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According to the theory of comparative advantage, trade barriers are detrimental to the world economy and decrease overall economic efficiency. Most trade barriers work on the same principle: the imposition of some sort of cost (money, time, bureaucracy, quota) on trade that raises the price or availability of the traded products .
The logic of formal trade agreements is that they outline what is agreed upon and specify the punishments for deviation from the rules set in the agreement. [1] Trade agreements therefore make misunderstandings less likely, and create confidence on both sides that cheating will be punished; this increases the likelihood of long-term cooperation ...
Strategic trade theory suggests that in some industries global economic interaction gives rise to zero-sum competition over the excess returns available in oligopolistic industries. [ 6 ] In the absence of intervention by any government, the firm that is the first to enter a particular industry will win and by doing so will deter entry by ...
Economic interdependence is the mutual dependence of the participants in an economic system who trade in order to obtain the products they cannot produce efficiently for themselves. Such trading relationships require that the behavior of a participant affects its trading partners and it would be costly to rupture their relationship. [ 1 ]
Regionalism, or Regional Trade Agreements (RTA), are trade policies and agreements that are crafted by the nations in a region for the purposes of increasing international trade in the area. RTAs have been described by supporters as a means of increasing free trade with the goal of eventually merging into larger, either bilateral or ...
In 1947, the most economically prominent nations signed the multilateral General Agreement on Tariffs and Trade (GATT), whose main goals were to reduce tariffs and other trade barriers as well as eliminate discriminatory treatments between signatory countries. After gradual rounds of negotiations, more countries were integrated and tariffs were ...
International trade theory is a sub-field of economics which analyzes the patterns of international trade, its origins, and its welfare implications. International trade policy has been highly controversial since the 18th century. International trade theory and economics itself have developed as means to evaluate the effects of trade policies.
The OED records the use of the phrase "free trade agreement" with reference to the Australian colonies as early as 1877. [9] After the WTO's World Trade Organization - which has been considered by some as a failure for not promoting trade talks, but a success by others for preventing trade wars - states increasingly started exploring options to conclude FTAs.