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1 INTERNATIONAL TRADE Definition: A process that occurs when goods and services cross national boundaries in exchange for money or the goods and services of another nation. Significance: International Trade ties countries together and generates economic, political and social interdependence —it also generates tension. There is a tension between the desire for material benefits of an open system and pressure to promote/defend state and/or particularistic interests. Until the Industrial Revolution the world was basically agrarian with a minimal standard of living. Following the Industrial Revolution and the WWs International Trade has increased immensely—there have been some success stories as well as many disappointments—development will always be uneven LIBERAL PERSPECTIVE ON INTERNATIONAL TRADE: (Smith & Ricardo) Advocate laissez-faire policies emphasizing that states need to agree upon regulations that will maximize the gains from trade in a competitive, interdependent and globalizing international political economy. LAW OF COMPARATIVE ADVANTAGE: (The cost of producing an item ourselves with the availability and costs of buying it from others) Free trade increases efficiency making everyone better off! Why has trade failed as an engine of growth? market failures—weak demand, weak linkages, weak adaptive capacity Problem of weak demand —meant that the stimulus to growth was much smaller (Except for oil and natural gas) Countries before they develop have litter or no industries—their first industries are normally “extracting” industries (food stuffs, agricultural raw materials, minerals, oil & natural gas)—they can export these until they can develop other industries but the problem for developing countries is that the demand for what they can produce is relatively weak. After WWII: Triad (industrialized centers that grew)— much of the growth was in services that do not require raw materials. Also a growth in technology . Countries that would have expected to benefit from exports suffered because of the creation of synthetics—less important to import the natural materials. Where do these synthetics made of?—fibers that come from oil or natural gas (OPEC countries have done a lot better than the rest) Problem of Export Enclaves : In many poor countries the export sector was an export enclave—benefits that are earned go to the foreign countries and foreign workers rather than spreading it out in the economy. Domestic economies have been resistant to change (weak adaptive capacity) —variety of cultural and social reasons REALIST (MERCANTILIST) PERSPECTIVE ON INTERNATIONAL TRADE : (List and Hamilton) Liberal/free trade policies a way for England to maintain its dominant advantage over trading partners—Hamilton argued that protectionist policies and protection of infant industries was needed to achieve national independence and security. They challenge that the law of comparative advantage
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This note was uploaded on 06/06/2010 for the course POL S 186 taught by Professor Cohen during the Winter '10 term at UCSB.

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