Chapter 7 of World Politics: Interests Interactions Institutions

comparative advantage

The ability of a country or firm to produce a particular good or service more efficiently than other goods or services, such that its resources are most efficiently employed in this activity

Absolute advantage

the ability of a country or firm to produce more of a particular good or service than other countries or firms using the same amount of effort and resources

Neo-mercantilism

A belief that national economic policy should encourage exports and discourage imports, and that the country should aim to run a trade surplus

Hecksher-Ohlin trade theory

The theory that a country will export goods that make intensive use of the factors of production in which it is well endowed. Thus, a labor-rich country will export goods that make intensive use of labor.

protectionism

the imposition of barriers to restrict imports

trade barriers

government limitation on the international exchange of goods. examples include tariffs, quantitative restrictions (quotas), import licenses, requirements that governments buy only domestically produced goods, and health and safety standards that discriminate against foreign goods.

tariff

a tax imposed on imports. it raises the domestic price of imported goods and may be applied for the purpose of protecting domestic producers from foreign competition

quantitative restriction (quota)

limit placed on the amount of a particular good that is allowed to be imported

nontariff barriers to trade

Obstacles to imports other than tariffs (trade taxes). Examples: 1) restrictions on the number of products that can be imported 2) regulations that favor domestic over imported products 3) measures that discriminate against foreign goods or services 4) "Buy American" laws that govern what state and local governments can buy

Stolper-Samuelson Theorem

The theorem that trade protection benefits the scarce factor or production. So in a labor-scarce country, labor benefits from protection and loses from trade liberalization.

Ricardo-Viner (specific-factors) model

A model of trade relations that emphasizes the sector in which factors of production are employed rather than the nature of the factor itself

Reciprocity

In international trade relations, a mutual agreement to lower tariffs and other barriers to trade

World Trade Organization (WTO)

An institution created in 1995 to succeed the GATT and to govern international trade relations. this organization encourages and polices the multilateral reduction of barriers to trade, and it oversees the resolution of trade disputes.

General Agreement on Tariffs and Trade (GATT)

An international institution created in 1947 in which member countries committed to reduce barriers to trade and to provide similar trading conditions to all other members. In 1995, it was replaced by the WTO.

Regional Trade Agreements (RTAs)

agreements among three or more countries in a region to reduce barriers to trade among themselves

most favored nation status

A status established by most modern trade agreements guaranteeing that the signatories will extend to each other any favorable trading terms