INTERNATIONAL TRADE

Pushkar Bajracharya
ASSUMPTIONS AND LIMITATIONS
 Full employment
 Economic efficiency

 Division of gains

 Two countries, two commodities

 Transport costs

 Statics and dynamics

 Services

 Production networks
TRAE PATTERN THEORIES
 Theory of country size (larger the country lesser
dependence on trade and vice versa)
 Size of the economy
TYPES OF PRODUCTS BEING TRADING
 Factors proportions theory
 People land

 Manufacturing locations

 Capital, labour rates and specialisation

 Process technology

 Product technology
WHOM DO COUNTRIES TRADE WITH?
 Country similarity theory
 Specialisation and acquired advantage

 Product differentiation

 The effects of cultural similarity

 Effects of political relationships and economic

agreements
 Effects of distance

 Overcoming distance
STATICS AND DYNAMICS OF TRADE
PLC theory
Porter diamond (four factors)
 Demand conditions

 Factor conditions

 Related and supporting industries

 Firm strategy, structure and rivalry

 Limitations of the theory

FACTOR MOBILITY THEORY
 Capital
 Labour

 Economic motives

 Political motives

 Effects of trade and factor mobility

 Substitution

 Complementarity
RATIONALE FOR GOVERNMENT
INTERVENTION
1. Fighting unemployment
-Prospect of retaliation
-Analysing trade offs
2. Protecting infant industries
 Underlying assumptions

 Determining probability of success

 Identifying qualified industries

RATIONALE FOR GOVERNMENT
INTERVENTION..
3. Developing industrial base
 Surplus workers

 Investment inflows

 Diversification

 Growth in manufacturing goods

 Import substitution and export led growth

 Nation building
RATIONALE FOR GOVERNMENT
INTERVENTION..
4. Economic relationships with other countries
 Balance of trade adjustments

 Comparative access or fairness

 Restrictions as a bargaining tool

 Price control objectives

 Dumping

 Optimum tariff theory

NON-ECONOMIC RATIONALE FOR
GOVERNMENT INTERVENTION
 Maintaining essential industries
 Preventing shipments to unfriendly countries

 Maintaining or extending spheres of influence

 Preserving national identity

BARRIERS OF TRADE
 Tariff
 Overcoming market imperfections

 Issue of Valuation

 Quantitative restriction

 Standards

 Delays

 Embargoes
DEALING WITH GOVERNMENT
INFLUENCES
 Move operations to another country
 Concentrate on market niches that attract less
international competition
 Adopt internal innovations viz. better efficiency or
superior products
 Try to get governmrnt protection
INTERNATIONAL AGREEMENTS
 WTO
 Regional

 Bilateral