tailieunhanh - TRADE:INSTITUTIONS AND IMPACT- Why and how do countries trade?

Get goods and services that cannot be produced at home, To accumulate gold, Get cheaper goods and services, Efficiency and growth, Different theories and policies for different motives | Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 1 2006-2007 TRADE: INSTITUTIONS AND IMPACT Why and how do countries trade? Outline and schedule Ari Kokko Why do countries trade? • Get goods and services that cannot be produced at home • To accumulate gold • Get cheaper goods and services • Efficiency and growth • Different theories and policies for different motives Ari Kokko Ari Kokko 1 Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 1 2006-2007 Gains from trade: the simple view • Clear gains if countries are strong in different areas: absolute advantages • Less obvious - but undisputed - gains even if one country is “better” in all areas: comparative advantages Ari Kokko Absolute advantages Motorbikes Rice Vietnam 20 10 Laos 10 20 Labor requirements for one unit of output Ari Kokko Ari Kokko 2 Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 1 2006-2007 Comparative advantages Motorbikes Rice Vietnam 20 10 Laos 100 20 Labor requirements for one unit of output Ari Kokko Comparative advantages Trade is profitable as soon as relative prices differ between countries Why are there differences in relative prices? Classical and neoclassical theory: – technology differences (Adam Smith 1776 / David Ricardo 1815) – differences in factor endowments (Heckscher- Ohlin 1930) Ari Kokko Ari Kokko 3 Fulbright Economics Teaching Program Trade: Institutions and impact Lecture 1 2006-2007 Policy conclusions: neoclassical theory Free trade and specialization is optimal pattern of comparative advantages is given by nature all industries are equally “desirable” International framework should support development of free trade unilateral liberalization more difficult because of protectionist interest groups and lack of coordination Ari Kokko Institutions: Bretton-Woods solutions Four cornerstones of international economy after WWII to support growth of free trade – International Bank for