Objections to trade
(1) We should pay attention to trade deficit because it means that we are in debted to foreign countries.
There's no real deficit as we trade.
Foreign countries buy American treasury bonds is actually a gift to Americans to consume more.
International transactions are not different from domestic ones.
(2)What makes trades with local strangers so much more virtuous than trading with non local strangers.
Other countries, particularly less developed ones,have lower environmental and labor standards to attract investments.
A lot of researches fail to find the correlation between the location decisions of firms and environmental quality of a country.
Nations with highest environmental standards actually attract most investments.
Then why do firms leave pollution heavens?
High costs and poor security.
Trade is good to environment
(1)It leads to more environmental consciousness.
(2)Specialization allows people to end up producing things in places that have lower environmental impacts.
(3)Trade lets us have excessive income and now we pay more attention to our living environment to improve living standard rather than just survive in a bad place.
The empirical evidence on the relationship between income and spending on the environment is probably the most overwhelmingly robust relationship in economics.
(3)Many people believe low-wage exploitive labor. For example, China's cost advantages stem from exploitation of labor in which people are treated as slaves.
Questions:
1. What's slave labor?
2. Is slave really efficient in manufacturing area? If that was the case, why didn't China become the most prosperous country under the control of Mao?
What makes trade beneficial? Two notions.
(1) Smithian notion
1. Specialization saves time switching jobs. The saving of the time which is commonly lost in passing from one species work to another.
2. People have more time to develop knowledge, the increase of deftness in every particular worker and more chance to invent new machines, which facilitate and abridge labor, enabling one man to do the work of many.
3. People can apply capitals to production of goods.
4. Specialization extends market.
(2)Ricardian notion
Trade reduces cost because of comparative advantage.
Supply&Demand
The world is characterized by transactions costs.
Transactions costs: the cost of negotiating contracts and agreements.
Three types of transactions costs:
(1) Physical costs.
For example: before Internet, physical distance is a major barrier to trade.
(2)Ignorance of opportunity
Information is hard to get
(3)Interference
Barriers to prevent exchanging.
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