International trade has increased from $2 trillion in 1985 to over $ 6.4 trillion in 2002.1 This impressive growth is primarily the consequence of various political and technological developments of the past 15 years. The political raise of Russia and Asia, particularly China, has extended the worldwide markets. At the same time, technological changes like the Internet have decreased information asymmetry and lowered costs for logistic services, which facilitated the development of international trade. Moreover, organisations like the World Trade Organisation (WTO) have helped to liberalize and deregulate worldwide markets. Today, all aspects of a nation’s economy are closely correlated to the economies of its trading partners. The world has become a ‘village’ and market players are able to interact and transact around the world within ‘real time’ (Carbaugh 2002). [...]
Table of Contents
1. Compare and contrast the arguments for and against the greater liberalisation of international trade and reduction of protectionism.
2. Examine the articles: “Bilateral trade treaties are a sham” and “West wins trade war in secret”, then assess the future of international trade and investment. Is greater trade liberalisation or greater protectionism likely to predominate?
Research Objectives and Key Topics
The assignment aims to analyze the dual nature of international trade liberalization, weighing its economic benefits against the rising trend of strategic, bilateral protectionism practiced by major economic powers.
- The economic justification for free trade through absolute and comparative advantage.
- Positive macroeconomic impacts of liberalized markets on global productivity and living standards.
- Arguments against liberalization, specifically focusing on income distribution and the vulnerability of developing nations.
- The shift from multilateral WTO-based systems to bilateral agreements as a form of modern protectionism.
Excerpt from the Book
Compare and contrast the arguments for and against the greater liberalisation of international trade and reduction of protectionism.
International trade has increased from $2 trillion in 1985 to over $ 6.4 trillion in 2002. This impressive growth is primarily the consequence of various political and technological developments of the past 15 years. The political raise of Russia and Asia, particularly China, has extended the worldwide markets. At the same time, technological changes like the Internet have decreased information asymmetry and lowered costs for logistic services, which facilitated the development of international trade. Moreover, organisations like the World Trade Organisation (WTO) have helped to liberalize and deregulate worldwide markets. Today, all aspects of a nation’s economy are closely correlated to the economies of its trading partners. The world has become a ‘village’ and market players are able to interact and transact around the world within ‘real time’ (Carbaugh 2002).
The liberalisation of international trade can either assume the form of a Free trading area (FTA), customs union, common market or an economic integrated region (Daniels, Radebaugh & Sullivan 2001). The recent ‘boom’ of greater international trade liberalisation can be partly explained by the economic laws of absolute- and competitive advantage. By nature, countries have distinctive immobile production factors and hence different relative production costs for the same good or service (Lawler & Seddighi 2001). According to the absolute advantage model, a country can increase its overall output and productivity by focusing on its individual absolute advantage and therefore produce one good with fewer resources than another country (Sloman & Sutcliffe 2001).
Summary of Chapters
1. Compare and contrast the arguments for and against the greater liberalisation of international trade and reduction of protectionism.: This chapter evaluates the classical economic benefits of free trade, such as increased productivity and economies of scale, while contrasting them with social and economic drawbacks like wage depression and the vulnerability of infant industries.
2. Examine the articles: “Bilateral trade treaties are a sham” and “West wins trade war in secret”, then assess the future of international trade and investment. Is greater trade liberalisation or greater protectionism likely to predominate?: This chapter analyzes how powerful trading blocs use bilateral agreements to bypass multilateral standards, ultimately arguing that a form of "modern protectionism" is likely to dominate the future global economy.
Keywords
International trade, Liberalization, Protectionism, World Trade Organization (WTO), Bilateral trade agreements, Absolute advantage, Comparative advantage, Globalization, Economic growth, Emerging markets, Trade barriers, Tariff rates, Market integration, Lobby interests, Modern protectionism
Frequently Asked Questions
What is the fundamental focus of this assignment?
The paper examines the dual aspects of international trade, specifically evaluating the arguments for global market liberalization versus the arguments for national protectionism.
What are the primary thematic areas covered?
Key areas include the economic theories of absolute and comparative advantage, the impact of WTO policies, the rise of bilateralism, and the socioeconomic effects on both industrialized and Third World nations.
What is the primary objective of this study?
The study aims to determine whether future global trade will be defined by further liberalization or if a trend toward protectionist, bilateral trade strategies is more likely to prevail.
Which scientific methodology is applied?
The assignment employs a qualitative analysis of economic theories and recent empirical trends, supported by literature from established economic scholars and data from international organizations.
What topics are discussed in the main body?
The main body covers the drivers of trade growth (technology, politics), the benefits of free trade (efficiency, innovation), the risks for vulnerable economies, and the political motivations behind modern bilateral trade treaties.
Which keywords characterize the work?
Key terms include International Trade, Liberalization, Protectionism, WTO, Bilateral Agreements, Comparative Advantage, and Global Productivity.
Why do major powers prefer bilateral agreements over the WTO approach?
According to the author, bilateral agreements allow powerful nations to exert market pressure on smaller counterparts, insert non-trade related issues, and satisfy domestic lobby groups more effectively than multilateral frameworks.
How does the author define "modern protectionism"?
It is described as a strategy where dominant economies like the US and Europe selectively foster liberalization to suit their interests while using bilateral agreements to restrict competition and protect their own domestic industries.
- Quote paper
- Andreas Wellmann (Author), 2004, Liberalisation of Trade and reduction of protectionism, Munich, GRIN Verlag, https://www.grin.com/document/22181
