Term
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Definition
| One of the two principle components of the balance of payments. It records all payments between the country and the rest of the world in connection with goods, services, income earned on foreign investments, royalties, licenses, unilateral transfers by private individuals, government expenditures on foreign aid and overseas military spending |
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Term
| East Asian Model of Development |
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Definition
A model in which economic development is conceptualized as a series of distinct stages of industrialization. In the first satge, industrial policy promotes labor-intensive light industry, such as textiles and other consumer durables. In the second stage, them emphasis of industrial policy shifts to heavy industries, such as steel, ship building, petrochemicals and synthetic fibers. In the third stage, governments target still intensive and R&D-intensive consumer durables and industrial machinery, such as machine tools. semiconductors, computers, telecommunications equimpment, robotics and biotechnolgy. Governments design policies and organizations to promote the transition from one stage to the other |
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Term
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Definition
| A development strategy in which emphasis is place on producing manufactured goods that can be sold in international markets. Adopted by the East Asian NICs in the late 1950s to early 1960s after the gains from easy ISI has been exhausted. During the late 1980s this stategy and the apparent Asian success based on it provided the foundation for the Washington Consensus |
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Term
| Neoliberalism aka Washington Consensus |
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Definition
| The collection of policy reforms advocated by US officals and by the IMF and World Bank staffs as the solution to the economic problems facd by developing countries. The emphasis is on stabilization, structural adjustment, privatization and market liberalization |
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Term
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Definition
Efforts by private actors to convince politicans to enact policies that create rents they can capture rent - a higher-than-normal return on investment. Rents are created by barriers to entry, which can result from monopolisitic or oligopolistic market structures or government policies |
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Term
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Definition
| Policy reforms designed and promoted by the World Bank and IMF that seek to increase the role of the market and reduce the rold of the state in developing countries' economies. First emerged in connection with the Baker Plan, but have subsequently become a standard component of IMP conditionality agreements |
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Term
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Definition
| Proposed in 1985 by Secretary of US Treasury James A. Baker III this plan attempted to resolve the developing-country debt crisis through a combination of economic adjustment and additional lending. Of particular significance, the plan linked access to financial assistance from the IMF, World Bank and private leaders to the willingness of debtor governments to adopt structural adjustment programs |
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Term
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Definition
| The practice of imposing higher tariffs on goods involving more processesing. This practice, common in the advanced industrialized countries, makes it difficult for developing countries to export processed food to the industrialized countries. This barrier in turn makes it difficult for developing countries to diversify their exports away from commodities, while still capitializing on their comparative advantage |
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Definition
Tariff rates above 15 percent. Such rates apply to about 5 percent of the advanced industrialized countries' imports from all developing countries and to about 10 percent of their imports from the least-developed countries |
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Definition
| highly skeptical of the state's ability to allocate resources efficently and places great faith in the markets ability to do so |
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Definition
| A term applied to the industrialization process that refers to instances when the creation of a domestic industry increases deman in domestic industries that suplly inputs to the original industry. For example, the creation of the domestic auto industry may increase the demand for domestic auto parts such as batteries, glass, tires etc. |
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Definition
| Law asserting that people spend smaller percentages of their total income on food and other primary commodities as their incomes rise. It was a central component of the Singer-Prebisch theory that formed a part of structuralism |
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Term
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Definition
| Developed during the 1950s by Raul Prebisch and Hans Singer, it claimed that, because developing countries faced a secular decline in their terms of trade, particiaption in the GATT-based multilateral trade system would hamper their industrialization. The theory provided an intellectual justification for import substitution industrialization |
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Term
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Definition
| Added to the GATT in 1964 in part as a result of developing countries pressure. Contains three articles that focus on developing countries' trade problems. The three articles call upon the advances industrialized countries to improve market accesss for commodity exporters, to refrain from raising barriers to the import of products that are of special interest to the developing world, and to enegage in 'joint action to promote trade and development' |
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Term
| Generalized system of preferrences (GSP) |
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Definition
| Part of the GATT concluded in the late 1960s under which advances industrialized countries can allow manufactured exports from developing countries to enter their markets at preferential tariff rates. The GSP is therefore a legal exception to the GATT principle of nondiscrimination |
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Term
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Definition
A coalition of developing countries estalished at the conclusion of the UNCTAD conference in the early 1960s. 77 developing countries' governments signes a joint declaration that called for reform of the international trade system. The Group of 77 subsequently led the campaign for reform of the multilateral trade system during the next 20 years (UNCTAD and NIEO) |
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Term
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Definition
| A study conducted under GATT supervision in the late 1950s and suggesting that the GATT based trade system was relatively unfavorable to developing countries. The report altered the political dynamics of th international relations trade system by forcing the advances industrialization countries to take the demands for reform make by developing countries more seriously |
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Term
| Import Substitution Industrialization (ISI) |
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Definition
| An economic development strategy adopted in many developing countries after WW2 in which state attempted to industrialize by substituting domestically produced goods for manufactured items that had previously been imported. The strategy proceeded in two stages. Under easy ISI, the focus was on creating simple consumer goods. In the second stage, the focus shifted to consumer durable goods, intermediate inputs, and the capital goods needed to produce consumer durables. Most governments have abandoned this approach since the mid-1980s in favor of an export-oriented stategy |
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Term
| New International Economic Order (NIEO) |
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Definition
| A reform effort driven by the Group of 77 and adopted by the UN General Assembly in December 1974. It embodied a set of reform objectives that, if implemented, would have radically altered the nature and operation of the international economy by creating 'development friendly' trade rules and giving developing countries a larger role in the decision making processes of the World Bank and International Monetary Fund. The NIEO was abandoned in the early 1980s |
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Term
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Definition
| Sector contained all economic activities that do not enter into international trade, either because the good is too costly to transport (e.g. houses or concrete) or because in some cases the good or service must be preformed locally (e.g. the railway system, many public utilities, health care, auto repair, and the retail sector more generally) In addition, government employees such as civil servants, teachers, and military personnel, also work in the nontraded sector. |
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Term
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Definition
| A body of development economics that dominated the field in the early postwar period. It held that the shift of resources from agriculture to manufacture associated with industrialization would occur only if the state adopted policies explicitly designed to bring it about. Structuralism provided the intellectual and theoretical justification for a large role for the state in development process and for import substitution industrialization. |
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Term
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Definition
| The ratio of the price of a country's exports to the price of it's imports. An imporvement in a country's terms of trade means that the price of the goods it exports is rising relative to the price of the goods it imports, whereas a decline in a country's terms of trade means that the price of the goods it exports is falling relative to the price of goods it imports. An improvement in its terms of trade makes a country richer, whereas a decline in its terms of trade makes it poorer |
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Term
| United Nations Conference on Trade and Development (UNCTAD) |
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Definition
| First established in March 1964 in response to developing countries' dissatisfaction with GATT, this is a permanent UN body dedicated to promoting the developing countries' interest in the world trade system |
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Definition
| export orientated agricultural sectors that had few linkages to other parts of the local economy |
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Term
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Definition
| countries who exports were almost fully accounted for by one product |
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Term
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Definition
| Reductions in the unit cost of producing a good caused by increases in the number of goods produced. Economies of scale often arise from knowledge acquired in production. The existence of economies of scale in certain industries can provide a justification for welfare-enhancing industrial policy, as well as a rationale for strategic trade theory |
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Term
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Definition
| An assortment of government policies, including tax policy, government subsidies, traditional protectionism, and government procurement practices, used to channel resources away from some actors and industries and direct them toward those actors and industries the government wished to promote. The use of such policies is typically based on long term economic development objectives defined in temrs of booting economic growth, improving productivity, and enhancing internation competitiveness. The specific goals are often are determined by explicit comparisons to other countries' economic achievements |
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Term
| Infant Industry Case for Protection |
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Definition
| A theoretical justification for protection that applies to cases in which a country's newly created firms (infants) could not initally compiete against foreign producers in an established industry, but would be able to do so eventually if they were given time to mature |
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Term
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Definition
| Expands on the infant-industry case for protection by asserting that government intervention can help domestic firms gain international competitiveness in high-technology industries by providing means whereby those firms can overcome competitive advantages enjoyed by established firms. The theory also suggests that governments can use trade policy to compete for valued industries. |
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Term
| late-industrializing country |
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Definition
| a country that is trying to develop manufacturing industries in competition with established manufacturing industries in other countries |
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Term
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Definition
the degree to which national policymakers are insulated from domestic interest group pressures strong states - states in which policy makers and highly insulated from such pressures weak states - policy makers are fully exposed to such pressures |
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Term
| Collective Action Problem |
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Definition
| Applies to instances in which the action of a number of individuals is required to achieve a common goal. The problem arises because people will voluntarily invest time, energy, or money to achieve a common goal, but instead will allow others to bear these costs. That is, each free rides on the efforts of others. Because all members of the nterested gorup act in the same way, insufficient time, energy and money are dedicated to the achievement of the goal and the goal is therefore not achieved. In IPE it has been used to understand interest-group formation and why consumer interests are underrepresented in trade policy |
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Term
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Definition
| The ease with which factors of production can more from one industry to another. All factors are mobile in the long run, but many are relatively immoblie in the short run. Different assumptions about the mobility of factors underlie two different political theories of trade politics. The factor model assumes a high degree of factor mobility, whereas the sectoral model assumes that at least one factor is immobile in the short run |
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Term
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Definition
| a political model that argues that the politics of trade policy is characterized by competition between labor and capital. Each of these two groups has a distinct trade policy preference because international trade has a differential effect on the groups' incomes. The scarce factor will be harmed by trade and therefor lobby for protection. The abundant factor will benefit from trade and therefore lobby for trade liberalization |
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Term
Fractor Price Equalization (Stolper-Samuleson Theorem) |
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Definition
| In open economies, international trade will cause the price of the factors of productionto equalize. In a two-country world, the price of each country's scarce factor will fall, whereas the price of each countries abundant factor will rise. Eventually, the price of labor will be the same in both countries and the price of capital will be the same in both countries |
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Term
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Definition
| the domestic political process setting the terms under which the US participates in international trade negotiations and ratifieis the resulting agreements. Congress first grants the executive the authority to negotiate international trade agreements. Congress must then approve (through a simple majority and within 90 days) any trade agreement the executive concludes before the agreement can become law. Congress cannot amend the trade agreement. The 1974 Trade Act first instituted this procedure |
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Term
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Definition
| First fully stated by David Ricardo in the early 19th century, this concept holds that a country has a comparative advantage in a good if it cane produce that good more cheaply than it can produce other goods. By specializing in the production of goods in which is holds a comparative advantage and importing the other goods, the contry can consume more of all goods. In contrast to Adam Smith, therfore, this principle states that a country need not have an absolute advantage in any good to benefit from trade. The principle provides a powerful justification for liberal international trade by assertinf that all countries benefit from such trade |
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Term
| Dispute Settlement Mechanism |
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Definition
| A quasi-judicial tribunal that is used to resolve trade disputes between WTO member governments |
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Term
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Definition
| The amount of land, labor and capital a country has available. Countries have different relative factors endowments, and in the Hecksher-Ohlin model of international trade, these differences are the source of comparative advantage |
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Term
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Definition
| A regional trading arrangement in which governments eliminiate all tariffs on goods imported from other members, but retain independent tarifss on goods imported from nonmembers |
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Term
| Generalized System of Preferences (GSP) |
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Definition
| Part of the GATT concluded that in the late 1960s under which advanced industrialized countries can allow manufactured exports from developing countries to enter their markets at preferential tariff rates. The GSP is therefore a legal exception to the GATT principle of nondiscrimination |
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Term
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Definition
| A model on the determinants of comparative advantage that argues that comparative advantage arises from cross-national differences in factor endowments. A country's comparative advantage will lie in goods produces through heavy reliance on its abundant factors. Capital abundant countries have a comparative advantage in captial-intensive goods, and labor-abundant countries have comparative advantage in labor intensive goods |
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Term
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Definition
| A particular distribution of power in the international state system characterized by the exhistance of one country (a hegemon) whose power capabilities are substantially greater than the next-most powerful country or countries. The relevant capabilities include economic power, measured as the size and technological sophistication of the economy and military power. A prominent hypothesis, called hegemonic stability theory, links the openness and stability of the international economic system to the prenence or absence of a hegemon |
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Definition
Creations of the mind, such as inventions, literary and artistic works, symbols, names, images, and designs, used in commerce. The protection of intellectual property is the subject of the Trade Related Intellectual Property Rights Agreement negotiated as part of the Uruguay Round |
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Definition
| A traditional school of political economy that emerged in Britain during the 18th century as a challenge to merchantilism. Liberalism asserts that the purpose of economic activity is to enrich individuals and the state should thus play little role in the economic system. Liberalism gave rise to the theory of comparative advantage. It suggests that IPE is cooperative rather than conflictual |
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Definition
| A school of political economy originating in the 19th century work of Karl Marx. It asserts that politics is dominated by distributional conflict between social groups and that social groups are defined by economic structure. In capitalism, politics is dominated by conflict between advanced industrialized and developing countries |
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Definition
| A traditional school of political economy dating from at least the 17th century. Is assers that power and wealth are inextricably connected. Accordingly, it argues that governments structure their international economic transactions in order to enhance their power relative to other states and domestic society. Mercantilism thus depicts IPE as inherently conflictual |
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Definition
| The central principle upon which the WTO was based, this rule requires that any advantage extended by one WTO member government to another also be extended to all other WTO members. The principle therefore prevents trade measures thar discriminate between countries |
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Term
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Definition
| The second component of nondiscrimination in the GATT embodies in GATT Article III, as well as in the GATS and TRIPs agreements. National treatment requires governments to impose idential tax and regulatory policies on foreign and domestic like products. This principle thus prohibits governments from using taxes and regulatory policies to provide advantages to domestic producers of foreign products |
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Definition
| Any number of policy or structural impediments to trade other than tariffs. NTBs include such things as health and safety regulations, government purchasing practices, and retail and distribution networks. As quotas have been eliminated and tariffs reduced, NTBs have become one of the more important remaining obstacles to international trade and are thus an increasingly important issue in the WTO |
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Term
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Definition
| The formal and informal rules that structure collective decision making (politics). These rules establish who can legitimately participate in the political process, how these participants will make collective decisions, and how they will ensure compliance with the decisions they make. Such rules thus enable groups in countries and groups of countries in the internationl state system to reach and enforce collective decisions |
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Definition
A game-theory model often used to depict the difficulties that governments face when trying to cooperate in the global economy. Emphisizes the incentives that governments have to 'cheat' on any international agreement into which they enter and shows how those incentives make governments reluctant to enter into cooperative agreements |
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Term
| Reciprocal Trade Agreements Act |
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Definition
| American trade legislation passed in 1934 nunder which Congress allowed the executive to reduce tariffs by as much as 50 percent in exchange for equivalent concessions from foreign governments. Created the institutional framework for reciprocal tarriff reductions achieved under GATT following WW2 |
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Term
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Definition
| The central principle upon which barganing within the WTO is based. The concessions that each government makes to its partners in multilateral trade negotiations are roughly the same size as the concessions it gains from its trading partners |
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Term
| Regional TRading Arrangements (RTAs) |
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Definition
| Trade agreements in which tariffs discriminate between members and nonmembers. Although inherently discriminatory, RTAs are recognized as a legitimate exceptional to this principle under the GATT Article XXIV. Sometimes call preferential trade arrangements. |
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Term
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Definition
| A political model that argues that the politics of trade policy is characterized by competition between import-competing and export-oriented industries. Each industry has a different distinct trade policy preference becayse internantional trade has a differential effect on the industries' incomes. Industries that rely heavily on the the economy's abundant factor will benefit from trade and therefore lobby for trade liberaliztion |
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Definition
| An economic activity, such as financial services, transportation, consulting and accounting, and telecommunications, that does not involve manufacturing, farming or extraction of resources |
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Definition
| Trade legislation passed by the US Congress in 1930 that raised that average American tariff to a historic high of almost 60%. Widely regarded to have contributed to the collapse of the world trade and monetary systems and deepened the global depression during the 1930s |
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Definition
| A factor of production (labor, capital or land) that is tied to a particular industry or sector and that cannot be easily or quickly moved to another sector. Indicates a low level of factor mobility |
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Definition
| Taxes that governments imposed on foreign goods coming into the country. This tax raises the price of the foreign good in the domestic market of the country imposing the tariff. Even though tariffs distort international trade, they are the least distortionary of all trade barriers |
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Term
| Trade-Related Investment Measure (TRIM) |
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Definition
| A government policy toward foreign direct investment or MNC's that has an impact on the country's imports or exports. For example, domestic content or trade balancing requirments force frims to import fewer imports or export more output then they would in the absence of such regulations. The result is a distortion of international trade. Such measures are regulated by the WTO |
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Term
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Definition
| Established as the Special Trade Representative by Congress in 1962 Trade Expansion Act and given its current name by Congress during the 1970s, this office sets and administers US trade policy, is the nations chief trade negotiator and represents the United States in the WTO and other international organizations |
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Term
| Voluntary Export Restraints |
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Definition
| A form of protectionism under which one country (or a number of countries) agrees to limit its exports to another country's market. Adopted by governments in order to circumvent GATT restrictions on the use of other types of protectionism, such as tariffs and quotas |
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Term
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Definition
| The principle international trade organizatin todaythat began operation in 1995. Located in Geneva, Switzerland, the WTO is a relatively small organization whose role includes administering trade agreements, providing a forum for trade negotiations, helping governments settle trade disputs, and reviewing national trade policies |
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Definition
| decisions about resource allocated that determine the leverl of societal well-being |
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Term
| distributional consequences |
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Definition
| decisions about resource allocation that influence how income is distributed between groups within countries and between nations in the international system |
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Definition
| Studies which are oriented toward explaining the foreign economic policy choice that the governments make. This study most often answers the 'why' question |
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Definition
| Studies which are oriented toward assessing policy outcomes, making judgements abouty them and proposing alternatives when the judgement make about a particular policy is a negative one |
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Definition
| an evaluation which is interested primarily in whather a particular policy choice raiser or lowers social welfare |
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Definition
| Instances in which voluntary market-based transactions between individuals fail to allocate resources to socially desirable activities |
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Definition
| Goals or policy objects that the central actors in the political system and economy - individuals, firms, labor unions, other interest groups and governements - want to use foreign economic policy to change |
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Definition
| Mental models that provide a coherent set of beliefs about cause and effect relationships. In economic policy these mental models usually focus on the relationship between governemt policies and economic outcomes |
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Term
| Intergovernmental Bargaining |
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Definition
The WTOs primary decision making process and it focuses on negotiating agreements that directly liberalize trade and indirectly support that goal |
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Definition
The second core principle of the multilateral trade system, ensuring that each WTO member faces identical opportunties to trade with other WTO members. The principle takes two forms in the WTO, first the Most-Favored Nation and National Treatment |
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Term
Partial Equilibrium model |
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Definition
| This approach focuses on the market for a single commondity rather than on the entire economy. It highlights how production and consumption of this single commodity change in response to trade. It allows us to see exactly what is meant by gains from trade. |
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Term
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Definition
| This approach focuses on the entire economy. It highlights how production and consumption of all goods in an economy change in response to trade. This not only highlights the gains from trade but also illustrates the concept of comparative advantage which is the underlying reason why these gains exist |
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Term
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Definition
| Above market returns created by the quota. Rents arise bcause quotas restrict the number of foreign goods that can be sold in the domestic market below the level that domestic consumers want to buy. With supply held below demand, foreign producers can charge a higher price for each good they sell. |
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