Vous êtes sur la page 1sur 2

2.

Theories of International Trade, Tariff and Non-tariff


barriers and Trade Blocks Presentation Transcript
Theories of International Trade,Tariff and Non-tariff barriers andTrade
BlocksInternational Business Management Mrs. Charu Rastogi Asst. Prof.
Theories of InternationalAgenda TariffTrade & Trade BlocksNon-tariff Barriers
Mrs. Charu Rastogi Asst. Prof.
Adam SmithRicardoOhlin & HeckscherTHEORIES OFINTERNATIONAL TRADE
Mrs. Charu Rastogi Asst. Prof.
Evolution Absolute advantage (Classical) Mercantilismof Trade Theories
International Product Factor Proportions TradeComparative advantage National
competitive advantage New Trade TheoryCycle Mrs. Charu Rastogi Asst. Prof.
Mercantilism: mid-16th century Theory assumes that a nations wealth depends on
accumulated treasure Gold and silver are the currency of trade Therefore, this theory
holds that nations should accumulate financial wealth, in the form of gold or silver by
encouraging exports and Theory says you should have a tradediscouraging imports
surplus. Maximize export through subsidies. Minimize imports through tariffs and
quotas Flaw: restrictions, impaired growth Mrs. Charu Rastogi Asst. Prof.
Assumptions of 2Absolute Advantageand Comparative AdvantageTheories 2
commodity model countries, Labor as the only input Single currency assumed thereby
eliminating effects of exchange rate changes Homogeneous factors of production All
labor units are of same type. They can be freely moved from production of cloth to
production of bread and vice versa. i.e. No specialized labor. Units of production are
divisible in compact units. All factors of production are fully employed. No
government restrictions on freeAsst. Prof. Mrs. Charu Rastogi trade
Theory of absolute advantage Adam Smith: Wealth of Nations (1776) argued: A
country should produce only goods where it is most efficient, and trade for those goods
where it is not efficient Export those goods and services for which a country is more
productive than other countries Import those goods and services for which other
countries are more productive than it is Trade between countries is, therefore,
beneficial Assumes there is an absolute balance among nations Mrs. Charu Rastogi Asst.
Prof.
Theory of absolute advantage destroys the mercantilist idea since there are gains to
be had by both countries party to an exchange questions the objective of national
governments to acquire wealth through restrictive trade policies measures a nations
wealth by the living standards of its people Mrs. Charu Rastogi Asst. Prof.
Theory of absolute advantage PPF Production Possibility Frontier Ghan a South Korea
Mrs. Charu Rastogi Asst. Prof.
Absolute Advantages and Gainsfrom TradeAssume total amount of resources at 200. In
the absence of trade resource is used Mrs. Charu Rastogi Asst. Prof.equally for both
products; 100 for cocoa and 100 for Ghana
Mrs. Charu Rastogi Asst. Prof.
Mrs. Charu Rastogi Asst. Prof.
Mrs. Charu Rastogi Asst. Prof.
Criticism Most of the criticisms from absoluteof Absolute CostAdvantage Theory
advantage theory would arise because of the unrealistic nature of its However, an
important incompleteness in theassumptions. theory was the fact that it addressed only a
situation wherein one country enjoyed an absolute advantage in production of a
commodity over another country. It was Quite oftenpointed out that such situations are
rare. the advantage is not an absolute advantage but a comparative one as would be clear
from the Ricardian Theory of Comparative Cost Advantage. Mrs. Charu Rastogi Asst.
Prof.
Theory of comparative advantage David Ricardo: Principles of Political Economy
(1817) Extends free trade argument Efficiency of resource utilization leads to more
productivity Should import even if country is more efficient in the products production
than country from which it is buying. Produce and export those goods and services for
which it is relatively more productive than other countries Import those goods and
services for which other countries are relatively more productive than it is Makes better
use of resourcesrs. Charu Rastogi Asst. Prof. M
Theory of comparativeadvantage PPF Production Possibility Frontier Ghan a South
Korea Mrs. Charu Rastogi Asst. Prof.
Comparative Advantage and Gains from Trade100-100for bothproductsSK:100-
100Ghana:150 forCocoaand 50 forRice Assume total amount of resources at 200. In the
absenceMrs. Charu Rastogi Asst. Prof.equally for of trade resource is used both products;
100 for cocoa and 100 for Ghana
Limitation of Driven only by maximization of productionComparativeAdvantage
Theory and Only 2 countries engaged in production andconsumption Only What
about the transportation costs?consumption of just 2 goods? No consideration
forresource labour (that too, non-transferable) learning theory Mrs. Charu Rastogi
Asst. Prof.