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Political Economy of Trade Policy (Case for Free Trade (additional gains…
Political Economy of Trade Policy
Case for Free Trade
no effiiency losses from protection
additional gains
economies of scale
more productive firms to engage in exports
more opportunities for learning and innovation
less productive firms stay with the
domestic market
economy as a whole
more efficient
rent-seeking
political argument
Arguments Against Free Trade
terms of trade argument for a tariff
optimum tariff
domestic market failure
marginal social benefit
theory of the second best
Income Distribution and Trade Policy
electoral competition
two political parties
median voter (middle ground)
trade policy :red_cross:
e.g. U.S. sugar import quota
promises
collective action
favourable for group
small losses in total
best: small/organized group
protection from import competition
agriculture
clothing
textiles
apparel
welfare
national
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of particular group
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International Negotiations and Trade Policy
negotiations' advantages
mobilized support for freer trade
avoid trade wars
Trade agreeements
1947 GATT
1986 Uruguay Round
8th round
1995 WTO
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international organization
trade in services
GATS (trade in services)
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TRIPS
cut tariff rates
trade liberalization
process of binding
trade round
provisional agreement
trade in goods
2001 Doha Round
9th round
failure
nondiscrimination (MFN)
Preferential Trading Agreements
customs union
free trade area
exception to nondiscrimination
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