Top PDF International Trade: Theory and Policy

International Trade: Theory and Policy

International Trade: Theory and Policy

Countries did agree to one thing: to make a transition away from quota restrictions on agricultural commodity imports toward tariffs instead—a process called tariffication. The logic is that tariffs are more transparent and would be easier to negotiate downward in future World Trade Organization (WTO) rounds. A second concession countries made was to accept at least low levels of market access for important commodities. For many countries, important food products had prohibitive quotas in place. A prime example was the complete restriction on rice imports to Japan. The mechanism used to guarantee these minimum levels was to implement tariff-rate quotas. A tariff-rate quota sets a low tariff on a fixed quantity of imports and a high tariff on any imports over that quota. By setting the quota appropriately and setting a relatively low tariff on that amount, a country can easily meet its target minimum import levels.
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Some aspects of the pure theory of international trade

Some aspects of the pure theory of international trade

methods examined for the formulation of hypotheses which might fulfil the conditions stated earlier. In the first place, the parameters in which his results are expressed are mea­ surable under ideal conditions. It is conceivable that any one of the infinite number of parameters involved could be computed. Secondly, the theory is simple in the sense that the method employed has been used for the solution of economic problems outside the field of international trade, i.e. in the theory of value. Unfortunately, two problems remain. In the first place, the very large number of variables involved precludes the practicability of immediate testing. Answers to specific problems are not forthcoming. In the second place, in the absence of full quantitative information, he is unable to draw unambiguous qualitative conclusions about the behaviour of the solution values of the variables in response to changes in the given data because insufficient restrictions are imposed upon the original relationships to indicate definite limitations concerning the algebraic sign of these rates of change. It would appear that the remedy is to impose more severe initial assumptions.
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Adam Smith's Policy of International Trade: Trade policy in a mercantilist world

Adam Smith's Policy of International Trade: Trade policy in a mercantilist world

In short, in this paper we look at what, as is said, this great Scottish expounder of economic liberalism and the policy of laissez-faire has to say on international trade in general and more specifically on the selfsame mercantilist ideas today as he attacked in his days. Smith, however, is aware that complete free trade is an unrealistic goal. “To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is much more unconquerable, the private interests of many individuals, irresistibly oppose it” (IV.2.43). We can also think of the “Member of Parliament who supports every proposal for strengthening this monopoly is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance”(IV.2.43). Or, as said elsewhere with regards to some existing laws, “we may perhaps say of it what was said of the laws of Solon, that though not the best in itself, it is the best which the interests, prejudices, and temper of the times would admit of. It may perhaps in due time prepare the way for a better” (IV.5.92).
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The "institutional factor" in the theory of international trade: new vs  old trade theories

The "institutional factor" in the theory of international trade: new vs old trade theories

We conclude that the new theory enriches the theory of international trade because it analyses the role of additional causes of trade, but at the cost of increasing the number of factors responsible for the indeterminacy of the pattern of trade. From this perspective the assessment of progress in the new trade theory cannot be separated from the assessment of OhlinÕs research programme that recommends extending the theory of international trade along the WalrasÐCassel guidelines and to including also the institutional factor; and in turn the assessment of the OhlinÐSamuelson research programme, as Blaug (1992) has already pointed out, cannot be separated from the assessment of the modern general equilibrium programme. Then, if explanation of trade means prediction of the pattern of trade, progress by the new trade theory is very limited indeed. The new theory shares the lack of predictive content of the general equilibrium theory for an integrated economy, in which the existence of multiple equilibria and path dependency becomes the rule, in so far as it imposes no testable restrictions on the pattern of exchange and specialization among many agents. ÔAlmost anything might happen as regards the pattern of international tradeÕ is the motto that can be written at the end of the above quotation from Krugman.
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Multinational Firms and the Theory of International Trade

Multinational Firms and the Theory of International Trade

My training was in traditional international trade theory, which had been dominated for decades by the competitive, constant-returns general-equilibrium model. My first job out of graduate school was at the University of Western Ontario in Canada, where I found it hard to reconcile important aspects of the Canadian economy with what I had been taught and indeed with what I was teaching to students. The Canadian manufacturing sector included many large firms and was over 50% foreign owned. I discovered that, quite disjoint from international trade theory, there was another field that considered industrial-organization aspects of trade and trade policy in partial-equilibrium and descriptive analysis. Here there were discussions of how policy influenced foreign ownership and attempts to measure the scale and market power inefficiencies caused by restrictive trade policies. Rather than consider trade liberalization, successive
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Equity, International Trade and Climate Policy

Equity, International Trade and Climate Policy

tion and the costs of climate change should be equal. Thus, the inequities of the no-climate-change scenario are maintained (whereas, in a no-policy-scenario, inequities would deteriorate). Such relative no-envy solutions often prove a prag- matic way out in everyday policy making. The other alternatives have more similarity to conventional economic theory. We first do a sensitivity analysis around the discount rate and risk aversion. In a fourth alternative, a global welfare function is maximised that explicitly includes distaste for inequity. This alternative has roots in neo-classical economics, but cannot distinguish between inequities of climate change, inequities of emission reduction, and inequities of other causes. A further alternative introduces altruism. Again, altruism does not distinguish between sources of inequity. A final alternative is again deeply rooted in neo-classical economics. The polluter pays principle is rigorously implemented.
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On interactions of optimal climate policy and international trade  An assessment of border carbon measures

On interactions of optimal climate policy and international trade An assessment of border carbon measures

To gain more accurate evidence about welfare effects of BCA and to assess quantitatively trade flows and optimal climate policies, we need to parametrize the generic model of section 2. The analytical model has some shortcomings since it does not account for the dynamics of global climate change and neglects other production factors. And since the production and utility functions in the analytical model are kept general, we can not characterize the exact equilibrium outcome. For this reason we analyze the findings from above in a numerical integrated assessment model (IAM). An IAM combines a simple mathematical representation of the global carbon cycle with an general equilibrium representation of the economy. We require a model, which is able to represent optimal climate policy under second-best solutions (border taxes) with regional and sectoral disaggregation and international trade in goods.
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E15 The Initiative. Maximizing the Opportunities of the Internet for International Trade. Policy Options Paper

E15 The Initiative. Maximizing the Opportunities of the Internet for International Trade. Policy Options Paper

The transformation in the character of cross-border trade is also resulting from global value chains of goods and services, which is made possible by the flow of immense amounts of data across borders on both public and private networks. Cross-border data flows are both essential to global value chains and can be a by-product of it. This has, in turn, given rise to the intersection of the trade regime with still more areas of economic and regulatory policy— notably with respect to data privacy and security policies, all of which can now have profound implications for the future of the international trade regime. As many have observed, the Internet is both part of the global commons and part of every nation’s sovereign jurisdiction. Policies that implicate its use (especially around data) can therefore have significant externalities. This recognition is not new— it has been fundamental to economic globalization and the development of the rules of the international trading system overall. Indeed, trade rules have increasingly shifted focus from border measures to internal measures because of the recognition that those internal practices have profound cross-border implications. Today, nowhere is this more important than with respect to digital trade and the regulation of data and information.
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Economic theorizing: A causal structuralist account with examples from international trade theory

Economic theorizing: A causal structuralist account with examples from international trade theory

When Bertil Ohlin, one of the founders of modem international trade theory, stated in his 1933 book that free commodity trade between countries tends to equalize the prices of production-factors between these countries, what did he mean by "tends to"? Many international economists who follow the so-called Heckscher-Ohlin-Samuelson tradition contend that the main reason for the occurrence of international trade is the difference in production-factor endowments among nations. As discussed in Chapter 1, they argue that a specific structure of production-factor endowment gives a country a comparative advantage in producing and exporting the commodity that uses more intensively the country's more abundant production-factor. In other words, the comparative abundance of a certain production-factor tends to lead the country to export the commodity in question. Again, what does "tends to" mean here? Admittedly, both usages are a synonym of "causes to." So, to be more specific, we should ask, What kind of causal thinking is involved in making this type of tendency claim? Defining this concept is directly relevant to our discussion of theory-building and theory-testing in economics. The nature of the causal thinking involved in this type of tendency claim is often misidentified as the regularist view of causal laws. As a result, the direction of the development of the meta-theory that is used to describe theory-development in economics is shaped to fit the regularist view of economic explanation discussed in Chapter 1.
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Fairness in international trade policy: equality and differential treatment in theory and practice (working paper)

Fairness in international trade policy: equality and differential treatment in theory and practice (working paper)

Abstract: In Fairness in Practice – A Social Contract for a Global Economy (2012) Aaron James proposes a substantial normative framework for a theory of fairness in the global economy. Based on a distinctive methodology of interpretive constructivism, James argues for an internal justification of fairness requirements in the field of international trade, and consequently defends three basic egalitarian principles of fairness. However, Mathias Risse and Gabriel Wollner, among others, have criticized James’s view for multiple reasons. In the following article, I will first engage with their critique, contending that their arguments do not prove that James’s view should be dismissed. Instead, I will introduce a new proposal, arguing that it is rather by a notion of differential treatment of countries that James’s account should be complemented. Taking into account all the relevant differences between countries, the concept of differential treatment allows for the provision and establishment of equal participation as a basis for considerations of fairness. To this end, I shall therefore propose an additional fourth principle of fairness called Equal Participation. I argue that it is necessary to significantly expand James’s contractualist and practice-dependent foundations, in order to reconcile crucial methodological concerns and to render James’s formulations applicable to current debates on free trade agreements. The article will conclude with an exploration of the applicability of this new approach to current trade policy issues, illustrating not only its practicability but also the urgent need for normative considerations in the context of international trade agreements.
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The trade policy effect in international trade: case of Pakistan

The trade policy effect in international trade: case of Pakistan

The debate on free trade and protectionism is ravaging in recent years. The industrialized countries are losing more and more market to the benefit of emerging countries. Liberals worry about new tariff barriers, while protectionists fear that unevenly distributed losses and gains will lead to significant economic dislocation of workers in import-competing industries. The economic policy of restricting imports and the economic policy of open- ing exports remain two critical measures of international trade. This study uses the gravity model to investigate the impacts of trade policy measures on trade flows between Paki- stan and its dominant trading pattern for the period 2006 to 2015. The findings revealed the statistically significant correlation of trade policy variables on exports and imports. The study extended the analysis by examining four specificities groups of trade policy and continuing the analysis by estimating different country groups according to geo- graphical or organizational clusters. The findings indicated that the specificities of trade policy have a statistically significant effect on exports and imports. Moreover, the signs of the coefficients are opposite in both models. The main political implication is that the proliferation of free trade agreements can have a positive impact on international trade. Keywords: Free trade, Protectionism, Trade policy, Gravity model
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International trade theory under imperfect competition in product and labour markets

International trade theory under imperfect competition in product and labour markets

In chapter one we abstract from having labour market imperfections in our model and focus on export policy in the old and new school of international trade theory. We recast the analyses of both schools and show how they both build an endogenous trade divergence into their analysis. Corden in his book "Trade Policy and Economic Welfare" (1974), defines a trade divergence as a divergence between the social marginal revenue and private marginal revenue of home production. We model a trade divergence in the old school by allowing the government to anticipate intra home industry competition over rent in a foreign market and the detrimental effect this can have on home welfare. The home government in anticipation of this, levies a tax on each home firm to ensure that maximum rent is taken home from the foreign market, even in the presence of intra home industry competition. The magnitude of intervention depends positively on the intensity of intra home industry competition. Our definition of an endogenous trade divergence (due to intra home industry competition over rent in a foreign market) corresponds to Bhagwati’s (1971) endogenous distortion and Krishna and Thursby’s (1988) trade distortion. As Corden points out, the word distortion gives the false impression that the divergence is not endogenous but is a by-product of a exogenous change in our model.
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Finite Change – Implication for Trade Theory, Policy and Development

Finite Change – Implication for Trade Theory, Policy and Development

The paper traces the evolution of trade theory beyond the standard 2X2 models and looks for implications of higher dimensional structures and adjustment problems with large shocks. Typically trade theory and policy talk about expansion and contraction of existing activities. In this paper we explore various situations where certain activities vanish altogether. Similarly other activities may come to existence following major changes in the economic environment. Such regime shifts are interpreted as finite changes as opposed to infinitesimal alterations. These changes allow us to think differently about standard policy changes, all of which have direct implications for developing countries. Emigration, wage inequality and distribution, non-equivalence of tariff and quota in competitive models, capital mobility and corruption are some of the applications involving such finite change. At a theoretical level the paper starts by an interesting interpretation of factor price “non- equalization” hypothesis in the basic Heckscher-Ohlin-Samuelson type models without depending on standard text book type argument.
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Analysis of Ahmadinejad Government's Foreign Policy According to the Critical Theory of International Relations

Analysis of Ahmadinejad Government's Foreign Policy According to the Critical Theory of International Relations

Conquer and rule of fundamentalism jus- tice discourse were followed practical conse- quences, real and observable behavior. Adop- tion and follow-up of breaker foundation strategy against international order and sys- tem, politics of looking to the East, Latin America-oriented, use symbolism, movement of Non-Alignment, support of liberation movements especially Palestinians, are the samples of changing orientation of foreign policy of Islamic Republic during the rule of ninth government.( Dehghani Firoozabadi, 1386: 93-94). It seems that foreign policy of Ahmadinejad government is different from his before and after government. Therefore, it should be equipped to an appropriate theoret- ical framework for the analysis of foreign policy of that government. Perhaps it could be provided more detailed and objective analysis from foreign policy of Islamic Re- public of Iran during Ahmadinejad govern- ment according to the critical theory of inter- national relations. Because this theory is done, internal criticism of political structures and denoted its internal strengths and weak- nesses. Therefore, the main question of the article is: How can analyze foreign policy of Ahmadinejad, according to the critical theory of international relations. It is assumed the critical theory of international relations has the ability and feature for foreign policy of Ahmadinejad. It seems that foreign policy of Ahmadinejad government criticized unjust and hegemonic structure of international sys- tem. Therefore it can be said, in negative form (what should not be), foreign policy of Ahmadinejad government is so matched with critical theory of international relations. In contrast, the critical theory wants to rebuild international system based on modern ration-
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PRICE LEADERSHIP, COMPARATIVE COST AND ADVANTAGE IN THE THEORY OF INTERNATIONAL TRADE

PRICE LEADERSHIP, COMPARATIVE COST AND ADVANTAGE IN THE THEORY OF INTERNATIONAL TRADE

International trade is trade between different countries or across political frontiers. It is the result of geographical specialization as different countries have different kind of resources and skill. The pattern of international trade of a country changes along with its economic growth and development. International trade is between free traders and protectionists. The gain from trade are real and they can be large, free international trade raises real incomes and improves the standard of living, free trade or protection--the theory of comparative advantage is the case for free trade, trade barriers prevent a nation from reaping the benefits of specialization, push it to adopt relatively insufficient production techniques, and force consumers to pay higher prices for protected products than they would otherwise. Protectionism free trade promoters a mutually beneficial division of labor among nations, the free and open trade, simply promoters specializations and specialization increases productivity, opening up their economies to the global trading system is the most secured road to prosperity.
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THE THEORY OF PROTECTIONISM IN INTERNATIONAL TRADE : A REVERSE SENSE IN THE DR CONGO

THE THEORY OF PROTECTIONISM IN INTERNATIONAL TRADE : A REVERSE SENSE IN THE DR CONGO

A BSTRACT : This research demonstrates the opposite of the theory of protectionism in international trade as applied by the Democratic Republic of Congo, which aims in itself the protection of domestic production against foreign competition. When tariff barriers are used as a means of protection, the tariff being a tax, it generates income and most of the least developed African countries, one-third of their tax revenue comes from international trade. But these tariff barriers are justified only in the interest of protecting domestic production against foreign competition. If ever a domestic product would not compete with a foreign like product, there is no reason to apply tariff barriers. This is not the case for the Democratic Republic of Congo, where all foreign products in competition or not with domestic products are hit by import taxes for the sole purpose of maximizing revenue. This situation puts all the weight on the poor consumer who has to pay up to three taxes to buy a basic necessity not produced by the country. We must therefore stop the contrary application of the theory that generates revenues from imports necessary for the survival of the consumer and which sustains the finances of the state on the misery of the population.
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Environmental Legislation and International Trade: Theory, Policy and Indian experience

Environmental Legislation and International Trade: Theory, Policy and Indian experience

But what is the impact of trade liberalization on the environment is a matter of debate. Two conflicting hypotheses have emerged from the debate. First one is pollution haven hypothesis (PHH). This hypothesis suggests that the developed countries impose tougher environmental policies than do the developing countries, which results in distortion of existing patterns of comparative advantage. So the polluting industries shift operations from the developed to the developing countries; developing countries thus become ―pollution havens.‖ The second hypothesis, the factor endowment hypothesis (FEH), states that trade liberalization will result in trade patterns consistent with the Heckscher-Ohlin-Vanek (HOV) theory of comparative advantage based on factor endowment differentials. Rich countries are typically well endowed with capital. Since capital-intensive goods are often also pollution-intensive, factor-endowment theories of international trade predict that rich countries specialize in polluting goods. Thus the manifestation of the PHH is in direct conflict with the FEH. This debate is of great concern among economists, environmentalists and world bodies like WTO.
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International Trade Theory James E. Anderson Boston College

International Trade Theory James E. Anderson Boston College

On the way to equilibrium, it is theoretically possible that adjustment cost losses may temporarily exceed gains, justifying temporary relief measures. For example, workers displaced by import competition may be unemployed for a time. Extensive investigation of US cases suggests that such adjustment cost losses from trade are small, of short duration, and are swamped by the gains from trade. A typical investigation reports that the net cost to the economy of using protection to re-employ a worker far exceeds the wage the worker would receive in the job, usually several times the wage ranging up to ten times the wage. In practice, therefore, temporary protection for workers cannot be justified on efficiency grounds, though it remains possible to justify it on equity grounds. Economists in favor of liberal trade point out that protection can be replaced with much less inefficient methods of compensation to displaced workers.
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Imitative Behavior and Evolutionary Dynamics for the Comparative Advantage of International Trade Theory

Imitative Behavior and Evolutionary Dynamics for the Comparative Advantage of International Trade Theory

Under particular (and local) circumstances in which the economy does not exceed certain thresholds determined by the imitative behavior of the economic agents, although the country has advantages in the international market, it is evolving into a low-level equilibrium, with little technological development and workers who do not select to be skilled. We denote that such a country is immersed in a poverty trap. This situation shows the possibility that, if a country is not able to use technological change to increase its comparative advantage, the result of the industrial specialization supported by free trade increases the inequality gap between countries.
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Theory and policy in Anglo Irish trade relations, 1775 1800

Theory and policy in Anglo Irish trade relations, 1775 1800

This appears to have been a somewhat •esoteric proposal, and the trend of English opinion Avas probably more nearly represented by John Williams, who advocated a commercial union as a fi[r]

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