Post on 01-Jun-2018
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37
International Trade
McGraw-Hill/Irwin Copyright 2012 by The McGraw-Hill Companies, Inc !ll rights reser"e#
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Some Key Trade Facts
LO1
Principal U.S. exports
include:
Principal U.S. imports
include:
Chemicals
Agricultural products
Consumer durables SemiconductorsAircraft
U.S. provides about 8.5%of orld!s e"ports
#etroleum
Automobiles
$etals ousehold appliances Computers
37&'
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Economic Basis for Trade
(ations have different resourceendoments
)abor&intensive goods
)and&intensive goods
Capital&intensive goods
LO2 37&3
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Assumptions *o nations
Same si+e labor force
Constant costs in each countr, -ifferent costs beteen countries
U.S. absolute advantage in both
pportunit, cost ratio Slope of the curve
/egetables sacrificed per ton of beef
LO2
Comparative Advantage
37&0
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Vegetables
(Ton
s)
!
2"
2!
1"
1!
"
!
"
#!
#"
" 1! 1" 2!
$ee% (Tons)
Vegetables
(Ton
s)
!
2"
2!
1"
1!
"
!
"
#!
#"
" 1! 1" 2! 2" !
$ee% (Tons)
(a) United States (b) Mexico
12
1& &
#
A
Z
Comparative Advantage
LO2 37&5
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Comparative Advantage
LO2 37&1
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Comparative Advantage
6ains from trade
*rading possibilities line
Slope euals terms of trade
mproved options Complete speciali+ation
$ore of both goods $ore efficient resource allocation
LO2 37&8
t
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ra e arr ers an xportSubsidies
*ariffs
9evenue tariff
#rotective tariff
mport uota (ontariff barrier :(*4;
/oluntar, e"port restriction :/
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Economic Impact of Taris
-irect effects -ecline in consumption
ncrease in domestic production
-ecline in imports *ariff revenue
ndirect effects
LO# 37&2>
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Economic Impact of Quotas
-ecline in consumption ncrease in domestic production
-ecline in imports
?uotas do not provide for an,government revenue but instead
transfer it to foreign producers
LO# 37&22
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Te Case for !rotection
$ilitar, self&sufficienc, -iversification for stabilit,
nfant industr,
#rotection against dumping
ncreased domestic emplo,ment
Cheap foreign labor
LO" 37&2'
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"ATT
*hree principles@
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European %nion
nitiated in 2=58 as Common $arBetAbolished tariffs and import uotas
beteen member nations
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&AFTA
Agreement beteen U.S. Canadaand $e"ico