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Week 3

The document discusses international trade theory including comparative advantage and absolute advantage. It covers trade instruments, barriers like tariffs and quotas, liberalization, and globalization. It examines how trade benefits economic growth but can also increase inequality and environmental concerns.

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chhenghuy81
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© © All Rights Reserved
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21 views

Week 3

The document discusses international trade theory including comparative advantage and absolute advantage. It covers trade instruments, barriers like tariffs and quotas, liberalization, and globalization. It examines how trade benefits economic growth but can also increase inequality and environmental concerns.

Uploaded by

chhenghuy81
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Week 3

Trade Theory
and the WTO
Understanding Trade Theory

• The fundamental concepts and principles of trade theory


include comparative advantage and absolute advantage.
• Comparative Advantage is a central concept in trade theory.
It asserts that nations should specialize in producing goods
and services where they have a lower opportunity cost
compared to other nations
• Absolute Advantage, another essential trade theory,
contends that a country can produce a good more efficiently
than other nations
Gains from Trade

• These theories guide nations in deciding what to trade


and with whom.
• Trade allows nations to consume beyond their
production possibilities, fostering economic growth and
prosperity.
• International trade offers a myriad of benefits, from
economic growth and increased market access to
enhanced specialization and innovation.
Trade Instruments Overview

• To facilitate international trade, various instruments and


tools are employed.
• These instruments include trade agreements, contracts,
and trade finance.
• Trade agreements reduce trade barriers, promote
economic cooperation, and create favorable conditions
for global commerce.
• Effective trade contracts are essential for defining the
terms and conditions of international transactions.
Trade Instruments Overview (Cont)

• Trade finance encompasses a range of financial


products and services designed to mitigate risks and
facilitate international trade.
Tariff Barriers

• Tariff barriers, including import duties, are a common form of


trade restriction.
• Tariffs come in different forms, such as ad valorem, specific,
and compound tariffs.
• Ad valorem tariffs are levied as a percentage of the imported
good's value
• Specific tariffs are fixed, predetermined charges per unit of the
imported product, regardless of its price.
• Compound tariffs combine elements of both ad valorem and
specific tariffs
Non-Tariff Barriers (NTBs)

• Non-tariff barriers (NTBs) include quotas and


subsidies.
• Import quotas restrict the quantity of goods that can be
imported.
• Governments may provide subsidies to domestic
industries or offer export incentives.
• Technical regulations and standards can act as non-
tariff barriers.
Trade Facilitation

• Trade facilitation measures streamline customs


procedures and documentation.
• These measures enhance the efficiency and speed of
international trade.
• Trade policy plays a vital role in addressing trade
barriers
• The formulation and implementation of effective trade
policies can promote open and fair international trade.
Trade Liberalization and Globalization

• Trade liberalization involves reducing barriers to


international trade, such as tariffs and trade
restrictions.
• Globalization encompasses the increasing
interconnectedness of economies, cultures, and
societies worldwide
• Trade liberalization and globalization bring numerous
benefits, including economic growth, access to new
markets, and cultural exchange
Trade Liberalization and Globalization

• Multinational corporations play a pivotal role in driving


globalization and benefiting from trade liberalization.
• However, there are potential downsides which include
income inequality, cultural homogenization, and
environmental concerns.
Conclusion

• It's evident that international trade is a dynamic and


multifaceted realm that shapes economies, businesses,
and societies worldwide.
• We've explored the fundamental principles of trade
theories, from comparative advantage to absolute
advantage, gaining insight into how nations make trade
decisions based on these concepts.
Conclusion

• Examining the broader global trade landscape, we've


witnessed the transformative forces of trade
liberalization and globalization, understanding their
benefits and challenges, and their impact on businesses,
industries, and cultures.
• It's essential to recognize that global trade is continually
evolving. New technologies, shifting geopolitical
landscapes, and changing consumer preferences will
shape the future of international trade.
Discussion Questions

1. How do comparative advantage and absolute advantage theories


influence a nation's decision to engage in international trade? Can
you provide real-world examples illustrating these concepts?
2. Trade liberalization and globalization have transformed the global
trade landscape. What are the key benefits and challenges
associated with these trends? How can businesses adapt to thrive
in an increasingly globalized world?
Discussion Questions

3. Multinational corporations (MNCs) often drive globalization. How


do MNCs expand globally, and what advantages do they gain from
operating in multiple countries? Are there ethical considerations
surrounding the activities of MNCs in different regions?
4. Looking to the future, how do you envision the evolution of
international trade in an era of rapid technological advancements and
changing consumer behaviors? What strategies should businesses and
governments employ to navigate the complexities of the evolving
global trade landscape?
THANK YOU

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