trade without discrimination and led to WTO being made

Question 43

WTO

Answer 43

the only international organization dealing with the global rules of trade. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.

Question 44

Prisoner’s dilemma

Answer 44

a situation where individual decision-makers always have an incentive to choose in a way that creates a less-than-optimal outcome for the individuals as a group.
example:
Two prisoners are accused of a crime. If one confesses and the other does not, the one who confesses will be released immediately and the other will spend 20 years in prison. If neither confesses, each will be held only a few months. If both confess, they will each be jailed 15 years.

Question 45

economies of experience

Answer 45

an economy in which many goods or services are sold by emphasizing the effect they can have on people’s lives.” Experiences are their own category, just like “goods” and “services.”

Question 46

Pareo Suboptimal

Answer 46

Pareto efficiency is an economic state in which resources are allocated in the most efficient manner

Question 47

nondiscrimination

Answer 47

Pareto efficiency is an economic state in which resources are allocated in the most efficient manner

Question 48

national treatment

Answer 48

National treatment is the principle of giving others the same treatment as one’s own nationals.

Question 49

most-favored-nation status

Answer 49

based on the idea that countries should treat all their trade partners equally—that no one country should be “more favored.”

Question 50

trade re-routing

Answer 50

An order to buy or sell a security at the current price available in the market/
We define trade redirection in global supply chains as the reshipment of value-added imports by the last but one country in the chain to their final destination.

Question 51

Generalized System of Preferences (GSP)

Answer 51

The Generalized System of Preferences (GSP) is a trade program that provides nonreciprocal, duty- free treatment for certain U.S. imports from eligible developing countries. The GSP is the largest such U.S. program; there are other regional preference programs, including the African Growth and Opportunity Act (AGOA)

Question 52

dispute settlement procedures under GATT and WTO

Answer 52

Consultations, mediation, etc
Panel set up and panellists appointed
Final panel report to parties
Dispute Settlement Body adopts report (if no appeal)
Appeals report
Dispute Settlement Body adopts appeals report

Question 53

Trade-related intellectual property rights(TRIPS)

Answer 53

WTO mandated IPR protections of its members to protect citizens of the country from IP theft, as well as other nations’ citizens.

Question 54

Trade-related Investment Measures(TRIMS)

Answer 54

rules that restrict preference of domestic firms and thereby enable international firms to operate more easily within foreign markets. Policies such as local content requirements and trade balancing rules that have traditionally been used to both promote the interests of domestic industries and combat restrictive business practices are now banned.