SISU-105 FA3 Lecture Notes - Lecture 7: Mercosur, Arms Industry, World Trade Organization

• School: American University
• Department: SISU - INT'L SERVICE UNDERGRADUATE
• Course: SISU-105 FA3
• Professor: Tuomi

Document Summary

Sisu-105 - lecture note - wp 3/27 trade. Like realists, espouse relative power and protection of self-interest. Aim for a trade surplus at all times often put up barriers to imports. Mercantilists prefer manufacturing to service; strong industry dominates. Believe states can mutually benefit from economic exchanges. Main goal of economic policy: maximization of total wealth through achieving optimal efficiency. Because of comparative (vs. absolute) advantage trade can benefit both parties. Prefer that the government does not interfere in trade opposed to protectionism. Countries/people have different opportunity costs of production relative advantage. Distorting markets for the short-term advantage of a state. Externalities: effects on a third party to a transaction that is not included in the cost of the transaction. We don"t consider the benefit of herd immunity when deciding whether or not to get one. Real reason is domestic interest groups (agriculture, textiles) Methods: tariffs, quotas, subsidies, voluntary export restrictions, standards and regulation.