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James Fortson




INTERNATIONAL TRADE
INTRODUCTION TO GLOBALISATION




TRADE
ABSOLUTE ADVANTAGE
When one country/firm specialises in the production of one good over another ­ there is a benefit of trade for
each.

Problems:

Trading costs: Transport costs, tariffs, exchange rates, logistical issues which increase firms' costs of
production.
Good must be…

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James Fortson




Problems:
Consumers like choice.
You assume that both are homogenous products, but there are different brands ­ consumer tastes and brand
loyalty. Consumers will only buy (and import) something they like.
Constant returns to scale.
In reality there are economies and diseconomies of scale. If you produce more…

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James Fortson




To promote domestic standards (of e.g. food Could widen the inequality gap since it is often
safety, the environment, and labour market the developed countries that form trading
conditions. blocs.
To raise revenue.




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