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IPPTChap0011.pptxCHAPTER 1:
The World of International Economics
Copyright © 2014 by the McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
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Introduction
International trade and finance have never been more important.
Signs of globalization are everywhere.
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Extent of Markets: factor markets tend to be national in scope, G&S markets international. This really gives rise to Int’l Trade as a field, because if factor markets and G&S markets were international in scope, we’d essentially be studying one economy. If no markets were international in scope there’d be no international trade.
Exceptions: factor that is international in scope: skilled labor. G&S that are not int’l in scope: haircuts, certain foods, etc.
Marketing considerations: steering wheels must be on the right if you want to sell cars in South Africa.
International Trade: Questions
We’ll explore these questions:
What are the effects of trade?
What determines the basis of trade?
What determines the value and volume of trade?
What factors impede the flow of trade?
What happens when policies impede the flow of trade?
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International Monetary Economics: Questions
We’ll explore these questions:
What is a country’s balance of payments?
How are exchange rates determined?
What macroeconomic effects does trade cause?
What makes capital flow between countries?
What policies should countries pursue?
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The Nature of Merchandise Trade
The volume and value of world exports have grown tremendously.
The value of global exports was $17.8 trillion in 2011; it was $2 trillion in 1985.
Over the past 40 years, global trade has grown faster than global production.
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Main point: exports have grown more rapidly than production, indicating an increased reliance on international trade.
Geographical Composition of Trade
North America, Europe, and Asia dominate global exporting and importing.
These regions tend to trade with other countries in the same region.
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Commodity Composition of Trade
In 2010, manufactures comprised 67.1% of trade, with agricultural and mining-related products making up the balance.
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Trade and the U.S.
The U.S. trades the most with our NAFTA partners (Canada and Mexico), followed by the European Union.
Trade with Asia is also very important. China is the second largest trading partner of the United States.
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The U.S. makes up about 31% of global GDP.
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Commodity Composition of U.S. Trade
The U.S. tends to export capital goods and industrial supplies.
The U.S. tends to import consumer goods and petroleum.
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Trade in Services
Over $4 trillion annually (2010).
About 20% of total trade (closer to 30% for U.S.).
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Leading Exporters of Commercial Services, 2010
| Country | Value (billions of $) | Share |
| U.S. | $578 | 13.9% |
| United Kingdom | 274 | 6.6% |
| Germany | 253 | 6.1% |
| China | 182 | 4.4% |
| France | 161 | 3.9% |
| India | 148 | 3.9% |
| Japan | 143 | 3.4% |
| Spain | 141 | 3.4% |
| Netherlands | 128 | 3.1% |
| Singapore | 125 | 3.0% |
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Leading Importers of Commercial Services, 2010
| Country | Value (billions of $) | Share |
| U.S. | $391 | 10.1% |
| Germany | 284 | 7.3% |
| China | 236 | 6.1% |
| United Kingdom | 171 | 4.4% |
| Japan | 165 | 4.3% |
| France | 141 | 3.6% |
| India | 130 | 3.4% |
| Netherlands | 118 | 3.1% |
| Italy | 115 | 3.0% |
| Ireland | 113 | 2.9% |
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The Changing Degree on Economic Interdependence
The relative importance of trade has grown for most countries.
The relative importance of trade for all countries together has also grown.
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Growth in World Goods Production and Trade, 1963 -2010 (average annual
percentage change in volume)
1963-73 1970-79 1980-1985 1985-90 1995-2000 2005-10
Production
All commodities 6.0% 4.0% 1.7% 3.0% 4.0% 2.0%
Agriculture 2.5 2.0 2.9 1.9 2.5 2.0
Mining 5.5 2.5 -2.7 3.0 2.0 0.5
Manufacturing 7.5 4.5 2.3 3.2 4.0 2.5
Exports
All commodities 9.0% 5.0% 2.1% 5.8% 7.0% 3.5%
Agriculture 14.0 4.5 1.0 2.2 3.5 3.5
Mining 7.5 1.5 -2.7 4.8 4.0 1.5
Manufacturing 11.5 7.0 4.5 7.0 8.0 4.0
Growth in World Goods Production and Trade, 1963-2010 (average annual
percentage change in volume)
1963-73 1970-79 1980-1985 1985-90 1995-2000 2005-10
Production
All commodities 6.0% 4.0% 1.7% 3.0% 4.0% 2.0%
Agriculture 2.5 2.0 2.9 1.9 2.5 2.0
Mining 5.5 2.5 -2.7 3.0 2.0 0.5
Manufacturing 7.5 4.5 2.3 3.2 4.0 2.5
Exports
All commodities 9.0% 5.0% 2.1% 5.8% 7.0% 3.5%
Agriculture 14.0 4.5 1.0 2.2 3.5 3.5
Mining 7.5 1.5 -2.7 4.8 4.0 1.5
Manufacturing 11.5 7.0 4.5 7.0 8.0 4.0
Merchandise Exports and Imports by Region , 2011 (billions of dollars)
Value of Exports Share Value of Imports Share
North America $2,283 12.8% 3,090 17.2%
South and Central America 749 4.2 727 4.0
Europe 6,601 37.1 6,854 38.1
Commonwealth of Indep. States 788 4.4 540 3.0
Africa 597 3.4 555 3.1
Middle East 1,228 6.9 665 3.7
Asia 5,534 31.1 5,568 30.9
World $17,779 100.0% $18,000 100.0%
Merchandise Exports and Imports by Region, 2011 (billions of dollars)
Value of Exports Share Value of Imports Share
North America $2,283 12.8% 3,090 17.2%
South and Central America 749 4.2 727 4.0
Europe 6,601 37.1 6,854 38.1
Commonwealth of Indep. States 788 4.4 540 3.0
Africa 597 3.4 555 3.1
Middle East 1,228 6.9 665 3.7
Asia 5,534 31.1 5,568 30.9
World $17,779 100.0% $18,000 100.0%
Regional Structure of Exports, 2010
North
America
South and
Central
America
Europe CIS
Africa Middle
East
Asia
N. America
48.7%
8.4% 16.8% 0.6% 1.7% 2.7% 21.0%
So. And C. America 23.9% 25.6% 18.7% 1.3% 2.6% 2.6% 23.2%
Europe 7.4% 1.7%
71.0%
3.2% 3.1% 3.0% 9.3%
CIS 5.6% 1.1% 52.4% 18.6% 1.5% 3.3% 14.9%
Africa 16.8% 2.7% 36.2% 0.4% 12.3% 3.7% 24.1%
Middle East 8.8% 0.8% 12.1% 0.5% 3.2% 10.0% 52.6%
Asia 17.1% 3.2% 17.2% 1.8% 2.7% 4.2%
52.6%
Regional Structure of Exports, 2010
|
|
North America |
South and Central America |
Europe |
CIS
|
Africa |
Middle East |
Asia |
|
|
N. America |
48.7% |
8.4% |
16.8% |
0.6% |
1.7% |
2.7% |
21.0% |
|
|
So. And C. America |
23.9% |
25.6% |
18.7% |
1.3% |
2.6% |
2.6% |
23.2% |
|
|
Europe |
7.4% |
1.7% |
71.0% |
3.2% |
3.1% |
3.0% |
9.3% |
|
|
CIS |
5.6% |
1.1% |
52.4% |
18.6% |
1.5% |
3.3% |
14.9% |
|
|
Africa |
16.8% |
2.7% |
36.2% |
0.4% |
12.3% |
3.7% |
24.1% |
|
|
Middle East |
8.8% |
0.8% |
12.1% |
0.5% |
3.2% |
10.0% |
52.6% |
|
|
Asia |
17.1% |
3.2% |
17.2% |
1.8% |
2.7% |
4.2% |
52.6% |
|
Top 10 Merchandise Exporters, 20 11
Value Percentage
Country $, billions Share
China $1,889 10.4%
United States 1,481 8.1
Germany 1,474 8.1
Japan 823 4.5
Netherlands 660 3.6
France 597 3.3
Korea 555 3.0
Italy 523 2.9
Russian Federation 522 2.9
Belgium 476 2.6
Top 10 Merchandise Exporters, 2011
Value Percentage
Country $, billions Share
China $1,889 10.4%
United States 1,481 8.1
Germany 1,474 8.1
Japan 823 4.5
Netherlands 660 3.6
France 597 3.3
Korea 555 3.0
Italy 523 2.9
Russian Federation 522 2.9
Belgium 476 2.6
Top 10 Merchandise Importers, 20 11
Value Percentage
Country $, billions Share
United States $2,265 12.3%
China 1,743 9.5
Germany 1,254 6.8
Japan 854 4.6
France 715 3.9
United Kingdom 636 3.5
Netherlands 597 3.2
Italy 557 3.0
Korea 524 2.9
Hong Kong (China) 511 2.8
Top 10 Merchandise Importers, 2011
Value Percentage
Country $, billions Share
United States $2,265 12.3%
China 1,743 9.5
Germany 1,254 6.8
Japan 854 4.6
France 715 3.9
United Kingdom 636 3.5
Netherlands 597 3.2
Italy 557 3.0
Korea 524 2.9
Hong Kong (China) 511 2.8
Composition of World Merchandise Exports
($, billions), 2010 and 1980
Product Category Value in
2010
Share in
2010
Share in
1980
Agricultural Products $1,362 9.2% 14.7%
Mining Products $3,026 20.4% 27.7%
Manufactures $9,962 67.1% 53.9%
Composition of World Merchandise Exports
($, billions), 2010 and 1980
|
Product Category |
Value in 2010 |
Share in 2010 |
Share in 1980 |
|
Agricultural Products |
$1,362 |
9.2% |
14.7% |
|
Mining Products |
$3,026 |
20.4% |
27.7% |
|
Manufactures |
$9,962 |
67.1% |
53.9% |
U.S. Merchandise Trade by Area and Country , 2011
(millions of dollars and % )
Exports to Imports From
value share value share
Region or Country
European Union $273,280 18.3% $373,216 16.7%
Europe, non-EU 62,307 4.2% 80,387 3.6%
Canada 282,253 18.8% 321,955 14.4%
Mexico 197,777 13.2% 267,572 12.0%
Latin America (not
Mexico)
169,639 11.3% 174,556 7.8%
China 105,180 7.0% 400,529 17.9%
Japan 67,654 4.5% 131,666 5.9%
Other Asia 246,069 16.4% 285,756 12.8%
Middle East 59,497 4.0% 106,699 4.8%
Africa 33,733 2.3% 93,345 4.2%
Total 1,497,389 100.0% 2,235,681 100.0%
U.S. Merchandise Trade by Area and Country, 2011
(millions of dollars and %)
|
|
Exports to |
Imports From |
||
|
|
value |
share |
value |
share |
|
Region or Country |
|
|
|
|
European Union |
$273,280 |
18.3% |
$373,216 |
16.7% |
|
Europe, non-EU |
62,307 |
4.2% |
80,387 |
3.6% |
|
Canada |
282,253 |
18.8% |
321,955 |
14.4% |
|
Mexico |
197,777 |
13.2% |
267,572 |
12.0% |
|
Latin America (not Mexico) |
169,639 |
11.3% |
174,556 |
7.8% |
|
China |
105,180 |
7.0% |
400,529 |
17.9% |
|
Japan |
67,654 |
4.5% |
131,666 |
5.9% |
Other Asia |
246,069 |
16.4% |
285,756 |
12.8% |
|
Middle East |
59,497 |
4.0% |
106,699 |
4.8% |
|
Africa |
33,733 |
2.3% |
93,345 |
4.2% |
|
Total |
1,497,389 |
100.0% |
2,235,681 |
100.0% |
Commodity Composition of U.S. Trade, 2011
(billions of dollars and % )
Exports to Imports From
value share value share
Foods, feeds, beverages $126.1 8.4% $108.2 4.8%
Industrial supplies/materials 517.7 34.6% 783.8 35.0%
Capital goods (non -auto) 491.4 32.8% 513.3 23.0%
Automotive 132.5 8.8% 255.0 11.4%
Consumer goods 176.3 11.8% 516.8 23.1%
Other goods 53.3 3.6% 59.3 2.7%
Total 1,497.4 100.0% 2,235.7 100.0%
Commodity Composition of U.S. Trade, 2011
(billions of dollars and %)
|
|
Exports to |
Imports From |
||
|
|
value |
share |
value |
share |
|
|
|
|
|
|
Foods, feeds, beverages |
$126.1 |
8.4% |
$108.2 |
4.8% |
|
Industrial supplies/materials |
517.7 |
34.6% |
783.8 |
35.0% |
|
Capital goods (non-auto) |
491.4 |
32.8% |
513.3 |
23.0% |
|
Automotive |
132.5 |
8.8% |
255.0 |
11.4% |
|
Consumer goods |
176.3 |
11.8% |
516.8 |
23.1% |
|
Other goods |
53.3 |
3.6% |
59.3 |
2.7% |
|
Total |
1,497.4 |
100.0% |
2,235.7 |
100.0% |
International Interdependence for Selected Countries and Groups of
Countries, 1970 – 2010 (exports as a % of GDP)
1970 2010
Industrialized Countries:
Australia 14% 20%
Belgium 52% 80%
Canada 23% 29%
France 16% 25%
Germany NA 47%
Italy 16% 27%
Japan 11% 15%
Netherlands 42% 78%
United Kingdom 23% 30%
United States 6% 13%
Developing Countries:
Argentina 9% 22%
Chile 15% 39%
China 3% 30%
Czech Republic NA 79%
India 4% 22%
Kenya 30% 26%
Mexico 6% 30%
Nigeria 8% 39%
International Interdependence for Selected Countries and Groups of Countries, 1970 – 2010 (exports as a % of GDP)
|
|
1970 |
2010 |
|
Industrialized Countries: |
|
|
Australia |
14% |
20% |
|
Belgium |
52% |
80% |
|
Canada |
23% |
29% |
|
France |
16% |
25% |
|
Germany |
NA |
47% |
|
Italy |
16% |
27% |
|
Japan |
11% |
15% |
Netherlands |
42% |
78% |
|
United Kingdom |
23% |
30% |
|
United States |
6% |
13% |
|
Developing Countries: |
|
|
|
Argentina |
9% |
22% |
|
Chile |
15% |
39% |
|
China |
3% |
30% |
|
Czech Republic |
NA |
79% |
|
India |
4% |
22% |
|
Kenya |
30% |
26% |
|
Mexico |
6% |
30% |
|
Nigeria |
8% |
39% |
