International Economic Theories and Policies Have a Term Paper

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International economic theories and policies have a double role: to explain and to regulate. On one side, the international economic theories explain the international economical environment where exchanges are produced, as well as general laws that govern this environment. The international economic policies create a regulatory environment, with rules under which these exchanges are produced.

The mercantilist view on trade evoked two main characteristics. One of them referred to the fact that the ideal for of richness was money or precious metals. The second basic idea revolved around the idea of profit, its origin and role. The first characteristic implied the fact that the balance of payment always had to be positive, so as to increase the country's reserve.

The absolute advantage was defined by Adam Smith and referred to the fact that the producer on the international market that could commercialize products that had lower production costs had an absolute advantage regarding all other producers. In this sense, Adam Smith suggested that it would be more profitable to buy from the international market those goods that were produced by foreign producers at lower costs. In this sense, he laid the basis for the liberal current of thought in trade.

The comparative or relative advantage was the central idea of Ricardo's theory of comparative costs of production and sustained the fact that even if a country did not have an absolute advantage, free trade could still be in its advantage, because of a comparative advantage. This referred to the quantity of work being used and to this quantity of work (and time) being relatively less compared to another quantity necessary to produce the same good in another country.

9. The tariff is a catalogue or a list that comprises the products that are subject to duty, as well as the amount of taxation (quotas) for each product.

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The tariffs are of two kinds: simple and compounded. The first category has only one column for all products, no matter their country of origin. The compounded ones have two or more categories of duty taxes and apply to different countries that the respective country has previously signed commercial treaties with.

The quotas are duty import taxes that are perceived as a percentage of the total value of the good. They are also called ad-valorem and refer the value of the good at the frontier. The value of the good is expressed in the national currency at a quotation advised by the IMF.

Export taxes are perceived by the state for national goods that are exported. They have a budgetary motivation, or one of the two others (see below question 11).

Export subsidies are forms of encouragement from the state to national producers. The state agrees to sustain some of the costs of production. The effect is that the producers can in this way become more competitive on the international market because they will be able to practice lower prices.

12. Dumping has several definitions. On one hand, dumping is considered selling on a foreign market at a price lower than that practiced at home. Secondly, dumping can also be defined as selling below your costs of production (in the sense that it would actually contravene with the main economical motivation, that of having profit). Thirdly, dumping can also be defined as selling below a generally agreed on international price for the respective good. Price discrimination generally refers to selling outside the most favored nation clause that is at different prices for different countries within the WTO system.

13. The commercial policies of the United States are a combination between liberalism and protectionism.….....

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