CHAPTER 9 – INTERNATIONAL TRADE
Chapter 9 draws our attention to a distinction between "Economics" and "Political Economy." Our transparency work deals mostly with the "pure science" – the analytical work of understanding what is going on – in other words, to explain the mechanism of trade. "Political Economy" deals with the way the world really works – the messy politics that gets involved, as when producer interests get expressed and incorporated into public policy.
The gaping trade deficit of $250 billion or more is bothersome. If you are inclined to worry, you will ask, "How long can it go on like this?" We are basically accepting read goods from abroad and just giving them dollars. What do they do with these dollars? To the extent they want to buy U.S. goods, sure. Past that, put them into the U.S. bond (government and corporation) market and the U.S. stock market. When will foreigners tire of just taking dollars? What if they want to pull them out of the U.S. Effects on our financial markets (bad!). And on the U.S. inflation rate (bad!).
Chapter 9 first emphasizes the common sense importance of comparative advantage.
Chapter 9 looks at international trade in three stages.
Before any trade with the outside world (p. 174)
Open the domestic market to trade with the outside world with totally free market and no government intervention.
Government intervenes with tariffs and quotas, responding to the pleas of labor and manufacturing enterprises for "relief."
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Notes | Clint Johnson |
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