Term
| Simplifying Assumptions of Ricardian Model |
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Definition
1) Perfect competition (many small firms)
2) Two countries
3) Two products
4) One factor of production (Labor): limited resource, mobile within the country between sectors but not between countries
5) No transportation cost |
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Term
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Definition
| Amount of labor applied to production of c (cheese) |
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Definition
| Unit-labor requirement for the production of c (hrs/unit - in this case kg of cheese) |
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Definition
| Labor productivity of cheese production (kg/hr) |
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Term
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Definition
| Opportunity cost of producing cheese (l wine/kg cheese) |
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Definition
| Solved within the model, for instance Lc, Lw, Qw, Qc |
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Definition
| Are given when using the model, for instance Alc, Alw, L |
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Term
| Production Possibility Frontier (PPF) |
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Definition
| L = Lc + Lw or L=AlcQc + AlwQw |
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Term
| PPF in Slope-Intercept Form |
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Definition
| Qw = L/Alw - (Alc/Alw)Qc - Slope is the - of opportunity cost of cheese production in terms of wine (l/kg) |
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Term
| Production Possibility Set (PPS) |
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Definition
| All points of production within the bounds of the x-axis, y-axis, and PPF |
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Term
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Definition
| Labor productivity is greater in one country than other 1/Alc > 1/Alc*. This can also be shown in terms of unit-labor requirement: Alc < Alc* |
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Term
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Definition
| Opportunity cost of producing C in one country is less than in the other Alc/Alw < Alc*/Alw*. This also implies that the other country has a comparative advantage in producing the other good - Alw*/Alc* < Alw/Alc (cross multiply to get this equation from the last) |
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Term
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Definition
| When a country engages in absolutely no trade |
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Term
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Definition
| The other end of the spectrum from autarky - countries engage in trade, treating imported goods just as they treat domestically produced goods |
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Definition
| What is imported in terms of what is exported x kg C/y L W |
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Term
| Results of specialization in comparative adv good and trade on production |
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Definition
| Increased production efficiency - more of each good is produced, even though labor/labor productivity and technology have not increased |
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Term
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Definition
| Total revenue - Total cost: pc = Qc*Pc - Lc*Wc where Qc = quantity cheese produced, Pc = Price of cheese, Lc = labor, Wc = Wages - since this is perfectly compeititive industry, profit = 0 |
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Term
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Definition
| Wc = Pc*Qc / Lc, but Qc = Lc/Alc, so Wc = Pc(Lc/Alc)/Lc or Pc/Alc |
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Term
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Definition
| Pc/Alc = Pw/Alw, that is Pc/Pw = Alc/Alw, in words, the price of cheese (in terms of wine) is equal to the opportunity cost of producing cheese (in terms of wine) |
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Term
| Results of specialization in comparative adv good and trade on prices |
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Definition
| Since Pc/Pw = opportunity cost (Alc/Alw) and in case of comparative advantage, Alc/Alw < Alc*/Alw*, this means (Pc/Pw)aut < (Pc*/Pw*)aut. But due to trade, supply in the country with comparative disadvantage on C production INCREASES, bringing the price (Pc*/Pw*) down. At the same time, in the country exporting C, imports of W bring Pw/Pc down, thereby increasing its reciprocal Pc/Pw. So the Free Trade prices migrate to fall between the autarky prices of the two countries: (Pc/Pw)aut < (Pc/Pw)ft < (Pc*/Pw*)aut. This also implies Alc/Alw < (Pc/Pw)ft, that is, in free trade, companies profit as they price of cheese (in terms of wine) is greater than the opportunity cost (in terms of wine) to produce it. |
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Term
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Definition
| Pascal Lamy - has no power, just promotes freer trade and monitors trade |
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Definition
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Term
| First person to write about Comparative Adv |
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Definition
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Term
| Conditions for Antidumping Duty |
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Definition
| 1) Sale at less than fair value: a) price less than cost, b) price less than price in exporter's market, or c) price less than price in 3rd country's market; AND 2) dumping has caused or threatens to cause harm to domestic producers |
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Definition
| Charged if 1) foreign government is providing an export subsidy AND 2) subsidy is causing injury to domestic competing firms |
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Definition
Charged if 1) sudden surge in imports of a particular product AND 2) surge has caused injury to domestic competing firms;
response can be tariff or quota or something else |
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Term
| What are the exceptions to WTO MFN (besides lesser tariffs through FTAs) |
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Definition
| Counter-vailing duties, anti-dumping duties, and safeguards |
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Term
| Tariff-weighted average tariff |
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Definition
| calculated by total number of tariff revenue divided by total value of all imports |
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| US tariff-weight avg tariff |
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Definition
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Term
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Definition
| import tax is a fixed sum, charged per unit |
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Term
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Definition
| import tax is a percentage of the value |
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Term
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Definition
| the definitions of goods and their associated tariffs - these are then further delineated for MFN status, special status (FTAs), or non-MFN status |
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Term
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Definition
| 1930: raised tariffs in response to Great Depression to keep money in the domestic market and create jobs... this failed horribly |
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Term
| Reciprocal Trade Agreements Act |
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Definition
| response to Smoot Hawley to try to open trade back up - authority given to President to work out bi-lateral trade agreements |
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Term
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Definition
| Gives the USTR more leverage, as they do not trade agreements can just be voted up or down in Congress rather than debated and amended |
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Definition
| Import tax (form of protectionism) |
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Definition
| limit on the number of imports of a selected good (form of protectionism) |
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Definition
| government pays producers to expore (form of protectionism, usually prohibited through MFN agreement in WTO, but allowed and used for agirculture); can be specific or ad valorem |
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Definition
| non-discrimination when it comes to protections against WTO member nations |
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Definition
| once an imported good enters the domestic market, it must be treated like domestic products |
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Term
| Voluntary export restraints (VERs) |
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Definition
| This is insisted upon by countries encountering too many imports, they ask the exporting countries to limit exports of particular goods - thus a "voluntary" restraint |
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Definition
| specified quotas on particular textiles. Was renamed Agreement on Textiles and Clothing during Uruguay round and was phased out over 10 year period |
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Term
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Definition
| unconstitutional in the US, but used in other countries to limit exports (or drive up gov't revenue) based on taxes on sought after goods in the international market |
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Term
| Voluntary Import Expansions (VIEs) |
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Definition
| An exporting country asks a country with limited imports to allow more imports on specific goods |
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Definition
| Costly administrative barriers such as limiting certain kinds of imports to entering at one port or requiring multiple licenses on each product unit |
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Term
| Health and safety standards |
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Definition
| Regulates what kinds of imports can enter domestic market based on health/safety standards; used for instance with pharmaceutical products |
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Term
| Government Procurement Policy |
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Definition
| Federal and state gov'ts must buy a certain percentage of their necessities from domestic producers |
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Definition
| Allows a specific quantity of a particular good in at a certain time of the year at a lower quota than at other times of the year |
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Term
| Interational Trade Commission |
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Definition
| Investigates antidumping and countervailing duty requests and recommends protection when they deem it worthy |
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Term
| International Trade Administration |
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Definition
| Determines the margin between fair-value and LTFV sale prices in antidumping cases in order to levy Anti-dumping Duty. Also determines margin to be levied as counter-vailing duty in cases of unfair export subsidies |
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