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by: Jessica McCall

EXAM 3 POSC 1020

Jessica McCall
GPA 3.5

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About this Document

Entire set of notes for EXAM 3
Introduction to International Relations
Lydia Lundgren
75 ?




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This 4 page Bundle was uploaded by Jessica McCall on Thursday November 19, 2015. The Bundle belongs to POSC 1020 at Clemson University taught by Lydia Lundgren in Fall 2015. Since its upload, it has received 51 views. For similar materials see Introduction to International Relations in Political Science at Clemson University.


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Date Created: 11/19/15
International Trade: Benefits of trade  Mutually beneficial-voluntarily exchange o Producers get to sell to a larger market, usually increasing efficiency o Consumers buy goods for less, freeing wealth for other uses Advantage 1. Absolute advantage a. When one country is more efficient in one product. b. This is in comparison to other countries c. Example: Italy produces wine more efficiently than the US i. Italy has ABSOLUTE ADVANTAGE 2. Comparative advantage a. Whether or not a country has an absolute advantage for any product, it should specialize in what it does best b. Producing other products less efficiently wastes resources c. Not compared to other states Heckscher-Ohlin Trade Theory Free Trade Debate  No Free Trade: o Exports goods-they make money o Imports are problematic—take away jobs  Free Trade: o Imports are good-provide what countries cannot o Exports are what the country cannot sell so good Trade Restrictions  Tariff-a tax on import or export of a good  Quota-limit on volume of goods that can be traded  Nontariff barriers o Legislative preference o Antidumping penalties o Subsidies o Health and safety regulations that target foreign products  Protectionism: restricting imports o Consumers pay higher prices o Cost of forgoing more efficient exchanges  Countries may prefer to trade with countries with o Similar cultures and economic systems o Those who don’t pose security threats Who Favors Restriction  Stolper-Samuelson o Classes of labor (capital, land, labor) o General o Free trade benefits the owners of abundant factors o They have a lot of it so they will want to sell it to foreign market o If factor is limited then it is valuable and protected o Restrictions favor owners of scarce factors so they prefer tariff or other restrictions  Ricardo-Viner o Focuses on sector (industry v. industry) o Specific o Everyone in competitive export industry favors free trade o More places to sell o Everyone in a field with stiff import competition sector will favor restrictions, too much competition from outside o Will trade help or hurt my industry?   Trade policy and Interdependence o International economic conditions such as depression or growth, influence costs and benefits of trade o Barriers are easier to overcome when  Smaller number of states involved  Information about others’ interests and strategies available  States interact over time  Concessions can be linked to other issues  Global trade agreements o Role of institutions  GATT general agreement on tariffs and trade  Lowered barriers, but its goal was not complete liberalization  GATT WTO o Replaced it  More members  Stalled on issues like agriculture  GATT is an agreement  WTO is an organization o Developing countries feel they are ignored o They want more trade liberalization HOME: where investment comes from HOST: where investments go  Benefits from taxing MNCs  Provisions of more jobs  Technology *Host countries lacking in capital will pay higher interest rate or price and that allows for greater profits Benefits:  Natural resources may not be available in HOME country  Differences in business environment-taxes, politics, etc. Costs:  Sovereign risk-more difficult to enforce debt in foreign jurisdiction  Different macroeconomic trends  Higher costs of information Both can benefit but there may be costs INVESTMENTS: 1. Describe the different modes of investment 2. List the motives for investing abroad 3. Analyze some of the controversies of investing abroad 4. Describe the politics of foreign direct investments 5. Introduce the IMF Cross border investments Portfolio-no role in management  Bonds  Loans  Stocks/equities Direct investment-maintains control Sovereign Debts: Domestic Challenges Governments who have taken loans 1. May cut spending/raise taxes 2. Raise interest rates, reduce imports and increase exports to make more profit Austerity  Application of policies to reduce consumption, by cutting spending, raising taxes, restricting wages Sovereign Debts  Recession-a sharp slowdown in rate of economic growth  Depression-severe downturn in business cycle, typically associated with major decline in economic activity, production, and investment IMF-International Monetary Fund  Created in 1944 to guarantee monetary stability  Lender of last resort  Resolves problems between debtor-creditor  All members have votes but votes are proportional to contributions May undermine authority-threaten sovereignty


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