Tiêu đề Chapter 9 ( Unit 1).pdf ✅

UNIT - 1: THEORIES OF INTERNATIONAL TRADE INTRODUCTION ▪ International trade is the exchange of goods and services as well as resources between countries. It involves transactions between residents of different countries. If there is a point on which most economists agree, it is that trade among nations makes the world better off. International trade is an integral part of international relations and has become an important engine of growth in developed as well as developing countries. Benefits of International Trade Powerful stimulus to economic efficiency and contributes to economic growth and rising incomes. The wider market made possible owing to trade induces companies to reap the quantitative and qualitative benefits of division of labour. Efficient deployment of productive resources to their best use is a direct economic advantage of foreign trade. Greater efficiency in the use of natural, human, industrial and financial resources ensures productivity gains. Since international trade also tends to decrease the likelihood of domestic monopolies, it is always beneficial to the community. ▪ Trade provides access to new markets and new materials and enables sourcing of inputs and components internationally at competitive prices. This reflects in innovative products at lower prices and wider choice in products and services for consumers. It also enables nations to acquire foreign exchange reserves necessary for imports which are crucial for sustaining their economies. Boost
▪ Trade also provides greater stimulus to innovative services in banking, insurance, logistics, consultancy services etc. For emerging economies, improvement in the quality of output of goods and services, superior products, finer labour and environmental standards etc. enhance the value of their products and enable them to move up the global value chain. Opening up of new markets results in broadening the productive base and facilitates export diversification so that new production possibilities are opened up. ▪ Trade can also contribute to human resource development, by facilitating fundamental and applied research and exchange of know-how and best practices between trade partners. ▪ Trade strengthens bonds between nations by bringing citizens of different countries together in mutually beneficial exchanges and, thus, promotes harmony and cooperation among nations. Limitations -The major arguments put forth against trade openness ▪ International trade is often not equally beneficial to all nations. Potential unequal market access and disregard for the principles of a fair trading system may even amplify the differences between trading countries, especially if they differ in their wealth. ▪ Economic exploitation is a likely outcome when underprivileged countries become vulnerable to the growing political power of corporations operating globally. The domestic entities can be easily outperformed by financially stronger transnational companies. -
▪ Substantial environmental damage and exhaustion of natural resources in a shorter span of time could have serious negative consequences on the society at large. Trade cycles and the associated economic crises occurring in different countries are also likely to get transmitted rapidly to other countries. Risky dependence of underdeveloped countries on foreign nations impairs economic autonomy and endangers their political sovereignty. Such reliance often leads to widespread exploitation and loss of cultural identity. Substantial dependence may also have severe adverse consequences in times of wars and other political disturbances. ▪ Too much export orientation may distort actual investments away from the genuine investment needs of a country. Finally, there is often a lack of transparency and predictability in respect of many aspects related to trade policies of trading partners. There are also many risks in trade which are associated with changes in governments’ policies of participating countries, such as imposition of an import ban, high import tariffs or trade embargoes.
IMPORTANT THEORIES OF INTERNATIONAL TRADE 1) The Mercantilists’ View of International Trade ▪ Mercantilism, which is derived from the word mercantile, “trade and commercial affairs”. Mercantilism according to Microsoft Encarta Dictionary (2009), is the economic policy trending in Europe from the 16th to the 18th centuries. ▪ Government used power to control industry and trade with the theoretical belief that national power is achieved and sustained by having constant large quantities of exports over imports. Mercantilists also believed that the more gold and silver a country accumulates, the richer it becomes. Mercantilism advocated maximising exports in order to bring in more “specie” (money in the form of precious metals) and minimizing imports through the state imposing very high tariffs on foreign goods. ▪ This view argues that trade is a ‘zero-sum game’, with winners who win, does so only at the expense of losers and one country’s gain is equal to another country’s loss, so that the net change in wealth or benefits among the participants is zero ▪ Nations’ human and material resources are unevenly endowed, distributed and developed. This allows flow of labour, raw materials, capital and finished products across national boundaries and markets; thus resulting in “mercantilism”. ImpDuty available * - +$10 - B - $10 Exports e