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POLI 243 (70)
Chapter 3

POLI 243 Chapter 3: Book Chap 3

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Political Science
POLI 243
Anthony Imbrogno

Monday, 6 February 2017 The political economy of international trade cooperation (chap 3 of book) The economic case for trade - The WTO helps govs work together in pursuit of mutual gain - Comparative advantage: • Production possibility frontier (PPF): countries have limited K and L. therefore there is an opportunity cost for whichever allocation of resources is chosen • Consumption indifference curves: tells us how much of a specific good consumers will buy over another • Together, we can know equilibrium production and consumption • Thanks to this, we can find out which goods a country produces more efficiently • The theory states that every country benefits from trade, if they specialise in the production they produce relatively well and M the rest from other countries • Hecksher-Olin model tells us which goods countries will be better at producing: factor endowment, because an abundant factor will be cheaper than a scarce one Trade bargaining - Trade often isn’t liberalised unilaterally; some sectors remain more protected than others. Liberalisation occurs through bargaining - Bargaining- patience and outside option are strategies countries use, for ex in the Doha round, to obtain info about other countries negotiating positions - Gov’s have different bargaining power: if they are patient (can walk away from a deal in order to get something better)
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