Geza Feketukuty, the main US negotiator for services in the Uruguay Round, gives a wonderful anecdote about the first efforts to start negotiations on trade in services: “The Swiss delegate. rejected trade in services, stressing how impossible it was for him to have his hair cut by a hairdresser in another country. The Chair of the Committee.. replied that all women in Germany had benefited enormously from French exports of hairdressing services, and she was confident that the delegate`s wife would confirm that this was also the case in Switzerland. [23] A company established in an industry that required considerable investment and knowledge had a huge advantage over its potential competitors. Its production series were large, which allowed it to produce products at a low marginal cost. And the capital investment for a new competitor would be significant. Explain five strategies that a small business could use to scale up to benefit from economies of scale. When industries are in decline and inefficient, they may require significant investments to make them efficient again. Protecting these industries would encourage companies to invest and reinvent themselves. However, protectionism could also be an excuse to protect inefficient companies Once such an industry becomes dominant, it is extremely difficult for industries in other countries to compete. The cost of entry capital can be very high and it is difficult for a new entrant to master the technology. In addition, the industry generally has a network of suppliers essential to competitiveness, such as steel companies and tyre manufacturers.

However, if such an industry loses its dominant position, it is equally difficult for it to re-enter the market. A second extremely important caveat is the so-called factor price equalization theorem, which states that international trade will lead to the equilibrium of the relative returns of factors of production such as unskilled labor under conditions of free trade between countries. This would mean that for a high-wage country like the United States, the wages of unskilled workers would fall, while wages would rise in countries with abundant labor. However, factor prices do not tend to be offset in industries where production costs are falling. When analyzing the effects of a surplus or deficit, economists often look at the term “trade” very broadly in the definition. In general, economists do not consider the simple trade balance of goods to be as relevant as the “current account”, which includes the trade balance of goods and services plus international net income (transferred profits from foreign investment, royalties, interest and dividends) and unilateral transfers (foreign aid and foreign transfers of persons). With the exception of unilateral transfers, all of these elements are regulated in our trade agreements. Under certain conditions, improving a country`s productivity can worsen its terms of trade.

For example, as Japanese TV manufacturers become more efficient and selling prices fall, trading conditions in Japan will deteriorate as more TVs are needed to trade the plane. Following a multilateral round of trade negotiations under gatt/WTO, tariffs will be reduced during a transitional period, but not completely abolished. However, in bilateral or regional U.S. free trade agreements (FTAs), the parties completely abolish almost all tariffs on trade between them, usually over a transitional period, which can be five to ten years. Kei-Mu Yi of the World Bank notes that standard economic models are very well responsible for the increase in world trade until the mid-1970s, but cannot explain the growth of trade since then. [21] However, a model that takes supply chains into account explains the growth of trade, and it estimates that this vertical specialization now accounts for about 30% of global trade. This would suggest that the mercantilists were right, that a nation would be well advised to restrict imports. However, almost all economists today would reject this conclusion, and in fact, many economists believe that lowering its trade barriers will benefit a country, whether or not the country`s trading partners remove their barriers. Adam Smith and many economists after him argue that the purpose of production is to produce goods for consumption. Stephen Cohen and colleagues put this argument this way: “Theories of comparative advantage (classical and neoclassical) imply that trade liberalization is always beneficial to consumers in any country, whether or not the country`s trading partners reciprocate by removing their own barriers to trade. From this perspective, the emphasis on the mutual dismantling of trade barriers is included in most real trade liberalization efforts. is out of place.

[12] In economic theory, the cost of all factors of production that could cross borders would entail equal costs in all trading countries if the factors of production were fully mobile. This would mean that the basis of comparative advantage for trade between countries would diminish and that there would ultimately be less international trade. If developing countries have relatively new industries, then those industries would be fighting against international competition right now. However, if they invest in the industry, they may be able to gain a comparative advantage in the future. In this new world, the economic policies pursued by a nation could create a new comparative advantage. A country could promote education and shift its unskilled workforce to semi-skilled or even highly skilled. Or it could provide grants for research and development to create new technologies. Or it could take political measures to force the transfer of technology or capital from another country. B such as allowing its companies to hack into the technology of its competitors or forcing foreign investors to transfer technology.

Instead, the real debate between economists and policymakers revolves around whether the United States should respond to foreign neo-Marxist practices, and if so, how. Stephen Cohen and colleagues say: While measuring the impact of tariffs is more accurate than measuring non-tariff barriers or services, it`s not as simple as it seems. For example, economists often use a weighted tariff taking into account the proportion of imports that fall under that tariff line. One of the problems with this approach is that a very high tariff completely blocks imports, leading to the erroneous conclusion that no weight is given to this tariff line. the tariff rate maximizing the net benefit resulting from the improvement in the country`s terms of trade compared to the negative effect resulting from the reduction in the volume of trade. When the terms of trade of the nation imposing the tariff improve, those of the trading partner deteriorate because they are the opposite. With a lower volume of transactions and the deterioration of the terms of trade, the well-being of the trading partner is definitely in decline. Therefore, it is likely that the trading partner will retaliate […] Note that even if the trading partner does not retaliate when a nation imposes the optimal tariff, the profits of the nation that imposes tariffs are less than the losses of the trading partner, so the world as a whole is worse off than under free trade.

In this sense, free trade maximizes the well-being of the world. [9] Developing countries can benefit from free trade by increasing their quantity of or access to economic resources. Nations generally have limited economic resources. Economic resources include land, labour and capital. Land represents the natural resources found within the borders of a nation. The objective of removing trade barriers is, of course, to raise the level of trade, which should improve economic well-being. Economists often measure economic well-being in terms of the share of total production of goods and services (i.e., gross domestic product, GDP) that the country produces on average per person. GDP is the best available measure of economic well-being, but it presents significant conceptual challenges.

As Joseph Stiglitz notes, measuring GDP “does not take into account some of the factors that change people`s lives and contribute to their happiness, such as security, leisure, income distribution and a clean environment – including the factors that growth itself needs to be sustainable.” [10] Moreover, GDP does not distinguish between “good growth” and “bad growth”; For example, if a company disposes of waste in a river as a by-product of its manufacture, the production and subsequent cleaning of the river contributes to the measurement of GDP. .