How does resource distribution affect trade? What are the differences between absolute and...
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Transcript of How does resource distribution affect trade? What are the differences between absolute and...
How does resource distribution affect trade?What are the differences between absolute and
comparative advantage?What are the major imports and exports of the
countries of the world?How does trade affect employment?
WHY NATIONS TRADE
Lower PricesDifferent Factor EndowmentsEconomies of Scale Increased variety/choiceAbility to acquire needed resourcesCompetition aiding efficiencyPolitical BenefitsGrowth and development
ADVANTAGES TO TRADE
• Each country of the world possesses different types and quantities of land, labor, and capital resources.
By specializing in the production of certain goods and services, nations can use their resources more efficiently.
Specialization and trade can benefit all nations.
RESOURCE DISTRIBUTION/FACTOR ENDOWMENTS
As firms get larger the specialization of their workforce and the introduction of technology improves productivity.
ECONOMIES OF SCALE (AND LOWER PRICES/INCREASED EFFICIENCY)
ACQUISITION OF NEEDED RESOURCES
INCREASED VARIETY/CHOICES
Flaws in Theory ofComparative Advantage
Doesn’t address winners and losers in the country
Assumes factors within the country are perfectly mobile
Static model - doesn’t address potential for changes
Ignores externalities – positive and negative
Ignores economies of scale
Ignores national security and issues of inter-dependence
Many others….
h t t p : / /w w w. g a p m i n d e r. o rg / w o r l d /# $ m a j o r M o d e = c h a r t $ i s ; s h i = t ; l y = 2 0 0 3 ; l b = f ; i l = t ; f s = 1 1 ; a l = 3 0 ; s t l = t ; s t = t ; n s l = t ; s e = t $ w s t ; t t s= C$ t s ; s p = 5 . 59 2 9 0 3 2 2 5 8 0 6 4 4 ; t i = 2 0 1 0 $ zp v ; v = 1 $ i n c _ x ; m mi d = XCO O R D S ; i i d = ty a d r y l I p Q 1 K% 5 Fi H P 4 0 7 3 7 4 Q ; b y = i n d $ i n c _ y ; mm i d = YCO O R D S ; i i d = 0 A k Bd 6 l y S 3 Em p d H ZS T V M x a V d x Q l F L R 3 N M b n BE Wn Vu T Xc ; b y= i n d $ i n c _ s ; u n i Va l u e = 8 . 2 1 ; i i d = p h Aw c N AVu y j 0 XO o BL% 5 Fn 5 t AQ ; b y = i n d $ i n c _ c ; u n i Va l u e = 2 5 5 ;g i d = C AT I D 0 ; b y= g r p $ m a p _ x ; s c a l e = l i n ; d a t a M i n = 0 . 1 4 0 1 ; d a ta M a x = 0. 9 3 7 6 $ ma p _ y ; s c a l e = l i n ; d a t a M i n = 0 . 1 1 0 2 ; d a t a M a x = 2 3 4 $ m a p _ s ; s m a = 4 9 ; s m i = 2 . 6 5 $ c d ; b d = 0 $ i n d s=
GROWTH AND DEVELOPMENT
PROTECTIONISM AND TRADE
LIBERALISATION
Why Do Countries Limit Trade?Protect domestic business interests or employment
Health, safety or environmental concerns
Support infant “sunrise” industries
Avoid overspecialization
Prevent dumping
Raise revenue
Protect strategic industry
To improve terms of trade
Protect domestic business interests or employment
Health, safety or environmental concerns
Support infant “sunrise” industries
Protect strategic industry
Avoid overspecialization
Prevent dumping
Raise revenue
Why Do Countries Trade Freely?Allocate resources more efficientlyAvoid trade warProtectionism is a corruption magnetDomestic complacency causes higher costsHigher import costs
Allocate resources more efficiently
Domestic complacency causes higher costs
Avoid trade war
Protectionism is a corruption magnet
INTERNATIONAL COOPERATIONRecent trends have been toward lowering trade
barriers and increasing trade through international trade agreements.
In 1948, the General Agreement on Tariffs and Trade (GATT) was established to reduce tariffs and expand world trade.
In 1995, the World Trade Organization (WTO) was founded to ensure compliance with GATT, to negotiate new trade agreements, and to resolve trade disputes.
Major Trade Organization Members
EUCARICOMMERCOSURAPECNAFTA & APEC
PACIFIC OCEAN
ATLANTIC OCEAN
INDIAN OCEAN
PACIFIC OCEAN
GLOBAL TRADE AGREEMENTSMany nations have formed regional trade organizations. These trade organizations establish free-trade zones, or regions where a group of countries has agreed to reduce trade barriers among themselves.