Free Trade (PowerPoint download)

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					Free Trade
                   What is it?
• Definition- is a type of trade policy that allows
  traders to act and transact without
  interference from government.
• True supply and demand on a worldwide scale
• Aims to get rid of protectionism
  – Artificial price controls by governments
  – Tariffs on imports
  – Control of supply
            Who started this?
• International trade has been around a long
  time (artifacts from cultures dispersed/Silk
  Road), but not always free.
• First written about in “The Wealth of Nations”
  by Adam Smith
    Brief Modern History of Trade
• Mercantilism (1500s-1800s)
  - Government sets policies to maximize the
  supply of capitol (gold, silver, trade value of
  -How trade can best aid the state
  -Exports encouraged, imports discouraged
  - Protectionism
                  History II
• Slow change to free trade (1800s-present)
• Opening of markets (sometimes forcibly)
  - Opium Wars in China
  - Part reason for American Revolution
• Wide spread opening of markets since WWII
  - U.S. the leader
  - WTO: 153 member countries- working to free
  up the global market- in reality controlled by the
  U.S. and Europe
  Free Trade and the Asian Tigers
• Asian Tigers: Japan, South Korea, Taiwan,
  Singapore, and Hong Kong
  - protected their economies until ready for
  global markets (with tariffs)
  - still somewhat protective
         Free Trade and China
• Under Mao- closed off economy
• Deng Xiaoping- four modernizations- start to
  open up the economy
• Since Deng- Foreign trade has risen exponentially
  Free Trade and South/Southeast
• Trying to mimic the tigers success (with
  exception of Burma)
• Somewhat successful
  – Opened up to free trade to early?
    a. factories move to China
    b. few local major corporations
  – Foreign corporations exploit (sometimes)
  – Good growth rates (especially Vietnam and India)
Free Trade and the rest of Asia
Middle East
• free traders- need cheap foreign products because
  very little local industry (oil is the exception)
The Stans
• very underdeveloped countries and not improving
   • Little foreign trade
   • Weak governments
   Free Trade Agreements in Asia
• ASEAN- parts of agreement include India,
  Japan, South Korea
• SAFTA- Most countries in South Asia
• GAFTA- Middle Eastern countries (Israel not
Free Trade Zones
      Arguments Against Free Trade
• Income Inequality- Has risen since free trade has
  expanded. (could or could not be related)
• Environmental degradation- corporations can find
  another country to pollute and destroy the
• Child labor
• Race to the bottom (wages)- cheaper wages can
  equal cheaper products. Jobs = cheap labor
• National defense- losing vital industries
• Forcing cultural change
      Arguments For Free Trade
• Experts for it (87% of economists in 2006
  survey (83 respondents)
• Overall gain for society (theory and some
  empirical evidence)
• Natural resources and talents
• Cheaper products
• Free access to market information
• Easier investment
• Less taxes on corporations and individuals
• Easier movement of labor
              Mixed Results
• Asian Tigers: were more protectionist than
  free traders
• Latin America: Free traders with the U.S. and
  Canada and others
  - GDP has risen but has not trickled down
  - Economic exploitation/ environmental
• Freeing up of many Asian economies has
  created a GDP boom in recent years
         Things to think about
• Are you going to act for what is good for your
  country or for Asia?
• How does it fit in with your countries history
  on this topic?