Types of trade

o Free trade
Minimal government intervention
Reasons for
Leads to greater prosperity
Lower prices for g & s
helps raise consumer income
Reasons against
National defense
o Protect key industries & technology
Infant industry
o Allow important industries to grow
o Large enough to protect themselves
Protect Jobs
o Wage rates
o Fair trade
Protection against monopolies and
Dumping to have a level field
o Forget trade
Major government intervention with
Bans on imports, large barriers to entry
And strong regulation
Barriers to trade
o Tariffs
A tax placed on imported goods
Export tariff
Tax as goods leave a country
Transit tariff
Tax as they pass through a country
Import tariff
Tax good enters a country
o Non-tariff barriers
Government regulation that impedes trade
Quotas & licenses
Numerical export controls
Promotion of international trade & investment
o Subsidies
Favourable tax breaks
Direct payment to produces
Price support schemes
o Export financing programs
Providing financial support to
win contracts
o Free trade zones
Regions where imported or exported g & s
Receive preferential tariff treatment
International trade agreements
o Bi-lateral trade agreements
Trade agreement between
2 countries
o Cooperative agreements
GATT
General agreement on tariffs

WTO

And trade
Covered most trading nations
Goal was to reduce barriers to international trade

World Trade Organization

o Only international organization dealing
o With the rules of global trade
o Helps members to sort out trade
o Problems with each other
WTO enforcement
o If a country violates a rule, the WTO
o Can ask them step obey they rule
o If they refuse to, the WTO can impose
o A barrier onto the country
Regional integration
o Forms of economic integration
Free trade area
Members remove tariffs and barriers
Between themselves
Political union
The union effectively becomes
One country as it includes
Both political and economic
Integration
o Positives
Trade creation
Helps to increase level of trade
Between nations
Greater consensus
Easier to gain consensus
Do to the lesser # of nations
Than that of the WTO
Political cooperation
Trade integration can reduce
Chance of war
o Negatives
Trade diversion
Trade can be diverted from countries
Not involved in the agreement
Shifts in employment
Companies might move their production
To the most productive countries or
Lower cost countries
Loss of national control
Mostly in political unions
With centralised foreign policy
European union
o European parliament
More than 700 member elected
Power to supervise commissioner
Appointments and censure commission
o Council of the European union

o
o

Legislative body of EU
Concludes international agreements
With other nations on behalf of EU
European commission
Executive body of EU
Can draft legislation, manage and
Implement policy, and monitor
Member compliance
Court of justice
Hears cases against member nations
Court of auditors
Audits EU account and
Implement budget