Geographic Supranational Trends & Economics of Trade

Keith L. White

Supranationalism

The efforts of three or more states to forge associations for common advantage and in pursuit of common goals

• International sanctions• From League of Nations to United Nations

The United Nations

Representation of countries

Why Trade?

• Increase productivity

• Improve standard of living

• Utilize resources

• ABSOLUTE VS. COMPARATIVE ADVANTAGE

Absolute Advantage

• A country can produce more of a given product (good or service) than another country using the same resources.

Comparative Advantage

• The production of a good or service can be produced at a relatively lower OPPORTUNITY COST.

• (David Ricardo) = everyone will be better off producing the products they produce relatively best.

• Basis for today’s international trade

Economic Free Trade

• Eliminate trade barriers (tariffs/trade quotas/restrictions)

• Border restrictions/check points• “Open skies” (airline routes)• Cost/benefits analysis• EU• NAFTA• Currency/Monetary consolidation? (Euro)• A Global Order?

Toward a European Union

• The Organization of the European Economic Community (OEEC)

• France proposed a union with six other states called the European Coal and Steel Community (ECSC)

• The ECSC through negotiations and agreement led to the formation of the Common Market (EEC)

• Expansion created the European Community (EC)

• In 1992, further expansion led to creation of the European Union (EU)

Regional Multinational Unions• Supranationalism elsewhere

– NAFTA—the North American Free Trade Agreement– CARICOM– South America’s MERCOSUR– ECOWAS– Today, new groups are forming in almost all parts of

the world• FTAA—Free Trade Area of the Americas

• Other forms of Supranationalism– NATO– Cultural unions– Political unions

THE CHANGING GLOBAL POLITICAL LANDSCAPE

Restricting International Trade

• Protective Tariffs

• Trade Import Quotas

• Limits (Cargo/Passengers/Flights/Ships)

• Inspections/Licenses/Fees/Permits

• Economic Boycotts and Trade Embargos

Protectionist Arguments in USA

• National Defense

• Infant Industry Protection/Competition

• Domestic Jobs (Labor Union Influences)

• Keep US$ at home!

• Reduce trade deficit (Balance of payments)

• Environmental Issues

Current Trade Issues of Globalization

• Labor abuse/work exploitation (children) / Human Rights

• Safety concerns

• Environmental/pollution issues

• Cultural diffusion

• Devolution

• Religious fundamentalism vs. the evils of capitalism and free market forces

A New World Order?

• Write down your thoughts regarding globalization: Describe briefly how you would benefit and how you might not benefit is the world went to ONE currency. (Have fun and name this new currency!)

• Use an economic cost/benefits analysis for a free trade world. (Hint: Who would benefit and who would have to pay the cost = would the benefit be more than the cost?)

Extra Effort/Commentary

• The World Is Flat: A Brief History of the Twenty-First Century Thomas L. Friedman