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32-class notes

32-class notes - TODAY class 32 Fri Nov 27 Course...

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11/26/2009 1 TODAY – class 32 – Fri Nov 27 Course evaluations International Trade (continued) – Vertical fragmentation of production in a global supply chain. – Types of trade policy; Start normative reasons for trade policy – Brander (8, 169-183) Next class - Mon Nov 30 – normative and positive reasons for trade policy Comm394-Barbara Spencer Wed Dec 2 – Trade Policy issues and institutions Frid Dec 4 – Last class – dispute resolution. Bring your questions about the course material. Causes of International Trade iv: Improvements in communications and reductions in trade costs F d t l i t i th t h l Fundamental improvement in the technology of communication – development and growth of the internet, e-mail, fax, and telecommunications. Result : Rise in trade in services – e.g. the off- shoring of call centers, back-office services and software development from the US and other developed countries to India.
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11/26/2009 2 Reductions in trade costs lower tariffs; better infrastructure growth of tariff free export zones in developing growth of tariff free export zones in developing countries E.g. Chinese export zones – raw materials are imported, processed locally and then re-exported. No import duties if all the processed goods are exported. Result : rapid rise in trade in intermediate goods : rapid rise in trade in intermediate goods. E.g. Western multinationals send raw materials to China where the good is processed and re- exported. Vertical Fragmentation of Production Intermediate goods are produced through a global trading chain that stretches over more than one country. Intermediate inputs are exported to a country – Intermediate inputs are exported to a country, processed and then re-exported perhaps for further processing in another country. Production of Barbie-doll (Mattel) – Molds and paints from the US; Plastic and hair from Taiwan and Japan; Assembly in China.
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