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Chapter 6

chapter 6 notes

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Political Science
Robert O' Brien

Chapter 6 International Tradeone striking feature of the contemporary international trading system arises from the conflict between the continuing political importance of the national border and its declining economic relevance trade as an activity takes place domestically when 2 or more individuals exchange goods and servicesbut international trade is when exchange is conducted across national bordersinternational trade has two important components the existence of barriersrestrictions to trade and the medium of exchange in which trade is conducted international trade has political barriers and technical travel and distancepolitical barriers to trade are erected wherever different political authorities decide to prohibit or restricttheir citizens access to foreign goods and servicesProtectionism refers to policies designed to restrict the import of goods and services can take many forms but is most commonly in the form of tariffs taxes imposed on imports of particular goods tax revenue goes to the government protectionism has also taken different forms of nontariff barriers NTB Nontariff Barriers NTB1 QUOTAS specific limits on the quantity of imports or their value2 SUBSIDIES payments made to particular industries to help them be competitive on the international market3 CURRENCY CONTROLS limit the availability of foreign currency for the purchase of foreign goods4 ADMINISTRATIVE REGULATIONS includes bureaucratic procedures systems of advance payment minimal domestic content rules special marketing standards and healthsafety provisions 5 VOLUNTARY EXPORT RESTRAINTS one country agrees to limit its exports to a third country or countriesusually happens when importing countries threaten to place barriers against the goods of the exporting country Free Trade Liberal vs Protectionism LiberalProponents of Free Trade liberal political economy emphasizes the benefits of free tradefree trade benefits everyone increases efficiency and raises productivitybased on theory of comparative advantage countries should specialize and produce the goods and services in which they are most efficientRicardos idea was that trade is a positive sum game where all parties benefitted even if one party had absolute advantage over another in the production of goods and servicesview free trade as a positive sum game rather than a zerosum game as Mercantilist theories arguethat trade is s zerosum game where one countrys gain is equivalent to a loss sustained by its trading partner
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