Questions tagged [international-trade]

International trade theory is a sub-field of economics which analyzes the patterns of international trade, its origins, and its welfare implications.

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1k views

How could the economic cost of the world not speaking the same language be estimated?

While languages are fun and add color and flair to cultures and make the world a more interesting place, they also have a cost. Beyond the monetary costs of translation/editing/proofreading, ...
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594 views

Have there been instances where economists have advocated a trade embargo?

Due to Comparative Advantage, it is generally accepted among economists that free-trade is the best policy for a country and increases the standard of living for the citizens of that country and the ...
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How does a country devalue its currency?

I recently read an article in the New York Times that talked about China devaluing its currency (which I believe is held to a peg against the US Dollar). My question is: specifically what tools does a ...
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Are there any states that don't have debt?

I've not been able to find any states that don't have debt to other states. This, to me at least, seems really strange. Are there any nation states that are not in debt to other states, if so which ...
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Are there any datasets for protectionism?

Are there any data sources or variables that measure how protectionist a country is? If so, what are they?
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Generalization of the Heckscher-Ohlin Model

The Heckscher-Ohlin Model is normally presented for the case of 2 countries, 2 factors of production and 2 traded goods, leading to statements that, subject to free trade and various other assumptions:...
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Can a closed economy flourish?

I was wondering if it is possible to run a country based only on domestic economy and not to enter the world economy. Basically, if certain economy of a certain country fails and poses threat to world ...
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3answers
535 views

What arguments are there in favor of national food self-sufficiency?

National food self-sufficiency is an idea that appeals to many non-economists. For example, George W. Bush (2001): It’s important for our Nation to be able to grow foodstuffs to feed our people. ...
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455 views

Ricardo's theory of comparative advantage

The aim of this question is to better explore the mathematical economics model behind Ricardo's theory of comparative advantage and the claims that can be made based on this model. This seems ...
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How does a bank convert one currency to another?

Say for example I sell ZAR and buy USD. What happens behind the scenes so that the local ZAR bank is able to deposit USD into my account? Does the bank require some sort of USD cash reserve? How do ...
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What are some critiques to the principle of comparative advantage?

The principle of comparative advantage says that, in a free market, any agent should produce more of the goods for which they have a comparative advantage. The model is usually applied to advocate for ...
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239 views

Why is Algeria the #2 milk powder importer in the world?

Can anyone explain to me why Algeria, a country of 40 million people is importing almost half as much milk powder as China? Turkey has 80 million people yet it apparently doesn't import milk powder, ...
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476 views

How does US (its economy, banks, industry) profit from dollar being the “standard currency”?

How does US (its economy, banks, industry, "finance industry") profit from dollar being the "standard currency"? I am not seeking "ideological" explanations, but explanations of the mechanisms ...
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Why don't prices of USA labor and Mexican labor equalise?

That Mexicans workers get paid less US workers is a dynamic which motivates the moving of production to Mexico. This idea can be abstracted to Developed Markets (DM) labor and Emerging Markets (EM) ...
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Why is the Australian dollar, often viewed by traders as a proxy for the Chinese economy?

The Australian dollar, often viewed by traders as a proxy for the Chinese economy, gained 0.3 per cent against its US counterpart. From: https://www.ft.com/content/b18d1c56-cf75-11e9-b018-...
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382 views

Omitted variables in gravity model

I'm trying to construct a gravity model for EU trade flows using a panel dataset, but am suffering from what appears to be a persistent omitted variable problem. My residuals display a queer log-like, ...
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Leontief's Paradox and the amount of capital

Leontief (1953) showed that US exports in 1947 embodied considerably less capital and somewhat more labor than would be required for domestic production of competitive imports. \$2.55 million worth of ...
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EU and North America with CETA

The CETA trade deal is supposed to involve only the EU and Canada, but Canada has already a trade deal with the USA and Mexico : I don't understand how this is possible. For example, if I own one ...
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Ricardo's theory of comparative advantage for many countries

In textbooks on economics the Ricardo theory of comparative advantages is explained on the example of two countries with two goods. I suppose, there must be generalizations of Ricardo's theory for ...
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Why are imports subtracted from GDP?

GDP is a measure of a country's production. $$GDP = C + I + G + X_n$$ $C$ = Consumer Consumption $I$ = Gross Investment $G$ = Government Expenditures $X_n$ = Exports - Imports Exports are what we ...
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168 views

A valid argument against free trade?

Recently I read Bertrand Russell's Political Ideals (1917). Although he expresses strong left-wing ideals there, he supports free trade and criticizes protectionism. It seems that not any left-wing ...
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212 views

What does trade deficit really mean?

I watched a video about how if America imports USD 1m worth of goods but only exports USD 600k worth of goods, there is a USD 400k debt to other countries if the other country allows this deficit. US ...
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1answer
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Do import tariffs tend to increase a country's exchange rate (if so, why)?

From Prof. Stiglitz' Vanity Fair article: How, one might ask, is this possible, given Trump’s rhetoric, his determination to move against China with a 45 percent tariff? There’s a global ...
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Who exploits comparative advantage in international trade?

Suppose that under autarky, Colombia makes coffee and cars at \$1 and \$2 each, and Japan makes coffee and cars at \$20 and \$10 each. Since Japan has a comparative advantage in car manufacture, the ...
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US trade outpaces GDP

I notice that US exports doubled between 2000 and 2011, imports also increasing greatly, but GDP only grew by 20%. Thus, trade in the United States seems to have grown substantially faster than ...
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167 views

Does trade lead to economic growth in the most basic models of trade?

In the standard models of trade, such as Ricardo or Hecksher-Ohlin, I know that openness to trade will lead to increased consumption as (roughly) the consumption possibility frontier expands beyond ...
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Buying locally vs abroad

I interested in the net effect of buying locally versus abroad. The UK Government wants to buy a ship. It can buy from a UK or Korean shipyard. The unit price is the same for both yards: £10. A ten ...
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109 views

Is it true that the U.S has to run a chronic trade deficit with the rest of the world as a price to pay for being the world's reserve currency?

I have heard of the argument that in order for USD to be reserve currecy, the rest of the world must own enough USD to store it as reserves. In order for the rest of the world to own enough USD, U.S ...
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4answers
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What are some famous examples of infant industries that failed?

The Japanese and Korean car and steel industries are often touted as examples of successful infant industries. I'm trying to find some famous examples of failed infant industries. (They don't seem ...
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Does immiserizing growth exist outside of theory?

For a course in international trade, our professor touched on the idea of immiserizering growth. He emphasized that immiserizing growth was a theoretical outcome from specialization of trade and did ...
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3answers
88 views

Is protectionism more suited to large economies?

Large economies like the US and China use tariffs as trade weapons while retaining competitiveness because they have the critical mass to encapsulate supply chains and avoid the cost of cross-border ...
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Why do there seem to be relatively few imports from India into the United States?

In the United States I see significant quantities of manufactured good imports made in Taiwan, Japan, China and Korea. However, there seem to be relatively few imports from India. Why is this?
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International date line

What if international date line being shifted to Atlas Ocean? Most of trade partners will have different date, States and all America continents will enter day first etc. So what can be coincidence of ...
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The term “Most Favoured Nation” is misleading to me. Please explain

My understanding If Country A extends MFN status to Country B with reduced tariffs for a product, then it must treat all other nations in the same way. By this WTO encourages multilateral ...
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813 views

Why don't shipping businesses own their own shipping containers?

About two or three years ago I attended a talk by a consulting statistician, one of whose clients was a company in the business of leasing out intermodal shipping containers. He said those who are in ...
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How is wealth created? [duplicate]

The production of 'goods and services' and 'innovation' is the usual answer. I feel that doesn't really answer the question. These things can be traded for wealth but they don't generate new wealth. ...
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158 views

Must total world net exports be zero?

On the Wall Street Journal Op-Ed page (Trump’s Real Trade Problem Is Money ), John D. Mueller discusses the gold standard and claims something that I've either never heard before, don't understand, ...
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How does the U.S agriculture subsidy not constitute export subsidies under the WTO?

The WTO explicitly prohibits subsidies on export goods to prevent dumping and market distortion but the United States spends $2.4 Billion annually on corn subsidies ...
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141 views

How much of the Greece's public debt is created by its trade deficit?

How much of the Greece trade deficit reflects into it's public debt? Each year, Greece is importing about two times as much as it's exporting. In some years, even three times more. How much of that is ...
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1answer
160 views

How can a RTA have a trade imbalance with itself?

I'm looking at ASEAN data for 2015. It seems the intra-ASEAN exports are 305bn USD while the intra-ASEAN imports are only 238 billion USD. Am I misreading the statistics or is it actually possible for ...
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Do trade policies have to change after Brexit?

Being part of the EU is surely not the only way to participate in a free trade market. Could the UK continue with the same policies despite not being part of the EU?
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Why does the EU need a clearing centre to circumvent US sanctions against Iran?

As reported here and elsewhere, the EU is considering the creation of a clearing house to keep trading with Iran despite US sanctions. Why is it not possible for the EU to conduct normal financial ...
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1answer
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Heckscher-Ohlin with different technologies

Consider two countries: Home and Foreign that produce two goods, cars and wheat. The production technologies are such that: $q_{c} = K_{c}^{0.5} L_{c}^{0.5}$ and $q_{w} = 0.5 K_{w}^{0.5}L_{w}^{0.5}$ ...
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Uncovered Interest Parity question

I am trying to understand the fact that, given that the uncovered interest parity holds, a rise in dollar interest rates will cause the dollar to appreciate. Is this a good intuition? Uncovered ...
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What are the factors that drive openness in developed vs developing countries

My questions are: What are the factors (both positive and negative) that drive openness in a country? Do they differ between developed (e.g USA) and developing (e.g China) countries? Will these ...
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Why does a currency devaluation make a country more attractive for foreign direct investment?

The author of this article says "[the devaluation of the yuan] may also have impact on [foreign direct investment (FDI)] if China becomes a more attractive destination vis-a-vis India". Why is this? ...
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175 views

What exactly is the argument for Free Trade?

There's been a lot of talk about Free Trade. People seem to either know nothing about it, or they seem to either support or oppose it with such passion that if you didn't know any better, you would ...
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Does China subsidize its exports?

And if so, to what extent? Also, how does the extent of China's subsidies compare internationally? (I understand this is a broad question but I can imagine that some economists somewhere have come ...
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212 views

Gravity Equation Interpretation

I have a question about the gravity equation. In the Feenstra textbook, on page 144, it is stated that In the monopolistic competition model [...] the countries are completely specialized in ...
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93 views

Long term trade data request

Can anyone recommend a resource for very long term trade data? (1500-2014). I have looked and found bits and pieces here and there but haven't come across any single data-set covering all of it. I am ...