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    1 Introduction To The Issues804

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    1 Introduction To The Issues804

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    Noluyo Ya ¿ Yetişkin İletişim
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    Introduction to the Issue

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    1 Introduction To The Issues804

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    Noluyo Ya ¿ Yetişkin İletişim
    Introduction to the Issue

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    RAZ yee 1 INTRODUCTION TO THE ISSUES 1. Introduction 2. The importance of fee trade 2 Thethearyofeomparatve advantage 5: Te problems with te batie mode, Te aterentstages of iteration inrodieon 2. Freed read castor ion 4. Economic, monetary and polka ion . Understanding the integration procees 1 The decentralined model Conclusions Further reading A. INTRODUCTION “This book is about the free movement of good, persons, services, and capital. Ir focuses principallyon therales interfering with novernent from one Member State to another. To 2 lesser extent, tao examines the rlesregulating those producers or people wishing to {enter the European Union The aim ofthis chapter isto place these roles context. Why bis the EU set about this policy of acing frce movement? Who Benes, and eho loses? What re the comdiiona necesary for fee movement? And what i the ultima objective of such policies To bein wth we star by examining the age-old question, why is fretrade important In the interests of maintaining the economic, polities and social {ntagity of the mation state, hy nt sraply seal of national bordet, keep out foreign 0008, and protect national industriesard national obs? ‘ INTRODUCTION B. THE IMPORTANCE OF FREE TRADE 1. INTRODUCTION The benefits of fee trade can be semmariredbrefly—free trade allows for specaiza Tos speltzation lads to comparative advantage. and comparative advantage leads tu egotomies af scale which maximize consumer welfare and ensure the most ficient tas of wodaide resources, In hisfamous treatise on the Wealth of Nations the els ‘at ecomomist Adan Smith noted tithe maxim of every prudent master of family, seere to attempt to make at home what i il cost him more ta make than 10 buy What i pradenee inthe conduct of every priate family, can scare be folly i that of reat Kngom’ Two hundred years Inter, the Leuwiler report? prepared for GATT ‘lected seater sentiments: ‘A fomer may know how to sew anda tallor may know Fouoraise chickens but each can produce moreby concentrating on doing what each pa do most efliintly Since rede allows counties to concentrate on what they can do festand, sce no two countries areexactl alikein natural resources climate, or work: rate hove diflewenccs give each country a comparative advantage ovr the others in the same products Trade ranslates the ndvidual advantages or many counties into maximum productivity forall 2, THE THEORY OF COMPARATIVE ADVANTAGE the theory of comparative advartage was developed hy Ricanto in 1817" using the crample of wine and cloth prodaction in the UK and Portal Jackson explains the Sheraton ofthe mode inthe following terms? In the UK. takes ve hours of labour reread yard of loth and tenboursa gallon of wine: in Portugal takesten hours btlabour ts produce a yard of cloth and six hours a gallon of wine In these citcum tances the UK has an absolute advantage in cloth production and Portugal has an Tivoige advantage in wine production. tn the absence of trade the so-called ‘autarky ace a mix of wine and cloth even though the asc. both coutres will have tr ici better at prodactog cloth snd Portugal better at producing wine, Assuming an vailebity of 90 hours’ Tebour en the tral amount of wine and sloth produced in {he UK snd Portugal 13 yards of cloth and 4 gallons of wine, This is summarized intable L1 Table Absolute advantage autarky ase FE UK Prog Thal Gon Oye ip Bye (Wa 5hes= 50h) $x 10h =30 1) Wine Sethns toalloas (10 bes =40 a the so-called ‘cosmopolitan However iftradeisopened up betweenthe UK and Por case)and each staeisallowed to specialise, then 18 yards of cloth and 5 gallons af wine : Shepeduelagmnuetang iv ias wecansanertaetts ; é ‘Risolute advantage UK Portugal Total sya Os ls asx shes=50hn) ine gallons Sgillons 1S gallons (5x6he5= 90h on this we can se that specialization resin higher otal prustvty Even where one country hasan absoliteadvantage n respect ofboth goods there esti rn advantage in specialization. For example inthe UK, takes five hours of labour to produce a yard of cloth an ten houes to aoduce a gallon of win, while in Portugal it skeen hours of labour to pcoduce a yarlof cloth and ten hours to produce a gallon of wine then, ag assuming 90 hours of labour, table 1.3 shows prod levee in the autarky ese Table 3 Compuratve advantage tacky ese UK Portugal Teal th yds Syd iil Tle (00.5hee= 50k) (5 10hrs= shes) Wine talons salons ‘allom x ohes= 40h (x Whee =a be) urade s opened up between the UK and fortugal then able 14 shoes production levels inthe cosmopolitan cae. 6 vrropuerion ‘Table 14 Comparative avant conmopalita cate) 0K Pert Toul ‘Cloth sya ‘Oya yds lubeshrs—90br Wine ons ellons 9 allons (@210hrs=90 hes ven inthecasofthe UK havinganabsnnte advantage in respectofhoth wine and cloth, there isan advantage forthe twe countries ota il the ato of prodtion costs af the {so products differs. Thus, in the second example gallon of wine in the UK cost two yards of cloth, whereas in Portgal lt costs only one yd of lth ts herelore wort ‘while forthe UK to produce lath and trade it exces for wine. Thus, as Jackson points ‘out it isnot thedtferenceofabolutesdvantages but of comparative advantage ha ives "so guns from international rade. These examples show that with pecialiation comes gesterprouctivityand that timately fee tade should lead in chetper prot forthe Bish and Portuguese con sumer and geeserchice, [apply unl demand ean be brought into equilnram, then otic or allocative efcency willbe maximized (the wants or preferences ofthe various partes wil have bee satisfied tothe greatest posible extent, Putting it another way, the welfare of consumers is manimizod since they spend les oftheir fine resources on buyingthe goods hey need. Ata micro level. employment issecure for workers making ‘loth in the UK and wine in Fortogl eth the iyportant sacial consequences tht fenave from this security Halse means tha emplers shoul pt in place poo errs and conditions of employment in order to retain a skilled workforce who can meet the demand for tele products. Thus, socal benefits will arze as a consequence of fee trae” Indeed going beyond Reeardo, specialization, competition, and acest larger ‘markets should bring the incentive to investi produetion facilities and thus greater conomies of sale The economic benelits of cperating in a wider market were spelled ut in the Spak report drawn up by the heads of delegation tothe foreign alae ministers por tothe signing of the Trea of Rome. They noted that n such a market it would no longer be posible o contizue with outdated modes of production which lead to high prices and low salaries. Instead of maintaining & static positon. enterprise tend he subject to 2 constart pressure to invest im order to develop production Improve qualty. and modernize methods of exploitation, It would be necessary to Progresso stand still” Fre teade products mihér coniequtce of great fmportanes: the two. ation, Portugal and the UK, are now dependent on exch ther fr goods, The prosperity ofthe ‘countries is enhanced, boosting the prospects for peace at home and alo pesce between the tw trading nations countries trading peacefull arcs kay to go to war. This was Monnet vision forthe European Union is alls loth, he wh at 2g 3, THE PROBLEMS WITH THE BASIG MODEL icardo’s model is premised on a station of perfect competition with no state Intervention inthe market Economists make a numberof assumptions about such markets? buyers and sellers act rationally, are numerous, have full information shout products on offer can contract all cost, have sufficient resources to trans fev can enfer and leave the markst wit litle difficulty, and wil carry out the abl fatlons which they agree to perform. Under these assumptions maeketparteipants fould continue ta trade until no gains canbe realized from further exchange. The Aistribution is allocatively efficient: assets ate being employed in their most hi valued wse ‘oF course the real world isnot ike ths: dhe codons of perfect competition do not vst in any market, not jae transnational markets exch ae the EU's, For example in Fovmaton file, tennsaction costs, an the tendency of actors to shirk commitments tye isues i all markets, albeit thatthe problems are exacerbated in the transnational Context. However, there are certain protlem which are asocated with transnational markets which do notalfect national makes inthe same way For example, national ators endo respond to local concert, ignoring the external coms of hee requ tion by generating trade barlers and granting ineiclent subsides. This canbe seen in the following ilstrtion, In the proces of achieving allocative affciency, some, ifnot all, Bish wine makers out of busines, do Portuguese cloth makers. Thi ithe politically and socal dif Fell face of any fee trade regime. In ademcralic society, gvernments, needing to Be re-elected espond to public pressure about the actual or potential los af domestic jobs used by cheap imports, In the abvenceaf any exer restalaag factor they may put rade barriers. So, under pressure fom the Portuguese cloth industy the Portguese {vernment might ry to prevent the impor of Fish cloth o a est imi the quantity {eis lath imported ron the UK ty ising a imited nmber of import cence. These are quanlitative restrictions on tale (QU), Alternatively, the Portagues oveen- ment might ly down quality or other standards forthe cloth sllin Poctgsl or ight allow Portuguese cloth producers to reyster a tade mark. Such steps ae ferred 1 as measures having an effec equivalen to quantitative restrictions (MEE), These 0 clled rnon-tariffbarier (NB) may serve protectionist purposes which would becondemned inafeee trade regime) or they may frther other, mor legitimate, objectives sch as con ‘Any such action taken by the stat might be renfor ties Portuguese ch manufacturers might agree that cey wil supply cth to whole sales who agree to stock only Portuguese loth. Such restrictions will inevitably reduce the gains from free trade The UK government might decide to rtalitebyadopeing cel measures designed to inmpede the import of Portuguese rine. I might impose customs duties (CD) or other

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