International Trade Management Midterm 1

Fall 2026 - GSU

Still reading the source files: three left (Chapters 11-12 notes and deck, plus the additional notes), then I'll build the full card set.```

What did Christopher Columbus's 1492 voyage open up for trade?

The Americas to global trade, launching the Age of Exploration and the Atlantic trade routes. Ex: Spain backed him hoping to reach the East's spices and gold by sailing west, and he found a new world instead.

Why did Columbus sail west in 1492?

To find a new route to the riches of the East (spices, gold) with Spanish royal backing. Ex: the eastern route was long and treacherous, so sailing west seemed bold and innovative.

Age of Exploration

Period when European powers sought new trade routes, markets, and resources. Ex: Columbus's 1492 voyage marked its start.

Why did states trade until the 18th century?

Trade was a tool to acquire resources for war and state-building, so it was tied to national security and expansion. Ex: spices, gold, and silver financed armies and navies.

Mercantilism

Dominant theory from the 16th-18th century: wealth = gold and silver, so run a positive balance of trade (exports > imports). Ex: European powers hoarded precious metals and exported more than they imported.

Positive balance of trade

Exports exceed imports; the mercantilist goal for accumulating gold and silver. Ex: a mercantilist state would tax imports to keep its trade balance positive.

What policies did mercantilism produce?

Tariffs and quotas (protectionism), colonial expansion, and Navigation Acts. Ex: colonies supplied raw materials that were shipped to Europe and exchanged for finished goods.

Role of colonies under mercantilism

Supplied raw materials to the mother country and served as captive markets for its manufactured goods. Ex: raw materials went to Europe and came back as finished goods.

Navigation Acts

Laws restricting colonial trade to ships of the mother country, giving the colonizer control over colonial economies. Ex: a colony could not freely hire foreign ships to carry its goods.

Is mercantilism still around?

The strict dogma is gone, but echoes remain in modern protectionism that shields domestic industry and seeks favorable trade balances. Ex: tariffs meant to protect local producers.

Adam Smith and The Wealth of Nations (1776)

Scottish economist who attacked mercantilism, argued wealth is not finite, and championed free markets and open trade. Ex: Smith said trade makes countries richer, not just the exporter who hoards gold.

Invisible hand

Smith's idea that individuals pursuing self-interest unintentionally promote society's overall economic well-being. Ex: a baker seeking profit ends up supplying bread the community needs.

Absolute advantage

Adam Smith's idea: a country should specialize in goods it produces most efficiently. Ex: if Country A makes cloth with fewer resources than anyone, it specializes in cloth.

Comparative advantage

Ricardo's idea: specialize in goods with the lowest opportunity cost; trade benefits both sides even if one country is better at everything. Ex: a country more productive in both goods still gains by focusing where its relative advantage is greatest.

David Ricardo and On the Principles of Political Economy and Taxation

1817 work presenting comparative advantage, building on Smith's absolute advantage. Ex: Smith 1776 (absolute) then Ricardo 1817 (comparative).

Key difference: absolute vs comparative advantage

Absolute = who is more efficient outright; comparative = who has the lower opportunity cost (relative efficiency). Ex: trade can still help a country with no absolute advantage.

Opportunity cost

What you give up to produce one more unit of something; the lowest opportunity cost defines comparative advantage. Ex: the country giving up less cloth to make wine should make wine.

Why does comparative advantage matter?

Trade is about relative, not just absolute, efficiency; specialization raises total production and consumption. Ex: Country B with no absolute advantage still benefits by specializing where its opportunity cost is lower.

Why has pure free trade never existed?

Governments pursue security, jobs, and resilience; trade creates concentrated losses; bound tariffs differ across members; protection shifts to non-tariff tools; no world government. Ex: when tariffs fall, subsidies, standards, and procurement rules can replace them.

SS Savannah (1819)

First steamship used for international trade, sailing Savannah, Georgia to Liverpool, England; made maritime trade faster and more reliable. Ex: steamships cut transport costs in the 1800s.

Telegraph (1851)

First international line connected London and Paris, drastically speeding communication and cutting its cost. Ex: a merchant could learn of prices abroad in minutes, not weeks.

Morse code

System of dots and dashes representing letters, used to send telegraph messages over long distances. Ex: the 1851 London-Paris line used it.

How did WWI and WWII affect trade?

Destroyed infrastructure, caused depression, and led to trade barriers; the Marshall Plan later rebuilt trade networks. Ex: alliances split the world into blocs (Allies vs Central/Axis powers).

WWI alliances (1914-1918)

Allies (France, Britain, U.S.) vs Central Powers (Germany, Austria-Hungary, Ottoman Empire). Ex: global alliances made the war worldwide and disrupted trade.

WWII alliances (1939-1945)

Allies (U.S., Soviet Union, UK) vs Axis Powers (Germany, Italy, Japan). Ex: the Allies later built postwar institutions like the UN.

United Nations (1945)

Founded after WWII to maintain peace, security, and cooperation and prevent future wars; its agencies support development and fair, open trade. Ex: it was designed to be stronger than the failed League of Nations.

Why was the UN created?

To prevent a third world war (collective security), give nations a forum to talk, protect human rights, and encourage economic and social development. Ex: two world wars in 30 years convinced leaders a stronger body was needed.

UN Charter origin

Drafted at the San Francisco Conference (April-June 1945) by 50 countries; the UN officially began October 24, 1945. Ex: it came into existence once major Allied powers ratified the Charter.

UN Security Council voting

15 members (5 permanent: U.S., UK, France, Russia, China + 10 rotating); a resolution needs 9 of 15 votes and no veto from a permanent member. Ex: one permanent member's veto can block a resolution.

UN General Assembly voting

All 193 members, one vote each; majority (or two-thirds on major issues); consensus encouraged but not required. Ex: simple majority for ordinary matters, two-thirds for peace and security.

Universal Declaration of Human Rights

1948 UN document created after the Holocaust and wartime atrocities to defend human dignity. Ex: part of the UN's mission to protect human rights.

Specialized UN agencies

Bodies like WHO and UNESCO created to fight hunger, disease, and illiteracy; they use majority voting or consensus. Ex: WHO addresses health.

Marshall Plan (European Recovery Program)

1948 U.S. program to rebuild Western Europe after WWII; rebuilt economies, restored trade networks, reduced communism's appeal. Ex: it revitalized trade between Europe and the U.S.

Why was the Marshall Plan created?

Europe was devastated and the U.S. feared economic chaos would make it vulnerable to communism and Soviet influence. Ex: Secretary of State George C. Marshall proposed it in a Harvard speech in June 1947.

Marshall Plan size and uses

Over $13 billion (about $160 billion in today's money) from 1948-1952, used for infrastructure, industry, food production, and economic stabilization. Ex: money went to rebuilding war-torn industries.

Marshall Plan and the Soviet bloc

Aid was offered to all European countries including the USSR, but Stalin rejected it and blocked Eastern Europe. Ex: this marked the start of the Cold War divide.

Marshall Plan long-run significance

Showed economic power used as diplomacy (soft power), fostered European cooperation, and laid groundwork for the European Union. Ex: Western Europe aligned with the U.S., Eastern Europe with the USSR.

Bretton Woods Conference (1944)

July 1-22, 1944 in Bretton Woods, New Hampshire; delegates from 44 Allied nations designed a new international monetary system; created the IMF and IBRD. Ex: official name was the United Nations Monetary and Financial Conference.

How did Bretton Woods relate to GATT?

It focused on money and finance but created a stable environment for trade, setting the context for GATT in 1947. Ex: trade body ITO was proposed but GATT emerged as the practical framework.

Fixed exchange rate system (Bretton Woods system)

Currencies pegged to the U.S. dollar, which was convertible to gold at $35 per ounce; aimed to give trade stability. Ex: 10 French francs = 1 U.S. dollar.

Why did the fixed exchange rate system collapse?

U.S. deficits (Vietnam War, social programs) put more dollars abroad than gold to back them; countries like France demanded gold; speculation against weak currencies. Ex: fixed rates made adjusting to inflation and deficits hard.

Nixon Shock (1971)

August 1971: President Nixon ended dollar-to-gold convertibility, effectively ending Bretton Woods. Ex: by 1973 most major economies had moved to floating rates.

Floating exchange rate system

Currency values are set by supply and demand in global markets; replaced fixed rates in the 1970s. Ex: the dollar's value now moves with market forces.

Berlin Wall

Built August 1961 by East Germany with Soviet support; divided East and West Berlin until 1989 and symbolized the Cold War divide. Ex: communist Eastern Bloc vs capitalist Western Bloc.

Why was the Berlin Wall built?

To stop East Germans fleeing to West Berlin and Western Europe; about 2.7 million escaped between 1949 and 1961. Ex: it began as barbed wire, then became concrete walls with guard towers and minefields.

Life with the Berlin Wall

Families were split; guards had orders to shoot, and over 140 people died trying to escape. Ex: West Berlin became an island of freedom inside communist East Germany.

How did the Berlin Wall fall (1989)?

Gorbachev's reforms, Poland and Hungary opening borders, mass protests in East Germany, and a government spokesman's mistaken TV announcement on November 9, 1989. Ex: confused guards opened checkpoints and crowds crossed freely.

Significance of the Wall's fall

Symbolized the end of the Cold War, led to German reunification (1990), the collapse of communist regimes, and trade expansion. Ex: signaled greater international cooperation.

Gorbachev, glasnost, perestroika

Came to power 1985; glasnost = openness, perestroika = economic and political restructuring; USSR became unwilling to use force to keep communist governments in power. Ex: this weakened Soviet control over Eastern Europe.

Four Asian Tigers

Hong Kong, Singapore, South Korea, Taiwan; rapid industrialization and growth from the 1960s onward. Ex: called Tigers for aggressive, fast-paced development.

Export-oriented industrialization

Strategy of producing goods for export rather than domestic consumption; used by the Asian Tigers. Ex: they integrated into the global economy to grow.

Why did the Asian Tigers succeed?

Free markets and trade, foreign investment, strong education and infrastructure, skilled labor, and strategic protection of nascent industries. Ex: their model is cited as proof trade can drive growth in emerging economies.

Timeline: postwar institutions

1944-45 IMF + World Bank; 1945 UN; 1947 GATT; 1948-1952 Marshall Plan; 1995 WTO. Ex: money (IMF), reconstruction (World Bank), politics (UN), trade (GATT), recovery (Marshall Plan).

What caused WWII?

Unresolved WWI tensions (Treaty of Versailles), aggressive fascist expansion, the League's failure, appeasement, and the Nazi-Soviet Pact. Ex: the immediate cause was Germany's invasion of Poland.

Treaty of Versailles (1919)

Forced Germany to accept blame, pay heavy reparations, and give up territory; fueled resentment and Hitler's rise. Ex: Nazis promised to restore German pride and power.

Lebensraum

Hitler's idea of living space, meaning more land (especially eastward) for Germans, tied to racist beliefs. Ex: it justified expansion into Eastern Europe.

Aggression before WWII

Japan invaded Manchuria (1931) and China (1937); Mussolini invaded Ethiopia (1935). Ex: early aggressions met little resistance, encouraging more.

Why did the League of Nations fail?

Created after WWI but weak: no military power, and the U.S. never joined, so it could not stop Italy, Japan, or Germany. Ex: this failure shaped the stronger UN design.

Appeasement

Britain and France let Hitler rearm and annex Austria (Anschluss, 1938) and the Sudetenland (Munich Agreement, 1938) hoping to avoid war. Ex: it instead emboldened Hitler to push further.

Nazi-Soviet Pact (Molotov-Ribbentrop, August 1939)

Non-aggression pact between Germany and the USSR with a secret deal to divide Eastern Europe. Ex: freed Hitler to invade Poland without fear of Soviet interference.

Immediate cause of WWII in Europe

Germany invaded Poland on September 1, 1939; Britain and France declared war September 3, 1939. Ex: they had pledged to defend Poland.

Why did Germany, Italy, Japan seek expansion?

Nationalist ideology, economic need after the Great Depression (resources, markets, jobs), revenge for WWI, and weak resistance from other powers. Ex: Japan lacked raw materials at home.

Expansionist ideologies

Germany: Lebensraum; Italy: recreate the Roman Empire; Japan: Greater East Asia Co-Prosperity Sphere. Ex: Japan claimed to free Asia from Western colonialism but in practice meant Japanese domination.

Mutilated Victory

Italian grievance that it was promised more territory as a WWI ally but received little. Ex: fueled Italian revisionism.

Why did the U.S. and USSR ally in WWII?

Hitler broke the Pact with Operation Barbarossa (June 1941); shared goal of defeating Germany ("enemy of my enemy"), forming the Grand Alliance with Britain. Ex: they coordinated at Tehran (1943) and Yalta (1945).

Lend-Lease

U.S. program sending billions in weapons, trucks, food, and supplies to the USSR; the Soviet army in turn absorbed most of Germany's military power. Ex: mutual benefit that sustained the alliance.

Cold War

Rivalry (1947-1991) between capitalist U.S. and communist USSR that resurfaced after the alliance collapsed post-WWII. Ex: symbolized by the Berlin Wall.

1973 Oil Crisis

Yom Kippur War led OAPEC to embargo countries supporting Israel while OPEC cut output; prices quadrupled from about $3 to nearly $12 per barrel by 1974. Ex: shortages, gas lines, and inflation hit the West.

1979 Oil Crisis

Iranian Revolution disrupted supply; the 1980 Iran-Iraq War cut it further; prices reached about $39 per barrel. Ex: oil prices doubled again.

Why did oil prices spike so much?

Heavy Western dependence on Middle Eastern oil, OPEC's new control over production and prices, and fear and speculation. Ex: markets reacted to feared shortages as well as real cuts.

Stagflation

High inflation combined with low growth, a consequence of the 1970s oil shocks. Ex: it spurred energy conservation and alternative energy investment.

GATT (1947)

General Agreement on Tariffs and Trade: signed by 23 nations to reduce tariffs and quotas and promote free and fair trade without discrimination. Ex: central idea was trade without discrimination.

GATT limitations

Weak dispute settlement, strong focus on goods, and exclusions of sectors such as agriculture and textiles. Ex: these gaps led to its replacement by the WTO.

WTO (1995)

Permanent organization that replaced GATT; broader scope, stronger dispute settlement, regulates trade and enforces rules. Ex: it carries forward GATT principles like MFN.

GATT vs WTO

GATT = agreement/framework focused on goods with weaker disputes; WTO = permanent organization with wider scope and more robust dispute settlement. Ex: WTO also covers services and intellectual property.

Core WTO principles

Non-discrimination, transparency, and fair competition. Ex: the WTO offers a forum to negotiate, settle disputes, and enforce rules.

What does the WTO system do?

Rules + transparency + negotiation + dispute settlement. Ex: policies are reviewed, information is published, and members negotiate barrier cuts.

Why have a WTO if there is no world government?

Each government controls its own trade policy, so agreed rules and a dispute process reduce uncertainty and transaction costs. Ex: exporters and importers can rely on common rules.

Trade Policy Review Mechanism

WTO regularly reviews members' trade policies to ensure transparency and accountability. Ex: reviews can identify areas for improvement.

WTO technical assistance and capacity building

Programs helping developing countries implement WTO agreements, improve trade infrastructure, and build negotiating skills. Ex: helps them participate more effectively.

Why does the WTO provide value to business?

Predictability and stability: products won't face discriminatory treatment in foreign markets. Ex: a firm can count on non-discriminatory tariff treatment.

Trade negotiation round

Multiyear package of negotiations in which many countries bargain simultaneously over tariffs, rules, and market access. Ex: GATT used eight major rounds (1947-1994).

Why use rounds?

Reciprocity, package bargaining (concede on one issue, gain on another), common multilateral rules, and political balance. Ex: this avoids thousands of separate bilateral deals.

Geneva Round (1947)

First round under GATT; focused on tariff reductions. Ex: set the pattern for multilateral bargaining.

Kennedy Round (1964-1967)

Continued tariff cuts; notes highlight introduction of anti-dumping measures. Ex: trade policy began moving beyond tariffs.

Tokyo Round (1973-1979)

Addressed non-tariff barriers to trade. Ex: recognized trade can be restricted by rules and policies other than tariffs.

Uruguay Round (1986-1994)

Created the WTO and extended rules to services and intellectual property. Ex: a major institutional expansion of the trading system.

Doha Round (2001-present)

Doha Development Round launched 2001 focusing on developing countries (agricultural subsidies, market access, barrier reduction); never concluded. Ex: developed vs developing countries disagreed on subsidies and access.

Why did Doha stall?

WTO decisions are normally by consensus; 166 members with different interests could not agree on an overall package. Ex: 2001-2015 deadlock, then 2015 Nairobi acknowledged fundamental disagreement.

Is the Doha Round officially cancelled?

No. It was not formally canceled, but the original package remains unconcluded. Ex: Nairobi Ministerial (2015) showed the division.

Round sequence mnemonic

Geneva 1947, Kennedy 1964-67, Tokyo 1973-79, Uruguay 1986-94, Doha 2001. Ex: tariffs, anti-dumping, non-tariff barriers, WTO creation plus services/IP, development.

Anti-dumping and CVD: GATT origins

GATT 1947 Article VI created the right to use them; the 1995 WTO added detailed rules via the Anti-Dumping Agreement and SCM Agreement. Ex: the WTO did not create the instruments, it regulated how they are used.

Voluntary Export Restraints (VERs)

Negotiated bilateral export limits used under GATT (autos, steel, semiconductors) that escaped multilateral discipline; the WTO Safeguards Agreement Article 11 prohibited them. Ex: widely used in the 1980s.

Why did the WTO eliminate VERs?

Bilateral deals escaped GATT discipline, could discriminate among exporters, and allowed protection without transparent safeguard rules. Ex: replaced by temporary, MFN-based safeguards.

VER phase-out timeline

WTO began 1 Jan 1995; existing VERs phased out within 4 years (1995-1998); final exception, the EC-Japan vehicle VER, ended 31 Dec 1999. Ex: marked a shift to rule-based safeguards.

WTO dispute settlement steps

Consultation, panel, ruling/appeal, implementation, retaliation if no compliance. Ex: a structured alternative to unilateral retaliation.

Panel stage in disputes

If consultations fail, the complaining party requests a panel of experts, which issues a report with findings and recommendations. Ex: the loser can appeal to the Appellate Body.

Appellate Body status

Unable to review appeals since 2019 (31 proceedings pending at end of 2024), so the appeals system is paralyzed. Ex: appeals may be filed but not resolved.

Dispute timelines

Targets: about 1 year without appeal, 15 months with appeal; implementation can get a reasonable period (about 15 months) plus compliance proceedings. Ex: disputes can take years.