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University of Waterloo
International Studies
Brian Orend

INTST 101: Introduction to International Studies Brian Orend Unit 7: International Trade This section will be somewhat different than the others, since it will include extensive material from a lecture I have already recorded for a different course I teach, PHIL 215 DE, which is Business and Professional Ethics. There is a whole unit there on International Business Law, Organizations, Globalization, Bribery (a prevalent practice in international business) and the Pros and Cons of Multinational Corporations. For now, I want to do a very brief introduction to all that material, outlining the basic concepts of international trade and capitalism. Defined International trade is the exchange of goods and services across international borders. Like when most of the world buys manufactured goods from China, and then sells them to their own people back home. Or when Americans buy softwood lumber and water from Canada, and Canada buys entertainment products, like movies, from the United 6WDWHV▯▯ ,QWHUQDWLRQDO▯ WUDGH▯ LV▯ D▯ PDVVLYH▯ SDUW▯ RI▯ WKH▯ ZRUOG¶V▯ RYHUDOO▯ HFRQRP\▯▯ DQG▯ LWV▯ history is as old as human settlement itself. Why Trade? The basic theory behind international trade is that of specialization and comparative advantage leading to higher living standards. The argument is familiar, and we can use a basic analogy of persons instead of countries. Imagine how painful and less enjoyable your life would be if you, yourself, had to individually produce everything you wanted and needed in your life: you had to grow your own fruits and vegetables, raise your own cows and chickens, kill them and carve them up by yourself, build your own home, build your own car (:^), sew your own clothes, etc. etc. Almost none of us has either the time or the money or the know-how, etc., to do this. If we had to make everything for ourselves, our lives would be so much worse. We have discovered the principle of trade: ,¶OO▯SURGXFH▯VRPHWKLQJ▯ZHOO▯▯NHHS▯ZKDW▯,▯QHHG▯IRU▯P\VHOI▯▯EXW▯WKHQ▯DQ\▯VXUSOXV▯,▯SURGXFH ZKLFK▯,▯GRQ¶W▯ZDQW▯RU▯QHHG▯▯,¶OO▯VHOO▯LW▯WR▯\RX▯▯,¶OO▯WKHQ▯XVH▯WKH▯PRQH\▯,▯JHW▯IURP▯WKDW▯WUDGH▯ to buy all the others things I want and need, yet cannot provide for myself. By 1 INTST 101: Introduction to International Studies Brian Orend VSHFLDOL]LQJ▯▯DQG▯WKHQ▯WUDGLQJ▯WKRVH▯WKLQJV▯,▯KDYH▯D▯FRPSDUDWLYH▯DGYDQWDJH▯LQ▯▯,¶OO▯YDVWO\▯ improve the standard and quality of my life. The same principle applies to trade between nations, and the growth of international trade has, clearly, measurably improved the lives of millions, even billions, the world over. This way of understanding the many benefits of LQWHUQDWLRQDO▯WUDGH▯DOVR▯JHWV▯UHIHUUHG▯WR▯DV▯WKH▯³5LFDUGLDQ▯PRGHO´▯▯DIWHU▯WKH economist Ricardo, who first conceptualized it. Capitalism/Free Market Economy This understanding of trade fits within a capitalist framework. You GRQ¶W KHDU▯ WKH▯ SKUDVH▯ ³FDSLWDOLVP´▯ much anymore, as the preferred phrase is the much nicer-VRXQGLQJ▯³IUHH▯PDUNHW▯HFRQRP\▯´▯%XW▯LW¶V▯YLWDO▯WR▯ note the general principles and realities which it implies. A capitalist or free-market economy has several distinguishing features: There is private property ownership allowed. This is to say that the state or government does not own everything in the society; that ordinary people and businesses can own things and make use of them as they see fit, subject to some kind RI▯JHQHUDO▯³QRQ-KDUPLQJ´▯SULQFLSOH▯ People are free to open up businesses, if they want. This is to say the state does not prevent or prohibit entrepreneurial activity. If these businesses are successful, the owners get to keep at least some of the
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