Reading Guide

Reading Guide for Unit 13 – International Trade

Table of Contents from Taylor:

Chapter Number/Title; Sub-section titles and page numbers

Jim’s Comments

3 International Trade 41

Absolute Advantage 43

        A Numerical Example of Absolute Advantage and Trade 43

        Trade and Opportunity Cost 46

        Limitations of the Numerical Example 47

Comparative Advantage 48

        Identifying Comparative Advantage 48

        Mutually Beneficial Trade with Comparative Advantage 50

        How Opportunity Cost Sets the Boundaries of Trade 52

        Comparative Advantage Goes Camping 53

        The Power of the Comparative Advantage Example 53

Intra-industry Trade between Similar Economies 54

        The Prevalence of Intra-industry Trade between Similar Economies 54

        Gains from Specialization and Learning 55

        Economies of Scale, Competition, Variety 56

        Dynamic Comparative Advantage 57

The Size of Benefits from International Trade 57

From Interpersonal to International Trade 59

Key Concepts and Summary 60

Review Questions 60

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6 Globalization and Protectionism 105

Protectionism: An Indirect Subsidy from Consumers to Producers 106

        Demand and Supply Analysis of Protectionism 107

        Who Benefits and Who Pays? 108

International Trade and Its Effects on Jobs, Wages, and Working Conditions 110

        Fewer Jobs? 110

        Trade and Wages 111

        Labor Standards 112

The Infant Industry Argument 114

The Dumping Argument 115

        The Growth of Anti-Dumping Cases 115

        Why Might Dumping Occur? 116

        Should Anti-Dumping Cases Be Limited? 116

The Environmental Protection Argument 117

        The Race to the Bottom Scenario 117

        Pressuring Low-Income Countries for Higher Environmental Standards 118

The Unsafe Consumer Products Argument 119

The National Interest Argument 119

How Trade Policy Is Enacted: Global, Regional, and National 122

        The World Trade Organization 122

        Regional Trading Agreements 123

        Trade Policy at the National Level 123

        Long-Term Trends in Barriers to Trade 124

The Trade-offs of Trade Policy 125

Key Concepts and Summary 126

Review Questions 128

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