Deck 3: Global Trade

Question 1

What do trade economists mean by "fragmentation" and how does fragmentation relate to "global value chains"?

Answer 1

No Answer.

Question 2

What is depicted by the "smile curve", and is the curve always found "smiling" in major industries?

Answer 2

No Answer.

Question 3

What are regional production networks and how do they relate to "glocalisation"?

Answer 3

No Answer.

Question 4

Can a country that is "worse in everything" become a successful exporter of some goods?

Question 5

Is trade according to the principle of comparative advantage a zero-sum game?

Question 6

What are the "terms of trade"?

Question 7

What is the role of wages and exchange rates in the model of comparative advantage with many goods in determining exports and imports of country?

Question 8

Can a successful exporter in a country be negatively affected by events that happen to other sectors in that country? Explain why and how.

Question 9

Identify the 5 correct statements
1. With "fragmentation" economists denote the uneven spread of economic activity over the globe
2. Because the "Smile Curve" is an empirical concept, not all curves do necessarily "smile".
3. The interaction of centrifugal and centripetal forces in global trade can help to explain "glocalization".
4. Trading cars for gasoline is denoted as "intra-industry trade"
5. According to the principle of comparative advantage, trade increases welfare on a global level because it allows to realise economies of scale.
6. According to the principle of comparative advantage trade increases welfare on a global level because of efficiency gains from specialisation.
7. According to the principle of comparative advantage, efficiency gains from specialisation are distributed amongst trading partners according to the terms-of trade.
8. According to the principle of comparative advantage, trade is a zero-sum game as the gains of one trading partner are compensated fully by losses of the other trading partner.
9. Wages and exchange rates turn (Ricardian) comparative advantages of nations into competitive advantages of industries.
10. The export performance of the German textile industry cannot be influenced by the performance of the German automobile industry.

Question 10

What is the role of factor endowments in explaining trade?

Question 11

Does the factor price equalisation theorem predict absolute global wage equalisation?

Question 12

What is the Leontief paradox and how has its discovery changed the factor proportion theory?

Question 13

How do you evaluate the impact of trade with China on unskilled workers in advanced countries in the light of the factor proportion theory?

Question 14

What is predicted by the "product cycle theory of trade and investment"?

Question 15

How differs the 3^rd wave of globalisation (trade in tasks) from the 2^nd wave when NICs emerged as exporters of manufactures?

Question 16

Can comparative advantages be created by means of trade and industrial policy? And if yes, what could be key reasons behind it?

Question 17

What could be reasons why in some countries infant industry protection was successful and in others not?

Question 18

What are the expected effects of an integration of two markets where economies of scale and product differentiation are present?

Question 19

What has been expected from the creation of the EU Single Market?

Question 20

Identify the 5 correct statements
1. Countries with a large absolute number of workers have always a comparative advantage in producing labour-intensive goods.
2. The factor price equalisation theorem predicts absolute global wage equalisation.
3. For full factor price equalisation full price equalisation is required.
4. The "Leontief paradox" has shown that the US was a net exporter of labour-intensive goods.
5. According to the "product cycle theory of trade and investment", labour-rich countries have a comparative advantage in the "maturing phase" of a good's product cycle.
6. With respect to changes in comparative advantages, "trade in tasks" is much less predictable than trade in goods.
7. The "learning curve" can serve as an argument to use industrial policies in a latecomer country to create a comparative advantage.
8. Latecomer countries should always use infant-industry-protection policies to catch-up by learning.
9. Integrating two markets where economies of scale and product differentiation are present can help to become more competitive in relation to third countries.
10. Integrating two markets where economies of scale and product differentiation are present leads to less competition, higher prices and, thus, higher profits.

Question 21

What are the "gains" from trade highlighted by classical trade theory highlights?

Question 22

What are potential "pains" emanating from trade based on comparative advantages?

Question 23

What are the main reasons given for trade policies?

Question 24

What are anti-dumping measures?

Question 25

What are the welfare effects of a tariff and how do they compare to those of a voluntary export restraint?

Question 26

What is meant by "labour standards" in international trade policies?

Question 27

Are lower wages abroad a sufficient argument to impose "labour standards"?

Question 28

What is the likely impact of CO₂ taxes on global trade?

Question 29

Will robotisation and digitalisation necessarily lead to less trade globalisation?

Question 30

Should firms always reconfigure their global value chains when circumstances change? Discuss in the context of Covid-19 pandemic?

Question 31

Identify the 5 correct statements
1. According to classical trade theory countries should engage in free trade to help domestic companies to become successful exporters.
2. According to classical trade theory countries should engage in free trade because of the consumer benefits from lower prices resulting from a more efficient distribution of labour.
3. There is a risk that in reality structural change emanating from opening-up economies can result in persistent structural unemployment or real income losses.
4. Import quotas are a standard trade policy instrument that is allowed by the WTO and hence often used to deal with a sudden surge of foreign imports.
5. A voluntary export restraint (VER) is more harmful in terms of welfare losses to the protectionist country than a tariff.
6. A voluntary export restraint (VER) can be beneficial for the export-restrained foreign exporter.
7. Lower wages abroad constitute an unfair trade practice.
8. A carbon dioxide tax would lead to lower global trade, and thus to a reduction of global welfare.
9. Robotisation can stimulate re-shoring or nearshoring of production.
10. Incidences like the Covid-19 pandemic clearly show the need of having fully national value chains in order to secure a steady supply of critical health products.