PO102 Lecture Notes - Lecture 11: Infant Industry Argument, Ngaire Woods, International Political Economy

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3 Jul 2017
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What is Global Political Economy?
- The interplay of economics and politics in world affairs (Ngaire Woods, 2008)
- What do International Political Economy (IPE) scholars study? Or what is IPE about?
Why has trade been so important
- It has been a source of wealth for countries
- Beause e at goods e at get at hoe
Benefits and positive effects
- The range of consumer choices is widened
- Helps to diffuse technology
- Create jobs
- Stimulates economic growth
Negative effects of trade
- Can destroy national industries
- Can displace workers or lead to job flight
- Can threaten culture and identity of a country
1995 trade stats proportion of GDP
- Just over 20% for the US
- 47% for France
- 60% for the UK
- 80% for Sweden
- The bigger the economy, the less important trade is to it
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- Midrange countries generally sit around 50%
Difference of option
- Trade a source for peace: interdependence creates positive bonds or Trade and
interdependence make countries dependent and vulnerable
Adam Smith (Liberal):
- Favored free trade
- Wote The ealth of Natios opaatie adatage
Comparative advantage
- Each country is superior in production of something (lowest cost)
Because of the quality of land, labour force, climate, etc.
- So the country should produce that good/service and trade for the rest
- Opportunity cost
- Never argued that every country would gain equally, but overall global wealth would
increase
Free trade
- Where the governments do not intervene to obstruct trade
- Liberals do not argue that everyone will necessarily gain from free trade, at least not in
the short run
- Some will gain more than others
- Free trade argument not based on equality or equity of distribution
Mercantilists or Nationalists argue (Friedrich List)
- Free trade favors the strong
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