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The main objective of this paper is to reassess the Federal Reserve System's "crisis prevention" responsibilities which have emerged recently from the shadows of the 1930s. This requires clarification of the distinction between defensive and dynamic open market operations (Sections I and II); assessment of the implications of recent changes in open market procedures (Section III); analysis of open market operations during the 1966 "crunch" (Section IV); and evaluation of the far-reaching changes in the discount mechanism recently proposed by the Federal Reserve (Section V). [ABSTRACT FROM AUTHOR]

In this article, the author presents a reply to the criticism of his paper "An Economic Justification of Protectionism," published in the November 1958 issue of "Quarterly Journal of Economics." A number of comments on the paper which have reached the author orally or in writing seem to take as an article of faith that free trade is the optimum policy even where the conditions on which free trade is posited do not exist. They advance arguments which the writers would have recognized as invalid if their desire to support the sacred principle had not dulled their critical scrutiny. Researcher Anthony Y.C. Koo's comments, while the most serious of the lot, seem to the author not entirely free from this defect. One of the reasons for suggesting that Koo's data do not invalidate the original argument is that a comparison between the United States and other countries quite different from the one he made seems equally forceful. Even if used without the obviously necessary adjustments, in comparison with actual wage data they show that in the United States a very large farm-nonfarm differential in real wages exists.

This paper is a limited attempt to determine how tariffs and subsidies affect decreasing-cost, import-competing industries where the economy under consideration plays a relatively major role in world trade. The approach is similar to that used by Corden in that it is partial equilibrium analysis. Subject to all the limitations of partial analysis, among the conclusions (where the import-competing industry is of a decreasing-cost nature) are (1) an optimum tariff can exist such that through subsidization there will be domestic production and imports, not all of one or the other; (2) the imposition of tariffs may actually cause prices in the import-competing industry to fall; (3) in other cases it is possible to achieve a social optimum by producing all of the good domestically and subsidizing domestic production; and (4) a social optimum can be achieved by subsidizing imports. [ABSTRACT FROM AUTHOR]

This article presents an examination of how markets in Taiwan present new opportunities for American businesses. The author discusses the efforts made by the U.S. to increase their number of trading partners in Europe and the Far East. The author examines the investment climate of Taiwan, discussing the advantages and disadvantages that the country presents when compared to other underdeveloped countries. He examines the country's economic growth, industrial development and overall political climate. He discusses Taiwan's government policy for foreign investment and various import and export restrictions.

This article analyzes the possibility of substituting factor mobility by commodity trade. In this paper, it will be demonstrated that in the case where factor prices differ between countries in closed economy equilibrium, and where such difference is due to different factor endowment ratios in the two countries, factor-price equalization is consistent with an infinite number of combinations of factor flows. The analysis begins by considering the case of free trade in goods under factor immobility assumptions when such trade is related to differences in relative factor endowments among countries.

Presents a paper which investigates the impact of the growth of state trading enterprises in the Partner States on the operation of the East African Common Market. Details of the framework developed which is applied to the common market and state trading enterprises in East Africa.

The article presents abstracts of the papers based on the industrial relations legislation, that were read on May 15, 1971 at the conference held at the Polytechnic of Central London. One of the papers discussed here is titled "The Evolution of U.S. Industrial Relations Legislation." Until almost the end of the 19th century American public policy on labor was expressed mainly through common law doctrines developed by state courts, inherited, to a large extent, from Great Britain. Two of the most important cases historically are Philadelphia Cordwainers 1806, in which a combination of working men to raise wages was held to be illegal as a violation of free trade; and Commonwealth v. Hunt 1842, when the state court of Massachusetts held that a combination was not illegal in itself, but only if criminal or unlawful purposes were involved which did not merely include attempting to raise wages. The first statute at the federal level was the Sherman Anti-Trust Act of 1890. In spite of debate as to whether it was intended that it should be applied to labor unions, it was and proved to be a considerable handicap.

Under the usual neoclassical assumptions a small trading nation will maximise the international value of its domestic production by following a policy of free trade. Any interference with the free-trade production pattern will result in a loss of real income which is termed the production cost of whatever constraint has led to the uneconomic allocation of resources. This paper explores the costs arising from a policy of trade protection. As is well known, the production cost is the same irrespective of whether the prescribed protective effect is attained via a tariff on competitive imports or by a subsidy paid directly to the producers concerned. Several problems are tackled in this paper. A comparison is made of the general-equilibrium and partial-equilibrium methods of cost calculation. Circumstances are distinguished in which the Corden and Brigden-Young formulae yield identical results. The paper concludes with an improved version of the Johnson model as a means of establishing feasible values for the production cost of protection: separate production functions are postulated for the two commodities, the relative size of the protected sector in the free-trade situation is introduced as a controlled variable, and the cost of protection is calculated as the income loss resulting from a prescribed fractional increase in the protected sector's ouput. The rate of tariff duty required to induce the specified protective effect is also provided in view of its relevance to commercial policy. [ABSTRACT FROM AUTHOR]

THE purpose of this paper is to present estimates of changes in the income terms of trade of a number of developed and developing countries for the years 1950-65 (in most cases) and to compare these estimates with those for changes in the net barter terms of trade, in the quantity of exports and in population. Although the terms of trade have been such an important and, at times, contentious topic of discussion, the net barter terms of trade have usually received a good deal more attention than the income terms of trade. This bias is unfortunate, and can certainly not be justified on the ground that the net barter are more important than the income terms of trade. The first part of the article will summarise some of the main considerations relating to these two concepts.[2] This will be followed by an account of the nature and limitations of the statistics as given in the United Nations Yearbook of International Trade Statistics. The third part presents an analysis of these statistics. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to develop a new approach to the theory of international capital movements. There has been much effort expended on the study of capital movements, but little has been done to develop a general equilibrium framework within which the causes and effects of capital movements can be analysed.[2] This may be the result of the classical premise that factors are immobile internationally, or of the factor-price equalisation theorem, which makes all factor movements (including capital) unnecessary when free trade exists,[a] However, Meade (23) pp. 348-93, has taken great care to emphasise that the conditions for factor-price equalisation may not be met, and Kenen (16) has devised a clever theory of capital and trade which allows for factor-price equalisation for land and labour, but not for capital. Hence, capital flows continue to exist in theory as well as fact, and there is a need for a general theory that illustrates the determination of the equilibrium direction and magnitude of these flows, as well as the causes behind them. [ABSTRACT FROM AUTHOR]

This paper highlights results of the National Bureau of Economic Research's (NBER) research project on exchange control, liberalization and economic development from 1970-1973. Initial adoption of exchange controls was generally an ad hoc response to external events. The optimal resource allocation dictum--that the marginal cost of earning foreign exchange should be equated with the marginal cost of saving foreign exchange--was generally abandoned in favor of saving foreign exchange at all costs. An export-oriented development strategy generally entails relatively greater use of indirect, rather than direct, interventions. There is considerable evidence from the individual country studies that direct intervention may be considerably more costly than is generally recognized. Export rebates, tariffs, surcharges, import entitlement schemes, and a host of other devices are generally employed under quantitative restrictions regimes, and they lead to a wide dispersion in effective exchange rates by commodity categories. The effect of liberalization is often to induce a recessionary tendency rather than the traditionally feared inflationary impact. Even when there is a single domestic price for the imported good, the method of license allocation makes an important difference to resource allocation and income distribution.

Presents a framework based on differential rates of economic growth for the analysis of the relative changes in production structure and per capita income in each member country of the Latin American Free Trade Association and the Central American Common Market. Regional economic integration; Market forces released by trade liberalization; Components of change in aggregate income.

SUMMARY In this paper a simple macro-model of an open economy is presented in order to investigate the relationship between the trade balance and the interest rate. It is shown that under certain conditions the model generates a lag relationship between the two variables. This is consistent with the relationship which J Ürg N iehans found to exist between the Swiss trade balance and its interest rate. With interest-rate sensitive capital movements introduced into the model, fluctuations in the balance of payments can be greater or less than fluctuations in the balance of trade. It is interesting to note that in the case where an internal balance is maintained with a monetary policy fluctuations in the balance of payments are greater than in the case where an internal balance is maintained with a fiscal policy. This conclusion is consistent with M undell's prescription for an optimal mix of monetary and fiscal policy. [ABSTRACT FROM AUTHOR]

The article presents comments of the author on the article "Brazilian Stabilization Program, 1964-66," by Alexandre Kafka. His paper represents an important contribution both to the literature on monetary problems in developing countries and to the economic history of Brazil. One of the more encouraging developments in Brazil and other countries is the extent to which first-rate technicians are playing a major role in policy formation. Kafka's paper indicates an awareness of how monetary policy must be made to fit in with all other economic policies. Although essentially a monetary economist-or what in the current vernacular would be called a monetarist, in approach, Kafka clearly understands that monetary policy does not exist in a vacuum and that the aim of economic policy cannot be defined in monetary terms alone.

This paper compares the average wage levels and employment structure between regions in a free trade precedent in the U.S. The strategy of comparing wage levels and employment structure has become a popular and useful tool for analyzing a variety of inter-regional problems. The paper also suggests that a substantial improvement in employee salary and employment in the country is feasible. The pattern of wage rates in each state is measured in turn by the structure of employment in each U.S. state.

This paper sets out to assess the impact on the United States of establishing a free trade area in manufactured goods and non-agricultural materials among the industrial nations of the West. Specifically, this arrangement implies the abolition of tariffs and quota restrictions within an area encompassing Western Europe, North America, and Japan. The commodities covered are those included in Sections 2-4 (materials) and 5-8 (manufactures) of the Standard International Trade Classification (SITC).[1] However, the unwrought non-ferrous metals (682.1-689.1) are included with the materials rather than the manufactures group.
This paper assesses the effect of a free trade area in the Atlantic Community on the United States. By applying import-demand and export-supply elasticities to price changes resulting from the elimination of tariffs in each 3 digit SITC commodity group, and multiplying the resulting percentage by the respective 1960 trade figures, it derives the impact of an AFTA on trade flows. Added to that are estimates of the effect of quota removal, and of the elimination of European discrimination against the United States. In total, we obtained an increase in U.S. imports and exports of $2.1 and $2.3 billions respectively. [ABSTRACT FROM AUTHOR]

In Latin America today, there exist two regional marketing arrangements, the Latin American Free Trade Association and the Central American Common Market. Neither is the kind of stop-gap, hurried measure so often used in underdeveloped countries for the correction of temporary but recurrent crises. Instead, the two trading arrangements constitute an integral part of Latin America's long run efforts to further development on the basis, to the greatest extent possible, of self-help. It is the purpose of this paper to describe these regional integration programs and to evaluate them in the light of existing controversies at the theoretical level. By Latin America we mean the 20 independent nations south of the Rio Grande. The population is some 200 millions, and it is sometimes overlooked that Latin America has the highest rate of population growth in the world. Average per capita income is difficult to estimate but certainly does not exceed $300 a year. Central America is the area lying geographically between Mexico and Panama and contains five of the 20 Latin American countries. Here live some 11 million people, with a birth rate exceeding that of the region as a whole, but with per capita income approximating only $200 a year. [ABSTRACT FROM AUTHOR]

The article presents a list of books and papers about regional economic groups. The books and papers include "Western European Integration," by Michael Curtis, "Britain and the Common Market," published in "Westminster Bank Review," "Recent Developments in the Social Policy of the European Economic Community," published in the "Common Market Law Review," "French Business Wants Full Common Market Free and Equal International Competition," published in "France Actuelle," and "Tasman Free Trade Area," published in "Review."

It has been shown that free trade is superior to no trade. The consumption possibility curve under autarchy would lie inside the consumption possibility curve under free trade except touching it at one point. Therefore, the situation utility, possibility curve under autarchy would lie inside the situation utility possibility curve under free trade except touching it at one point. The purpose of this paper is twofold. In Section I, it is demonstrated that this relationship does not hold under the assumption that consumer preferences are identical for each individual and the indifference curves which reflect consumer preferences are homothetic. Under this assumption, the situation utility possibility curve under autarchy would lie either strictly inside the situation utility possibility curve under trade or would coincide with it entirely. In Section II, it will be shown that the situation utility possibility curve under autarchy still may lie entirely inside the situation utility possibility curve under trade after we remove the assumption that individual preferences are identical and the indifference curves are homothetic.

The purpose of this paper is to provide empirical answers to questions concerning the trade patterns of Western Europe. Some questions related to impacts of tariff reductions, creation of the European Economic Community (EEC) and European Free Trade Association, enlargement of the EEC in the context of a broader area of free trade and its effect on the level and distribution of trade in Western Europe. The investigation is based upon the simulation of an econometric model estimated for 1953 to 1968 of bilateral trade flows for ten West European countries. The model is specified in a multistage framework combining traditional total import demand equations with share equations explaining the division of the total. The specification of the model provides estimates not only of direct price effects on bilateral trade but also of cross-price effects. Moreover, since the price variables referred in the article are specified inclusive of tariffs, this uses the estimated price coefficients directly to simulate trade patterns under alternative tariff configurations.

The article comments on trade and finance in China in the period 1784-1834. The first contrasts the decline of the great monopolistic companies with the rise of the free trade elements, and the second looks upon the trade as a bilateral buyer-seller relationship. The first covers the rivalries between the European elements, the second provides the basis of interpreting European relations with China. In most studies, a combination of both patterns are used, but always with an eye to the elements of contrast rather than those of similarity. Hence the differences between the great companies and the private traders are seen to work towards the eventual dissolution of the great Companies. In concentrating on the rivalry between the Company and the private traders, and on the deterioration of relations with China, the real significance of the opium trade is often missed. The first point requiring re-emphasis is that opium was the first commodity in over two hundred years of western trade to China which made a substantial impact on the China market, it was one of the main causes for the subsequent reversal of China's trade balance. Until then silver dollars were the main means of payment for the purchase of Chinese products.

The article presents a discussion on multilateral trading. One author focuses on the multilateral world trading system as discussed by economist Folke Hilgerdt. The author regrets that Hilgerdt did not elaborate on the point that the restoration of multilateralism on sound principles would require international planning on an extensive scale. A realistic approach to the problem of restoring world trade requires something more than a mere reiteration of nineteenth century principles of foreign trade policy. Professor Henry C. Simons offers a program of traditional liberalism, to be enforced by a supranational government. Professor Simons represents one school, which believes economists must restore free trade and at the same time restore a minimum degree of freedom in the domestic economy. There is another school of thought, which favors national economic planning after the war and argues that such planning may necessarily entail a control over foreign trade. Economists William W. Lockwood's discussion of postwar trade relations in the Far East impressed the second author as an excellent illustration of the importance of the maintenance of multilateral trade.