Chapter 5 Learning Objectives
After studying this chapter you should be able to:1. Use the resource- and institution-based views to
explain why nations trade2. Understand classical and modern theories of
international trade3. Realize the importance of political and economic
realities governing international trade4. Participate in two leading debates on international
trade5. Draw implications for action
Trade termsexporting - Selling abroad
importing - Buying from abroad
merchandise – physical goods
services - acts, efforts, or performances exchanged from producer to user without ownership rights
trade deficit - An economic condition in which a nation imports more than it exports
trade surplus - An economic conditionin which a nation exports more than it imports
balance of trade - The aggregation of buying (importing) and selling (exporting) by both sides leads to the country-level trade surplus or deficit.
REALITIES OF INTERNATIONAL TRADE
import tariff - A tax imposed on imports
nontariff barriers (NTBs) – restrict imports but are not in the usual form of a tariff: subsidies, import quotas, export restraints, local content requirements, administrative policies, antidumping duties, over-elaborate or inadequate infrastructure, “buy national" policy, bribery and corruption, unfair customs procedures, restrictive licenses, etc.
deadweight costs - Net losses that occur in an economy as the result of tariffs
REALITIES OF INTERNATIONAL TRADE
import quotas - Restrictions on the quantityof imports for specific period of timevoluntary export restraints (VRAs) - superficial policy to show that exporting countries voluntarilyagree to restrict their exportslocal content requirements - A requirement that a certain - proportion of the value of the goods made in one country originate from that country.antidumping duties - Costs levied on imports that have been “dumped” (selling below costs or below exporter’s home market price to “unfairly” drive domestic firms out of business)