International Political Economy John Lee Department of Political Science Florida State University

Comparative Advantage Countries should produce goods using abundant factors (i.e. countries should only produce what their good at producing). – Reduces costs for individuals in all countries, since all countries are producing goods efficiently. →If US auto industry is inefficient, US should not produce cars anymore.

Free Trade Free Trade – No restrictions on international commerce. – Promotes comparative advantage.

Protectionism Protectionism - Designed to protect inferior domestic industries from the pressure free trade places on them. Factor – a type of resources (e.g. land/labor).

Heckscher-Ohlin (HO) Model Countries export goods made with abundant factors, and import goods made from scarce factors. Stolpher-Samuelson Theorem – Acts of protectionism always benefit industries which use scarce resources.

Impediments to Free Trade 1.Organized labor forces. – If a group of people within a factor/industry are organized they can more efficiently lobby the government. 2.Democracies – Democracies respond to their citizen’s desires, even if they are short-sighted. – Within democracies divide government can promote protectionism. If government is unified, President can ignore other party’s demands, if divided the President must give in to both his/her party’s demands as well as the opposition party’s demands.

Impediments to Free trade 2.Democracy (cont.) – Even if the public wants free trade, the government masks protectionist policies as other types of policies. So “safety protections” can equate to acts of protectionism (i.e. US will only import apples that have passed USDA star inspection).

International Influences & Trade 1.Military Conflict – Some speculate that military conflict reduces trade. However research indicates that only the highest levels of interstate conflict reduce trade between countries. 2.Allies – Allies are more likely to trade with one another. 3.Joint Democracy/Autocracy – If two states share similar institutions, they will trade more with one another. – Market Protecting Institutions.