Introduction to Trade

1. Introduction to Trade HESO 449B – 002 Aneil Jaswal

2. Learning Outcomes • 1) Understand what is meant by the term trade • 2) Understand the history and reasons behind trade • 3) Understand trade in the context of development – begin to see potential connections to health • 4) Understand the issues that are being debated, in the context of globalization

3. What is Trade? • Exchange of good and/or services • Voluntary -> mutually beneficial • Facilitated by the markets • Barter • Money

4. Who Trades? • Individuals • Households • Firms • States

5. Why Trade? • specialization and division of labor • concentrate on a small aspect of production • economies of scale • COMPARTIVE ADVANTAGE

7. Absolute Advantage(two countries, two products, one production input (labour) • If Canada and India trade, both countries can divert labour to the good they produce most efficiently. For example: • Canada diverts 100 hours of labour from cloth production to wheat • India diverts 100 hours of labour from wheat production to cloth

8. Absolute Advantage(two countries, two products, one production input (labour) • Net gain from trade for Canada and India: 22 rolls of cloth and 6 bushels of wheat

9. Comparative Advantage(two countries, two products, one production input (labour) • Mexico has absolute advantage in cloth and wheat • Canada has comparative advantage in wheat • If Canada and Mexico trade, both countries can divert labour to the good they produce comparatively efficiently. For example: • Canada diverts 100 hours of labour from cloth production to wheat • India diverts 50 hours of labour from wheat production to cloth

10. Comparative Advantage(two countries, two products, one production input (labour) • Net gain from trade for Canada and Mexico: 6 rolls of cloth and 6 bushels of wheat

11. History of Trade • Silk Road • Mercantilism • Adam Smith • David Ricardo

12. Development of the Modern Trading System • Bretton Woods Agreement  International Political Economy • Free trade advanced further in the late 20th century and early 2000s: • 1992 EU lifts barriers to internal trade of goods and labor • 1994 NAFTA • 1995WTO is Born

14. WTO • Created in 1995 • After the Uruguay Round GATT (General Agreement on Tariffs and Trade..1947-1994 • Trade Disputes – mechanism • Covers 95% of World Trade • Current Round – DOHA • Committees • Voting System

15. Encouraging Trade • Tariff Reductions • Reciprocity • Non-Discrimination (most favored nation principle) • National Treatment • Non-Tariff Barrier Reductions

16. INTERNATIONAL TRADE • Bilateral • Multilateral • G7/8,G20 • G77

18. Collapse of Doha • US, India and China • Agriculture • Environment

19. Other Doha Issues • Access to patented medicines • Trade Related Aspects of Intellectual Property Rights (TRIPS) - On August 30, 2003, WTO members reached agreement on the TRIPS and medicines issue.

20. The Golden Straight Jacket

22. Fair Trade • Social + Environmental Standards • Example: Kenyan Farmers

23. Development • Agglomeration – Africa left behind • Capital Investment – aid for infrastructure...but how about equipment/machinery? • Econ theory suggests low capital countries provide high returns… • Poorest 49 countries =10% of population = 0.4% world trade

24. IMF • Oversees global financial system • SAPs – Structural Adjustment Policies…cut health care…

25. Regional Trade Agreements • Moving Away from Global? • NAFTA, EU, ASEAN

26. Free Trade Debate For • Economic Gains  growth, increase avg income • Interdependence  peace • Freedom • Against nationalism • Share culture/knowledge

28. Free Trade Debate Against • Against development • Cost of distribution • Harm young industry • Uneven wealth distribution • Excess dislocation • Dependency theory • Sovereignty • Instability

30. On the Global Economy