Introduction

Welcome to Part 1: Economics of International Trade. This OER discusses various economic concepts and applications of international trade.

Readers gain insight into the benefits of free trade by considering several theories. Despite the benefits of free trade, countries often adopt protectionist policies toward international trade. As such, this OER examines the effects of tariff and non-tariff barriers on the economic well-being of countries and the world. While protectionist policies are shown to be generally harmful, readers will consider some circumstances which can cause countries to be better off with such policies.

Import barriers and other protective measures may prove to be beneficial if countries are able to exercise significant influence over world prices, if external benefits are present in domestic production and employment, and if, in the context of regional economic integration, trade creation is greater than trade diversion and if the dynamic gains of a larger market (e.g., scale economies, increased investment, greater productivity) accrue.

Readers will also learn that the free movement of factors of production, such as labour and capital, can yield economic benefits for individual countries and the world in ways that are similar to international trade in goods and services. Such international movement of factors can be contentious and subject to national restrictions on their free flow, as in the case of trade.

Policies intended to increase exports – dumping and export subsidies – and their economic effects are also addressed. While these policies benefit importing countries, they are inefficient from the standpoint of the world. Accordingly, importing countries can retaliate with anti-dumping and countervailing duties. Such retaliation, however, may provoke retaliation by exporting countries in response.

Lastly, readers will recognize the potential for disputes among countries stemming from national policies toward international trade and factor movement. While mechanisms for the resolution of international disputes exist, the limits of their effectiveness are indicated.

International Trade and Finance – Part 1: Economics of International Trade was developed for use in BUS73000 International Trade and Finance in the International Business Management degree program at Conestoga College.

Features of this OER

Each chapter in International Trade and Finance is introduced with chapter-level Learning Objectives and a Think About It! box introducing the chapter’s main themes, which may include a short YouTube video, a Test Yourself H5P quiz, or a set of Reflection Questions.

Think About It! boxes throughout the chapters give readers the opportunity to explore certain terms and ideas further, such as with videos or interactive H5Ps.

Let’s Explore and Review boxes introduce external resources to help learners explore the foundations of a key concept or learn more about it.

Did You Know? boxes share interesting stories or supplemental information with readers.

Each chapter ends with a Chapter Summary based on the chapter’s Learning Objectives and gives readers a chance to assess their learning with Check Your Understanding H5P quizzes.

Each part includes a complete Glossary, with pop-up definitions linked to terms used in context.