Untitled Quiz

Course Module: International Trade

• Course code: ECF330/BF310
• University: University of Lusaka
• Faculty: Faculty of Economics, Business & Management
• Program: Undergraduate

Unit 1: International Trade Theory

• Mercantilism: Focus on accumulating gold and silver through trade surpluses.
• Classical Theory of Trade:
  • Principle of Absolute Advantage: A nation benefits from specializing in producing goods where it has an absolute advantage (can produce at a lower cost).
  • Principle of Comparative Advantage: A nation benefits from specializing in producing goods where it has a comparative advantage (lowest opportunity cost).
• Modern Trade Theory - Generalized Theory of Comparative Advantage: Explains trade based on differences in production costs (resource efficiency).
• Production Possibility Schedules: Illustrate a nation's possible combinations of goods it can produce.
• Trading Under Constant Cost Conditions: Trade based on absolute or comparative advantage where opportunity costs are constant.
• The Basis For Trade and Its Direction of Trade: Factors determining patterns of traded goods.
• Production Gains From Specialization: Increased output by specializing in production of specific goods.
• Consumption Gains From Trade: Increased variety of goods and services available for consumption through international trade.
• Equilibrium Terms of Trade: The exchange rate at which goods are traded.
• Terms-of-Trade Estimates: Methods for measuring and estimating terms of trade.
• Trading Under Increasing Cost Conditions: Trade based on principles where opportunity costs increase with increasing production.
• Indifference Curves And Trade: How tastes and preferences influence a nation's preferred consumption possibilities.
• Community Indifference Curves: Combination of indifference curves to represent entire nation's collective preferences for various commodities.
• Offer Curve Of One Nation: Illustrates the relationship between exports and imports of a nation.
• The Terms Of Trade Of A Nation: Details of the balance of trade and equilibrium prices of a nation.

Unit 2: The Heckscher-Ohlin Theory

• Factor-Price Equalization: International trade tends to equalize factor prices across countries.
• Stolper-Samuelson Theorem: A change in the price of a commodity affects the relative returns to the factors used in producing that commodity.
• Empirical Evidence on the Heckscher-Ohlin Model : Findings and examinations of the role of factor endowments and production costs in trade patterns.
• Leontief Paradox: A common finding against the Heckscher -Ohlin model that trade patterns did not align with predicted factor endowments in nations.

Unit 3: Extensions to ft the Heckscher-Ohlin Theory

• Increasing Returns to Scale or the Economies of Scale Trade Theory: Explains how gains from trade can arise even when nations have similar factor endowments.
• The Product Life Cycle Theory Of Trade: Explains how the pattern of trade can change over time as a nation develops or as products mature.
• Dynamic Comparative Advantage: Explains how comparative advantage can change over time due to technological improvements or factors like industrial policy.
• Transportation Costs and Comparative Advantage: Transport costs can lead to differing comparative advantages when nations are located in different parts of the world.
• The Theory of Overlapping Demand As A Basis For Trade: Expands on comparative advantage and considers factor endowments.
• Intra Industry Trade: Focuses on trade between countries in similar products.

Unit 4: The Theory of Commercial Policy

• Barriers to Free Trade- Tariffs: Taxes levied on imported products.
  • Types Of Tariffs:
    • Specific Tariffs: Fixed amount per unit.
    • Ad valorem Tariffs: Percentage of the value.
    • Compound Tariffs: Both specific and ad valorem tariffs combined.
• Tariff Welfare Effects: The effects of tariffs on consumers, producers and overall welfare .
• Tariff Escalation: Tariffs increase with the stages of processing in production.
• Tariff Welfare Effects: Small-Nation Model; and Tariff Welfare Effects: Large-Nation Model: Examining tariff effects on welfare in small and large nations.
• Import Quotas: Limiting the quantity of goods permitted to enter a country.
• Orderly Marketing Agreements (OMAs): Agreements between importing and exporting countries to restrict trade volumes for a specific product.
• Domestic Content Requirements: Stipulations on the percentage of a product that must be produced domestically to qualify for zero tariffs.
• Subsidies: Financial support given to domestic producers.
  • Domestic Subsidies: Granted to producers of import competing goods.
  • Export Subsidies: Given to the producers of domestically produced goods meant for export.
• Dumping: Selling goods or services below market value.
  • Sporadic Dumping: Short-term, temporary, sale of goods or services below market value.
  • Predatory Dumping: Intentional sale of goods or services below value to drive competitors out of business.
  • Persistent Dumping: Recurring sale of goods or services below market value.

Unit 5: Non -Tariff Barriers to Trade

• Import Quotas: Limiting the quantity of goods imported during a given period.
• Tariff-Rate Quotas: A two-tiered tariff.
• Other NTBs (non-tariff barriers): Government procurement policies, social regulations, and other restrictions.

Unit 6: Other Non-Tariff Barriers and Arguments for Trade Barriers

• Social Regulations: Government rules that affect firms' production processes, like environmental standards.
• Administrative Policies: Procedures and regulations that make it difficult or costly to import and export goods.
• Government Procurement Policies: Preferences for domestic suppliers over foreign ones in the government purchases.
• Arguments for Trade Restrictions:
  • National Security: Security concerns that dictate an increase in local production.
  • Infant Industry Argument: Providing protection to newly formed domestic industries to allow them to grow stronger eventually before exposing them to foreign competition.

Unit 7: Economic Integration

• Regional Trading Arrangements: Agreements between countries to reduce trade barriers.
  • Free-Trade Area: Members eliminate tariffs between themselves but keep their own tariffs against non-members.
  • Customs Union: Includes the features of a free trade are but adds a common external tariff on non-members.
  • Common Market: Incorporates the features of customs union but extends to factors of production.
  • Economic Union: A highly unified system which extends to economic and fiscal policies.
• Benefits of Regionalism: Economic growth, increase in investment, and development in countries.
• Constraints to Regional Integration: Varying economic strengths between countries, lack of political relations amongst countries.

Unit 8: Growth and International Trade

• Dynamic Factors in International Trade: Growth in factors of production and changes in technology will impact trade.
  • K-Saving Technical Progress: Labour productivity grows faster than capital productivity.
  • L-Saving Technical Progress: Capital productivity grows faster than labour productivity.
  • Neutral Technical Progress: Labour and capital productivity increase proportionally.
• Changes in Factor Supplies and Technology and Trade: How growth in factors or technology shapes the terms of trade and the volume of trade and the distribution of gains from trade.