Download International Trade

International Trade
Mgmt. 418
Chapter 1
The World of International Economics
The importance of international trade to the economic
health and overall standard of living of countries is very
clear today.
International trade had been very important all the time, in
the past, too.
We examine how international transactions influence
social welfare, income distribution, employment,
growth, price stability, and public policy.
The Nature of
Merchandise Trade
Since 1970’s, world trade surpassed world
merchandise production.
Growth in world production and trade:
The Gegraphical
Composition of Trade
In terms of major economic areas,
industrialized countries dominated world
trade until 2000.
In the last decade, in international
merchandise trade the share of West is
reduced and the share of Developing
countries increased.
Leading exporters and importers in
world merchandise trade (1999):
Exporters
value
%
Importers
value
%
(bn $) of world trade
(bn $) of world trade
EU
798.6
18.9 US
1059.9
23.6
US
695.0
16.4 EU
851.2
18.9
Japan
419.4
9.9 Japan
310.7
6.9
Canada
238.4
5.6 Canada
220.2
4.9
China
194.9
4.6 Hong Kong 181.7
4.0
Hong Kong 174.8
4.1 China
165.7
3.7
Korea
144.2
3.4 Mexico
148.2
3.3
Exports and imports by
region:
Exports
2000-2005 2004 2005
4.5
9.5 6.0
1.5
8.0 6.0
7.0
13.0 8.5
3.5
7.0 3.5
3.0
7.0 3.5
8.5
13.0 4.5
8.5
14.5 10.0
2.5
10.5
0.5
6.5
14.5
7.5
Imports
2000-2005 2004 2005
World
5.0
10.5 6.0
N. America
4.0
10.5 6.0
S. & C. America 4.5
19.0 14.0
Europe
3.0
7.0 3.5
EU (25)
2.5
6.5 3.0
CIS
15.5
16.0 18.0
Asia
8.0
14.5 7.5
Japan
3.5
7.0 2.5
Six EA traders 4.5
14.0 5.0
Geographical destination
of Exports (2005):
North America
South and Central
America
Europe
CIS
Africa
Middle East
Asia
Imports value (bn $)
2,290
297
4.573
216
253
330
2,881
Leading-country
merchandise exporters and
importers (2007):
Exporters value share % changeImporters value share %change
US
456.4 13.9
15
US
335.9 10.9
9
UK
273.0 8.3
18
Germany 250.5 8.1 15
Germany 205.8 6.3
15
UK
194.1 6.3
13
France 136.7 4.2
16
Japan
148.7 4.8
11
Spain
128.3 3.9
21
China
129.3 4.2
29
Japan
127.1 3.9
10
France 124.1 4.0
16
China
121.7 3.7
33
Italy
118.3 3.8
21
Italy
110.5 3.4
13
Spain
98.4 3.2
26
India
89.7 2.7
20
Ireland
94.5 3.1 20
Ireland
89.0 2.7
30
Netherland86.8 2.8 10
Netherlands87.5 2.7
9
Korea
82.5 2.7
21
Hong Kong 82.7 2.5
14
Canada 80.3 2.6
12
(China)
Belgium
75.5 2.3
India
77.2 2.5
22
The commodity composition
of world trade (%):
ISM-ex
Imports
Exports
1980
2004 1980
2004
31
26
29
14
(industrial supplies
And materials)
Capital goods
Consumer g.
Autos
Other
34
8
8
20
40
13
11
12
13
14
11
43
10.7
15
9.4
23
25
15
23
Trade as
% of GDP
9.8
Growth in world
production and trade (%):
Production
All
Agriculture
Mining
1963-73
6.0
2.5
5.5
Manufacturing 7.5
Exports
All
9.0
Agriculture 14.0
Mining
7.5
Manufacturing 11.5
1980-85
1.7
2.9
-2.7
2.3
2005
2.5
0.5
1.0
3.5
2.1
1.0
-2.7
4.5
6.0
5.5
2.5
7.0
World Trade in Services
The trade in services is increasing rapidly.
The share of service production in GDP of
many industrialized countries is
increasing, as well. For example,
services account for 72 % of GDP in the
USA, 56 % in Canada, 70 % in
Netherlands, 66 % in the UK, 61 % in
Germany, 71 % in France, and 60 % in
Japan.
International Standard Industrial
Classification (ISIC) system
Categorizes services as; wholesale and
retail trade, restaurants and hotels,
transport, storage, communications,
financial services, insurance, real estate,
business services, personal services,
community services, social services, and
government services.
International trade in
services
This category broadly consists of; commercial
services, investment income, and government
services.
The nature of trade in “services” is such that it is
extremely difficult to obtain accurate estimates
of the value of these transactions.
Many service transactions are not observable,
hence they are sometimes referred as
“invisibles”.
Liberalization of trade in
services
Mainly industrialized countries advocated
the liberalization of services trade, like
banks, financial services, insurance,
telecommunications sectors to open up
to foreign firms.
In 1996, telecommunications sector was
liberalized by WTO.
The changing degree of
interdependence
The relative size of trade is measured by
comparing the size of a country’s exports with
its GDP.
Increases in export/GDP ratio indicates that a
higher percentage of output of final goods and
services produced within a country’s borders is
being sold abroad.
It indicates a higher interdependence.
Exports could be raw materials, intermediary
goods, semi-finished goods, finished goods,
services, and/or capital goods
Dependence on exports
As dependence on exports increase, the
prosperity of importing countries become
important for the exporting country.
So dependence requires adjustments and policy
coordination among the trading countries.
This situation leads to economic integrations in
diferent regions of the world; such as, NAFTA,
EU, ECOWAS, ASEAN, GCC, etc.