International Trade and the Developing Countries
An Overview of the Developing Countries
Developing countries differ from each other.
However, compared to developed countries most developing countries have
low per capita incomes,
higher population growth
The Balance-of-Payments Accounts
Balance of payments accounts are a way of keeping track of all economic transactions
between the home country and the rest of the world over a specific time period (usually
Recent Growth of T
Economic integration occurs when two or more countries come together for purposes of
trade and/or economic coordination.
Greater integration may yield additional benefits, but it may also involve giving up
Economic Growth and International Trade
The Trade Effects of Growth
As real income rises,
producers are affected: how should they alter production in response?
consumers are also affected: how should they spend the additional income?
Trade Effects of Prod
International Factor Movements
Factors of Production: Capital
Types of capital foreign investment
Foreign Direct Investment (FDI)
Foreign Portfolio Investment (FPI)
FDI: Can involve individuals but the bulk is done by firms.
known as: multinational corpor
Arguments for Interventionist Trade Policies
Trade Policy as Part of Broader Social Policy Objectives
There are a number of common arguments in favor of protection.
These may help certain groups within a country, or may help a nation achieve some
Economic Effects of International Capital Flows On Incomes
Output rises in country I (the country to which the capital flows), BUT:
Returns fall for capitalists, since their rate of return decreases.
Returns rise for laborers.
Capitalists are hurt; labor
The Instruments of Trade Policy
Tariffs in General
Tariffs are simply taxes a country places on its imports.
Purpose of tariffs:
to protect domestic (import-competing) industries
to raise revenue for the government
There are two sorts of tariffs: specific
The Impact of Trade Policies
Consumer surplus (CS) is a measure of the overall well-being of consumers.
CS is the area between the demand curve and the price.
CS varies inversely with the price.
Producer surplus (PS) is a
Political Economy and U.S. Trade Policy
The Political Economy of Trade Policy
Q: If free trade has so many economic benefits, why is there so much protectionism?
A: The political economy of trade policy must be considered.
Two main areas examine these pol