Trade theory

Who produces which goods and why?

  • Ppl coordinate production activities to sell to consumers what they want
  • Ppl act in their own self-interest
    -> Invisible hand

Production possibility

One way to understand the invisible hand

Production possibilities frontier (PPF): đường giới hạn sản xuất

Absolute and comparative advantage

PPF illustrates the key trade-offs faced by one economy

Why trade?

Reciprocal Trade agreement act

general reductions

Most favoured nation (MFN) clause: agreement between two nations to apply tarrifs to each other at rates as low as those applied to any other nation having MFN status

tariff reductions being made on a nondiscriminatory basis

1998, US replaced MFN with normal trade relations

general agreement on tariffs and trade

WTO

main provisions of GATT: trade without discrimination, promote free trade, binding and transparency, multi trade negotiation

WTO reduce national sovereignty?

  • Yes, because WTO disputes settlement
  • No, because findings of a WTO dispute settlement panel cannot force the US to change its laws

Retaliatory tariffs for WTO enforcement?

  • Small country impose retaliatory tariffs

Trade liberalization - harm the environment?

  • "Race to the bottom" in environmental standards
  • Social preferences
    Trade liberalization: enhance productivity and growth, put downward pressure on inflation, create jobs

Trade liberalization - improve the environment?

  • Trade stimulates economic growth: key factors in societies' demand for
    giàu lên -> tăng nhu cầu về chất lượng môi trường, mức sống

Safe guard

Countervailing duties (thuế chống trợ cấp): export subsidies (trợ cấp thuế xuất khẩu) -> unfair competition
importing countries

Antidumping duties: protection against foreign dumping (bán phá giá)

antidumping investigation:

  • evidence of dumping,
  • evidence of material injury,
  • a link between the dumped imports and the alleged injury

antidumping duty:

  • equal to margin of dumping = normal price - export price
  • increase the price of imported goods
  • decrease consumer welfare