Chapter 13. Globalization and Trade
KEY TERMS
- absolute advantage
- when one country can use fewer resources to produce a good compared to another country; when a country is more productive compared to another country
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- anti-dumping laws
- laws that block imports sold below the cost of production and impose tariffs that would increase the price of these imports to reflect their cost of production
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- common market
- economic agreement between countries to allow free trade in goods, services, labor, and financial capital between members while having a common external trade policy
- disruptive market change
- innovative new product or production technology which disrupts the status quo in a market, leading the innovators to earn more income and profits and the other firms to lose income and profits, unless they can come up with their own innovations
- dumping
- selling internationally traded goods below their cost of production
- economic union
- economic agreement between countries to allow free trade between members, a common external trade policy, and coordinated monetary and fiscal policies
- free trade agreement
- economic agreement between countries to allow free trade between members
- gain from trade
- a country that can consume more than it can produce as a result of specialization and trade
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- General Agreement on Tariffs and Trade (GATT)
- forum in which nations could come together to negotiate reductions in tariffs and other barriers to trade; the precursor to the World Trade Organization
- infant industry argument
- core of the argument is that when new industries are first starting out they do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale
- import quotas
- numerical limits on the quantity of products that a country can import
- intra-industry trade
- international trade of goods within the same industry
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- national interest argument
- the argument that there are compelling national interests against depending on key imports from other nations
- nontariff barriers
- ways a nation can draw up rules, regulations, inspections, and paperwork to make it more costly or difficult to import products
- protectionism
- government policies to reduce or block imports
- race to the bottom
- when production locates in countries with the lowest environmental (or other) standards, putting pressure on all countries to reduce their environmental standards
- splitting up the value chain
- many of the different stages of producing a good happen in different geographic locations
- tariffs
- taxes that governments place on imported goods
- value chain
- how a good is produced in stages
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- World Trade Organization (WTO)
- organization that seeks to negotiate reductions in barriers to trade and to adjudicate complaints about violations of international trade policy; successor to the General Agreement on Tariffs and Trade (GATT)
