+ Introduction to Trade HESO 449B – 002 Aneil Jaswal

+ Learning Outcomes 1) Understand what is meant by the term trade 2) Understand the history and reasons behind trade 3) Understand trade in the context of development – begin to see potential connections to health 4) Understand the issues that are being debated, in the context of globalization

+ What is Trade? Exchange of good and/or services Voluntary -> mutually beneficial Facilitated by the markets Barter Money

+ Who Trades? Individuals Households Firms States

+ Why Trade? specialization and division of labor concentrate on a small aspect of production economies of scale COMPARTIVE ADVANTAGE

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Absolute Advantage (two countries, two products, one production input (labour) 1 roll of cloth1 Bushel of wheat Canada9 hours7 hours (more efficient) India3 hours (more efficient)12 hours If Canada and India trade, both countries can divert labour to the good they produce most efficiently. For example: Canada diverts 100 hours of labour from cloth production to wheat India diverts 100 hours of labour from wheat production to cloth

Absolute Advantage (two countries, two products, one production input (labour) Rolls of clothBushels of wheat Canada (100 hours from cloth production to wheat) -11 rolls (-100 hours divided by 9) +14 bushels (+100 hours divided by 7) India (100 hours from wheat production to cloth) +33 rolls (+100 hours divided by 3) -8 bushels (-100 hours divided by 12) Net gain from trade for Canada and India: 22 rolls of cloth and 6 bushels of wheat

Comparative Advantage (two countries, two products, one production input (labour) 1 roll of cloth1 Bushel of wheat Canada9 hours7 hours Mexico3 hours (more efficient)6 hours (more efficient) Mexico has absolute advantage in cloth and wheat Canada has comparative advantage in wheat If Canada and Mexico trade, both countries can divert labour to the good they produce comparatively efficiently. For example: Canada diverts 100 hours of labour from cloth production to wheat India diverts 50 hours of labour from wheat production to cloth

Comparative Advantage (two countries, two products, one production input (labour) Rolls of clothBushels of wheat Canada (100 hours from cloth production to wheat) -11 rolls (-100 hours divided by 9) +14 bushels (+100 hours divided by 7) Mexico (50 hours from wheat production to cloth) +17 rolls (+50 hours divided by 3) -8 bushels (-50 hours divided by 6) Net gain from trade for Canada and Mexico: 6 rolls of cloth and 6 bushels of wheat

+ History of Trade Silk Road Mercantilism Adam Smith David Ricardo

+ Development of the Modern Trading System Bretton Woods Agreement  International Political Economy Free trade advanced further in the late 20th century and early 2000s: 1992 EU lifts barriers to internal trade of goods and labor 1994 NAFTA 1995 WTO is Born

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+ WTO Created in 1995 After the Uruguay Round GATT (General Agreement on Tariffs and Trade Trade Disputes – mechanism Covers 95% of World Trade Current Round – DOHA Committees Voting System

+ Encouraging Trade Tariff Reductions Reciprocity Non-Discrimination (most favored nation principle) National Treatment Non-Tariff Barrier Reductions

+ INTERNATIONAL TRADE Bilateral Multilateral G7/8,G20 G77

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+ Collapse of Doha US, India and China Agriculture Environment

+ Other Doha Issues Access to patented medicines Trade Related Aspects of Intellectual Property Rights (TRIPS) - On August 30, 2003, WTO members reached agreement on the TRIPS and medicines issue.

+ The Golden Straight Jacket

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+ Fair Trade Social + Environmental Standards Example: Kenyan Farmers

+ Development Agglomeration – Africa left behind Capital Investment – aid for infrastructure...but how about equipment/machinery? Econ theory suggests low capital countries provide high returns… Poorest 49 countries =10% of population = 0.4% world trade

+ IMF Oversees global financial system SAPs – Structural Adjustment Policies…cut health care…

+ Regional Trade Agreements Moving Away from Global? NAFTA, EU, ASEAN

+ Free Trade Debate For Economic Gains  growth, increase avg income Interdependence  peace Freedom Against nationalism Share culture/knowledge

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+ Free Trade Debate Against Against development Cost of distribution Harm young industry Uneven wealth distribution Excess dislocation Dependency theory Sovereignty Instability

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+ On the Global Economy