International Trade
19th Century - 1945
- The pre-eminence of free trade was primarily based on the estimate of whether or not it was in any particular country's self-interest (a.k.a national advantage) to open its borders to imports in the 19th century.
- 1817 – David Ricardo, James Mill and Robert Torrens show that free trade might benefit the industrially weak as well as the strong, in the Comparative Advantage Theory (a.k.a. "Ricardo's Law") which explains why it can be beneficial for two parties to trade without barriers if one is more efficient at producing goods or services needed by the other.
- John Stuart Mill proved that a country with monopoly pricing power on the international market could manipulate the terms of trade through maintaining tariffs, and that the response to this might be reciprocity in trade policy. This was taken as evidence against the universal doctrine of free trade, as it was believed that more of the economic surplus of trade would increase to a country following reciprocal, rather than completely free, trade policies.
- Mill developed the “infant industry” scenario which promoted the theory that the government had the "duty" to protect young industries, if only for a time necessary for them to reach full capacity. This became the policy in many countries attempting to industrialize and surpass English exporters.
- The Great Depression was a major economic recession that lasted from 1929 until the late 1930s. During this period, there was a great drop in trade. The lack of free trade was considered by many as a principal cause of the depression.
- Only during World War II did the Great Depression end in the
3 comments:
In this post, you discuss controlling industry as the factor for being able to set tariffs. Is this concept dangerous? What can be done to ensure that countries do not have unfair taxes. I've seen labels for Fair Trade and what not on packages for food and such, but what does that really mean? Are there any other organizations like this?
Wow, you sure do show an interest in the subject...Yes, controlling industry is dangerous. Countries may be so concerned with economically taking defensive measures that they end up hurting themselves when other countries decide to take their business elsewhere. Just as they don't want to lose money, neither do other countries and if that means ending a previously lucrative trading partnership because one of the partners begins hiking up tariffs, then so be it. In order to ensure that other countries do not have unfair taxes, many measures have been implemented (besides the natural economic limits), such as global trading organizations such as the International Federation for Alternative Trade and of course the World trade Organization, just to name a few. As for the Fair Trade labels on food, I'd say that this correlates to the "Infant Industry Scenario" in that The FAIRTRADE Mark appears on products as an independent guarantee that disadvantaged producers in the developing world are getting a better deal. So, they are not being cheated, and thus, it a (at least) fairer trade than what they would have possibly received as compensation otherwise. I'm sorry, but I'm not sure what exactly your last question refers to, but I hoped I was helpful otherwise. Thanks for taking the time to actually read my post!
Thanks for responding, I understand much better now. Are there any countries that are particularly abusive as far as imports/exports go?
Post a Comment