Reflection and Application Report
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The Impact of Trade Policies
- Ghana
- 1970
- GNP/capita
- $250
- 1998
- GNP/per capita
- $390
- GNP Growth/year: 1.5%
- Shift from productive uses (cocoa) to unproductive uses (subsistence agriculture).
- GDP /(PPP) $2,500 in 2010
- Korea
- 1970
- GNP/per capita
- $260
- 1998
- GNP/per capita
- $8,600
- GNP Growth/year: 9%
- Shift from non-comparative advantage uses (agriculture) to productive uses (labor-intensive manufacturing).
- GDP /(PPP) $30,000 in 2010
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- 1st British African colony to win independence (1957).
- Nkrumah espoused pan African socialism.
- High tariffs.
- Anti-exporting policy.
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Economic Development in S Korea
- 5th largest export economy (2016)
- Exports as a percentage of GDP increased from 25.9% to 56.3% in 2012. (42% in 2016)
- Exported $515B and imports $398B (2016)
- Top exports:
- Integrated Circuits ($68.3B)
- Cars ($38.4B)
- Refined Petroleum ($24.8B)
- Passenger and Cargo Ships ($23B)
- Vehicle Parts ($20B)
- Top export destinations are: China, US, Vietnam…
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How did S Korea’s Economy Develop So Quickly?
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| 2018 World Bank Doing Business Rankings | ||||
| South Korea | United States | Japan | China | |
| Ease of Doing Business Rank | 4 | 6 | 34 | 78 |
| Starting a Business | 9 | 49 | 106 | 93 |
| Getting Electricity | 2 | 49 | 17 | 98 |
| Getting Credit | 55 | 2 | 77 | 68 |
| Trading across Borders | 33 | 36 | 51 | 97 |
| Enforcing Contracts | 1 | 16 | 51 | 5 |
| Resolving Insolvency | 5 | 3 | 1 | 56 |
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S K dominates in the ease to start a business and enforcing contracts. play a sig role in encouraging investment, production, communication and eventually, economic growth.
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How did S Korea’s Economy Develop So Quickly?
- An improvement in the bus environment
- Ease of starting a business (rank 9; US rank 49)
- Enforcing contracts (rank 1; US rank 16)
- Both play a significant role in encouraging investment, production, communication, and eventually economic growth.
- Policies incentivizing investment in innovation
- Spending the largest share of its GDP on R&D
- R&D intensity grew 88.5% (1996-2015)
- US only grew 14.4%
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- Kept lowering tariffs on manufactured goods.
- Created incentives to export.
- Reduced quotas.
- Reduced subsidies.
- 1950s: 77% of employment in agriculture. Now 20%.
- Manufacturing GNP went from 10% to over 30%.
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Updated Economic Figures
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| Ghana | S. Korea | |
| GDP (2010) | $2,500 | $30,000 |
| GDP growth rate (2010) | 5.7% | 6.1% |
| GDP Composition | ||
| Agriculture | 34% | 3% |
| Industry | 25% | 39% |
| Service | 41% | 58% |
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An Overview of Trade Theory
- Free Trade occurs when a government does not attempt to influence, through quotas or duties, what its citizens can buy from another country or what they can produce and sell to another country.
- The Benefits of Trade allow a country to specialize in the manufacture and export of products that can be produced most efficiently in that country.
- The Pattern of International Trade displays patterns that are easy to understand (Saudi Arabia/oil or China/crawfish). Others are not so easy to understand (Japan and cars).
- The history of Trade Theory and Government Involvement presents a mixed case for the role of government in promoting exports and limiting imports. Later theories appear to make a case for limited involvement.
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