Chapter 1 Controversies in Trade Policy
Chapter 11 ▪ Controversies in Trade Policy
Chapter Organization Introduction Sophisticated Arguments for Activist Trade Policy Globalization and low-Wage Labor Summary Copyright C 2003 Pearson Education, Inc Slide 11-2
Copyright © 2003 Pearson Education, Inc. Slide 11-2 Chapter Organization ▪ Introduction ▪ Sophisticated Arguments for Activist Trade Policy ▪ Globalization and Low-Wage Labor ▪ Summary
Introduction Two controversies over international trade arose in the 1980s and 1990s In the 1980s a new set of sophisticated arguments for government intervention in trade emerged in advanced countries These arguments focused on the" high-technology industries that came to prominence as a result of the ri of the silicon chip In the 1990s a dispute arose over the effects of growing international trade on workers in developing countries Copyright C 2003 Pearson Education, Inc Slide 11-3
Copyright © 2003 Pearson Education, Inc. Slide 11-3 Introduction ▪ Two controversies over international trade arose in the 1980s and 1990s. • In the 1980s a new set of sophisticated arguments for government intervention in trade emerged in advanced countries. – These arguments focused on the “high-technology” industries that came to prominence as a result of the rise of the silicon chip. • In the 1990s a dispute arose over the effects of growing international trade on workers in developing countries
Sophisticated arguments for Activist Trade policy There are two kinds of market failure that seem to be present and relevant to the trade policies of advanced countries Technological externalities The presence of monopoly profits in highly concentrated oligopolistic industries Copyright C 2003 Pearson Education, Inc Slide 11-4
Copyright © 2003 Pearson Education, Inc. Slide 11-4 Sophisticated Arguments for Activist Trade Policy ▪ There are two kinds of market failure that seem to be present and relevant to the trade policies of advanced countries: • Technological externalities • The presence of monopoly profits in highly concentrated oligopolistic industries
Sophisticated arguments for Activist Trade policy Technology and Externalities e Externalities Firms in an industry generate knowledge that other firms can also use without paying for it In high-tech industries firms face appropriability problems Example: In electronics. it is common for firms to reverse engineer" their rivals designs Copyright C 2003 Pearson Education, Inc Slide 11-5
Copyright © 2003 Pearson Education, Inc. Slide 11-5 ▪ Technology and Externalities • Externalities – Firms in an industry generate knowledge that other firms can also use without paying for it. • In high-tech industries firms face appropriability problems. – Example: In electronics, it is common for firms to “reverse engineer” their rivals’ designs. Sophisticated Arguments for Activist Trade Policy