《ch19 International Trade》.ppt

Critical to our study of international economics is the debate between free traders and protectionists. According to the theory of comparative advantage, all countries benefit from specialization and trade. Free international trade raises real incomes and improves the standard of living. Although protectionists point to the loss of jobs and argue for the protection of workers from foreign competition, foreign competition is unlikely to cause net job loss in an economy. Foreign trade and full employment can be pursued simultaneously. Although economists disagree about many things, the vast majority of them favor free trade. An Economic Consensus absolute advantage comparative advantage Corn Laws Doha Development Agenda dumping economic integration European Union (EU) exchange rate export subsidies factor endowments General Agreement on Tariffs and Trade (GATT) Heckscher-Ohlin theorem infant industry North American Free Trade Agreement (NAFTA) protection quota Smoot-Hawley tariff tariff terms of trade theory of comparative advantage trade deficit trade surplus U.S.-Canadian Free Trade Agreement World Trade Organization (WTO) R E V I E W T E R M S A N D C O N C E P T S * of 31 PART V The World Economy ? 2012 Pearson Education, Inc. Publishing as Prentice Hall * of 31 ? 2012 Pearson Education, Inc. Publishing as Prentice Hall PART V The World Economy Prepared by: Fernando Quijano Shelly Tefft CASE FAIR OSTER P R I N C I P L E S O F MACROECONOMICS T E N T H E D I T I O N CHAPTER OUTLINE 19 International Trade, Comparative Advantage, and Protectionism Trade Surpluses and Deficits The Economic Basis for Trade: Comparative Advantage Absolute Advantage versus Comparative Advantage Terms of Trade Exchange Rates The Sources of Comparative Advantage The Heckscher-Ohlin Theorem Other Explanations for Observed Trade Flows Trade Barriers: Tariffs, Export Subsidies, and Quotas U.S. Trade Policies, GATT, and the WTO Free Trade or Protection? Th