Class 12

Class 12 - Recap some influences on trade policy...

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Recap some influences on trade policy Analyze "Golden age" of globalization Why it happened Why it ended: the Depression Lessons: to understand trade / economic crises / policy responses Economy doesn't function in a vacuum Friedan: "Globalization is a choice, not a fact." Globalization fluctuates The "laws" of economics involve lots of politics: 1. Coercion: use of military/police force 2. Lobbies: domestic political interests Coercion example Congo exports rubber and ivory, but only importing Belgian weapons used by Belgian troops… why? (pg 83) Belgian troops used weapons to coerce local Congolese into forced labor - taxes - taking women and children hostage Free trade doesn't happen due to purely economic forces (like comparative advantage) "Free trade" can be forced with coercion (eg. Opium - forced China to import) Free trade is often the product of safe intervention to open economies/roles of IOs like the IMF. Winners - Exporters (higher demand, higher price) - Consumers (pay less than domestic price) - Workers in low-wage economies (competing with high-wage economies) Producers of goods with abundant tradable factors of production - because the cost of factors of production is lower than that of competitor's Losers - Low-skill workers in high-wage economies (foreign workers flushing their jobs) - Domestic producers (import of foreign products decrease domestic price) - Producers of goods with scarce factors of production (cost higher than those from overseas) "distribution consequences" there are winners and losers
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Class 12 - Recap some influences on trade policy...

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