POLI 243 notes March 10

POLI 243 notes March 10 - March 10, 2009 POLI 243 Intl Econ...

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March 10, 2009 POLI 243 – Int’l Econ Relations South Korea Chooses Export-Oriented Industrialization Trade and Economic Development - Despite similar starting points in 1945, several countries have attained different results - East Asian countries quite successful - Trade policy played an important role Trade Strategies (ISI) - Import-Substitution Industrialization ( ISI ) o Country is not industrialized yet; importing manufactured goods and exporting raw materials/agriculture – this makes it hard to develop your own industrial advantage (comparative advantage says invest in raw materials/agriculture) o This strategy involves blocking imports through tariffs - Based on historical experience (during world wards, great depression) o Trade patterns disrupted when economies switched to wartime production (stopped exporting manufactured goods); local producers in these countries then had a chance to produce manufactured goods - ISI widely adopted after WWII - many Middle Eastern countries, South Korea, Taiwan, etc. o Trying to express autonomy from old trading powers o (Linked to nationalism) Problems with ISI - Shortages develop, causing bottlenecks in production o You aren’t equipped to deal with the new demand after imports are blocked so you have shortages in some sectors; these in turn cause shortages in other sectors which rely on them o E.g. Steel – if you decide to create a steel industry and can’t produce enough right away, industries such as car manufacturers, etc. who use steel also have shortages - Profits are not always reinvested – if you have profits from one sector (e.g. steel
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POLI 243 notes March 10 - March 10, 2009 POLI 243 Intl Econ...

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