COMMERCE 4SA3 Lecture Notes - Lecture 5: New Trade Theory, Absolute Advantage, Diminishing Returns
21 Feb 2017
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Free trade: the absence of barriers to the free flow of goods and services between countries. A (cid:272)ou(cid:374)t(cid:396)(cid:455)"s e(cid:272)o(cid:374)o(cid:373)(cid:455) (cid:373)a(cid:455) gai(cid:374) if its (cid:272)itize(cid:374)s (cid:271)u(cid:455) (cid:272)e(cid:396)tai(cid:374) p(cid:396)odu(cid:272)ts f(cid:396)o(cid:373) othe(cid:396) (cid:374)atio(cid:374)s that (cid:272)ould (cid:271)e produced at home. The pattern of international trade: product life-cycle theory: this theory suggests that early in their life cycle, most new products are produced in and exported from the country in which they were developed. As a new product becomes widely accepted internationally, however, production starts in other countries. The mercantilist doctrine is by no means dead: absolute advantage, adam smith attacked the mercantilist assumption that trade is a zero-sum game. Qualifications and assumptions trade and simple extensions of the ricardian model immobile resource. Resources do not always move easily from one economic activity to another. The process also creates friction and human suffering. Political opposition to a free trade regime typically comes from those whose jobs are most at risk.
