ECONOMY AND TRADE

Trade is one of the most important issues for the economy. The birth of trade, different perspectives on trade and a lot of information about trade models are included in this article of My Economy Guide. If you haven’t read our previous articles before this full article,  What is Economy?  and  Production Factors  .

BIRTH OF FREE TRADE

Firstly, it will be more accurate to start briefly from the birth of trade in general. Trade has existed since humanity existed. At first this was a simple exchange, but the strengthening of the administrations, the development of civilization and the trade of different goods between countries accelerated the commercial development. This development of trade has led to the emergence of the merchant class.

Mercantilism

Mercantilism had a very important role in the 17th and 18th centuries, and especially in Europe. According to Mercantilism , if a country imports more than its exports, it becomes an asset and therefore its people become an asset. At the same time, according to this concept, the more valuable resources the country possesses, such as gold, the more wealthy this country is. Thus, the European geography turned to cheap underground resources and entered into a great competition to convert and sell the obtained resources into export products. But Mercantilism gave birth to a flawed system. Not every country could export more than imports. Not everyone could win in this race, and as a result, this imperfect understanding disappeared over time.

FREE TRADE

The Scottish philosopher Adam Smith has an important place in the end of mercantilism. Adam Simith argued that a country should produce what it can produce best and sell it in free trade . Thus, cheap resources will be imported if necessary, but the country and society will be enriched with this system. Speaking of this, we need to better explain the concept of Üstün Absolute Superiority daha.If a producer is able to produce more products faster and more than others, it is called an economic superiority for the producer.Another economic concept is “Comparative Advantage”. If a producer produces its product at a lower opportunity cost than another manufacturer, it has an economic “Comparative Advantage..

Let us exemplify these two concepts in detail. Ahmet can collect one basket of fruit in one hour, while Mehmet can collect two baskets of fruit in one hour. In this case, absolute superiority is Mehmet. However, in this hour, both Ahmet and Mehmet can afford a basket of fruits. In this case, Ahmet cannot carry out a basket of fruit while he is storing a basket of fruit, while Mehmet cannot carry out a basket of fruit while he is storing a basket of fruit. While Ahmet’s opportunity cost for fruit casing is a basket of fruit, Mehmet’s opportunity cost for this job is two baskets of fruit. The result is that Ahmet does casing and Mehmet does fruit picking.

INTERNATIONAL TRADE

Trade with people in other countries is international trade. Mutual benefits and benefits. Before the Second World War, countries were trying to protect their economies and trade with bilateral agreements because the benefits of free trade were not understood. The creation of the IMF and the World Bank, the formation of the General Agreement on Tariffs and Trade (GATT) and the transformed version of GATT in 1995 The benefits of free trade with the World Trade Organization were widely seen and rapidly free trade spread throughout the world.

INTERNATIONAL TRADE OBSTACLES

  • Customs Duties
  • quotas
  • embargoes

Customs duties are used to increase government revenue or to support a business line. For example, the US steel industry has been far less affected by cheap foreign competition with the support of customs duties. However, the increase in customs duties does not actually increase the state earnings, because the people buy less expensive products. At the same time, customs duties prevent competition and inefficiency.Quotas are limits for trading. In the 70s, imported cars were quotaed in the US to support local car brands and manufacturers. The result was higher prices and poor quality of cars. Later, foreign brands established a factory in the US and overcame the quota problem so that the competition for domestic producers reached a much higher level. Embargoes are commercial prohibitions used to punish or intimidate another country.

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