The World Trade Organization tries to strike a balance between international desires for free trade and Onational desires for foreign investment. O global desires for peace. Olegal desires to follow international law. national desires for protection.

The World Trade Organization tries to strike a balance between international desires for free trade and Onational desires for foreign investment. O global desires for peace. Olegal desires to follow international law. national desires for protection.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter28: International Trade

Section: Chapter Questions

Problem 15P

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The World Trade Organization tries to strike a balance between international
desires for free trade and
Onational desires for foreign investment.
O global desires for peace.
Olegal desires to follow international law.
national desires for protection.

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If trade barriers hurt the average worker in an economy (due to lower wages), why does government create trade barriers?
If opening up to free trade would benefit a nation, then why do nations not just eliminate their trade barriers, and not bother with international trade negotiations?
How do trade barriers affect the average Income level in an economy?
You just overheard your friend say the following: Poor countries like Malawi have no absolute advantages. They have poor soil, low investments in formal education and hence low-skill workers, no capital, and no natural resources to speak of. Because they have no advantage, they cannot benefit from trade. How would you respond?
If trade increases world GDP by 1 per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lankas GDP.
Are the gains from international trade more likely to be relatively more important to large or small countries?
Describe a scenario in which a trade surplus benefits an economy and one in which a trade surplus is economy in an economy that performs poorly. What key factor or factors are making the difference in the outcome that results from a trade surplus?
Economists sometimes say that protectionism is the second-best choice for dealing with any particular problem. What they mean is that there is often a policy choice that is more direct or effective for dealing with the problemâ€”a choice that would still allow the benefits of trade to occur. Explain why protectionism is a second-best choice for helping workers as a group helping industries stay strong protecting the environment advancing national defense
Trade has income distribution effects. For example, suppose that because of a government-negotiated reduction in trade barriers, trade between Germany and the Czech Republic increases. Germany sells house paint to the Czech Republic. The Czech Republic sells alarm clocks to Germany. Would you expect this pattern of trade to increase or decrease jobs and wages in the paint industry in Germany? The alarm clock industry in Germany? The paint industry in Czech Republic? The alarm clock industry in Czech Republic? What has to happen for there to be no increase in total unemployment in both countries?
In principle, the benefits of international trade to a country exceed the costs, no matter whether the country is importing or exporting. In practice, it is not always possible to compensate the losers in a country, for example, workers who lose their jobs due to foreign imports. In your opinion, does that mean that trade should be inhibited to prevent the losses?
Explain how trade barriers save jobs in protected industries, but only by costing jobs in other industries.
Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply (s) for cameras In Thailand and Japan is described by the following functions: QsT=-5+14P QsJ=-10+14P QdT=60-P QdJ=80-P P is the price measured in a common currency used in both countries, such as the Thai Baht. Compute the equilibrium price (P) and quantities in each country without trade. Now assume that free trade occurs. The free-trade price goes to 56.36 Baht. Who exports and Imports cameras and in what quantities?