IPIC

1
IPIC 7

• The New Trade Theory

By Frederique, Olivier, Mel, Alan, Cher Pong and
Konstantin
Based on Vanessas work
2
All wrong
Comparative advantage
increases trade
from which EVERYBODY gains

• But Global trade seems to be incestuous
• 40 of North American trade is within North
  America
• 70 of European trade is within Europe

3
How come?

• Markets (like life) are not perfect
• Imperfect competition (monopolies, oligopolies)
• Economies of scale (barriers of entries)
• Differentiated goods (not everything is
  commodity)
• It is not a zero sum game there are gains
• Competition (will bring prices and market power
  down)
• from Economies of scales (internal and external)
• from product varieties (more choices for the
  consumer)
• from input varieties (spillover gains for the
  producer)
• from rationalization (only the good survive)

4
The case for state intervention?

• New Theory of Trade
• Rent (higher returns\extra profit)
• External Economies (social outcomes, national
  prestige)
• This leads us to a case for government
  intervention (tarrifs, subsidies) or does it...
• Counter-arguments for protection

5
One more thing !!!!

• Dont forget the White Party tonight
• At Severine and Frederiques place
• .Vanessa might come