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Figure 2.1
Home firm
decision tree
Firm in Home
serve foreign markets / source from abroad?
no
yes, source from abroad
yes, serve
foreign market
Stay
domestic
Export or
local production?
Import or
local production?
export
local
production
Export
local
production
Multinational activity:
horizontal
Multinational activity:
vertical
import
Import
triggers intra-firm trade
Two types of trade: intra-firm
and inter-firm
Two types of multinational activity:
horizontal and vertical
Consisting of trade in final goods,
services, and intermediate goods
Multinational = firm owning and controlling
value adding activities in two or more countries
Fig. 2.2 Horizontal and vertical multinational activity
Country B
Country A
Multinational
(producer)
FDI
Horizontal
multinational
(market seeking)
Foreign
subsidiary
(producer)
Finished
products
Finished
products
Market A
Market B
Finished
products
Components
Vertical
multinational
(efficiency seeking)
FDI
Multinational
(producer,
marketer)
Finished products
Foreign
subsidiary
(assembler)
Figure 2.3 US export shares in 2010
US export shares (%), 2010
Africa, 2.2
Canada+Mexico,
32.2
OPEC, 4.3
Other, 6.1
S+C America,
10.8
European Union,
18.8
Pacific Rim, 25.5
Source: US census Bureau, own calculations
Figure 2.4 A country’s balance of payments
The balance of payments
Current account
Goods
Trade balance
Services
Income
Current transfers
Capital and financial account
Capital account
Financial account
Direct investment
Portfolio investment
Other investment
Reserve assets
Source: van Marrewijk (2012, p. 411)
Figure 2.5 Current
account balance; % of
GDP, 1980-2012
United States
Malaysia
Japan
6
20
4
15
2
10
0
1980 1985 1990 1995 2000 2005 2010
Philippines
5
0
1980 1985 1990 1995 2000 2005 2010
-2
-4
-5
-6
-10
-8
-15
Netherlands
Germany
Australia
12
12
10
10
8
6
China
8
6
4
4
2
2
Source: based on data from World
Development Indicators online
(1980-2010) and The Economist,
June 9, 2012, “Trade, exchange
rates, budget balances, and interest
rates” (2012 estimate).
0
1980 1985 1990 1995 2000 2005 2010
-2
-4
0
1980 1985 1990 1995 2000 2005 2010
-2
-6
-4
-8
-6
Figure 2.6
FDI flows,
2005-2011
b. FDI outflows; US $ bn, 2006-2011
a. FDI inflows; US $ bn, 2006-2011
2000
2000
transition
transition
1500
1500
1000
developing
1000
developing
500
500
developed
developed
0
0
2006
2007
2008
2009
2010
2011
2006
2007
2008
c. FDI flows into developing economies; US $ bn, 2005-2011
450
greenfield
400
M&A
350
Source: based on data
from UNCTAD, World
Investment Report
2012; developed =
developed economies;
developing =
developing
economies; transition
= transition
economies.
300
250
200
150
100
50
0
2005
2006
2007
2008
2009
2010
2011
2009
2010
2011
Figure 2.7 Value
added export
(VAX) as a share
of GDP; 1995
and 2008 (%)
Source: based on World
input output Database
(WIOD), see wiod.org.
Value added export (VAX) to GDP ratio; 1995 and 2008 (%)
Ireland
Czech Republic
Hungary
Belgium
Netherlands
Taiwan
Australia
Sweden
China
Germany
Denmark
Finland
South Korea
Poland
Canada
Russia
Indonesia
United Kingdom
Italy
Austria
Portugal
Mexico
France
Spain
India
Japan
Turkey
Greece
Brazil
United States
-10
VAX/GDP 1995
change 1995-2008
0
10
20
30
40
50
Figure 2.8 Value
added distributon
of an Apple iPad,
2011
Value added distribution of an Apple iPad
15%
distribution
and retail
31%
S Korea
profits
costs of inputs:
materials
7%
5%
other
24%
5%
2%
2%
Apple profits
2%
1%
30%
Source: The figure is
based on data provided
by Linden et al (2009,
2011). See also The
Economist January 21,
2012.
Unidentified profits
Costs of inputs: Non-China labor
Non-Apple U.S. profits
Taiwan profits
Cost of inputs: China labor
Japan profits
Figure 2.9 Global net capital flows; average for 15 countries, 1870-2010
Net capital flows; current account (% of GDP, abs. value)
6
5
4
3
2
1
0
1870- 1890- 1914- 1919- 1927- 1932- 1940- 1947- 1960- 1974- 1990- 20011889 1913 1918 1926 1931 1939 1946 1959 1973 1989 2000 2010
Source: see Table 2.11; average includes countries listed in Table 2.11 plus Denmark, Finland, the Netherlands,
Norway, Spain, and Sweden.
Figure 2.10 Capital outflows; selected countries (% of national savings
Capital outflows (% of national savings)
60
United Kingdom
capital outflow
50
40
United Kingdom
30
France
20
10
0
1850
-10
Germany
1860
1870
Source: O’Rourke and Williamson (1999).
1880
1890
1900
1910
year
Figure 2.11 Evolution of British and American share in foreign assets
Foreign assets; UK and USA share of total
0.8
share of assets
UK
0.6
USA
0.4
0.2
UK
USA
0
1825
1850
Source: see Table 2.14
1875
1900
1925
1950
1975 year 2000
Figure 2.12 Net private financial flows to developing economies; $ bn, 19922009
Net private financial flows to emerging and developing economies; $ bn, 1992-2009
200
D Asia
150
C&E Eur
D Asia
100
L Am
50
SSA
0
1992
-50
1994
1996
1998
CIS
2000
2002
2004
2006
2008
2010
CIS
-100
Source: IMF, World Economic Outlook database; D Asia = Developing Asia; L Am = Latin America & Caribbean;
C&E Eur = Central & Eastern Europe; CIS = Commonwealth of Independent States; SSA = Sub-Saharan Africa.