Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Key Terms 23 International Trade End Show 23-1 Copyright 2008 The McGraw-Hill Companies Chapter Objectives Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Key Terms End Show 23-2 • The Graphical Model of Comparative Advantage, Specialization, and the Gains From Trade • How Differences Between World Prices and Domestic Prices Prompt Exports and Imports • How Economists Analyze the Economic Effects of Tariffs and Quotas • The Rebuttals to the Most Frequently Presented Arguments for Protectionism • About the Assistance Provided Workers Under the Trade Adjustment Act of 2002 • How the Offshoring of U.S. Jobs Relates to the Growing International Trade in Services Copyright 2008 The McGraw-Hill Companies Some Key Trade Facts • U.S. trade deficit in goods • $517 billion in 2009 • U.S. trade surplus in services • $138 billion in 2009 • Canada largest U.S. trade partner • Trade deficit with China • $220 billion in 2009 • Exports are 13% U.S. output • Dependence on oil LO1 23-3 Some Key Facts Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Key Terms • U.S. Sizable Trade Deficit with China • U.S. Dependence on Oil is Reflected • U.S. has World’s Highest Trading Volume (Exports and Imports) • China a Major Trade Force • International Trade Links World Economies • International Trade is the Center of Policy Debates End Show 23-4 Copyright 2008 The McGraw-Hill Companies Some Key Trade Facts • Principal U.S. exports include: • Chemicals • Agricultural products • Consumer durables • Semiconductors • Aircraft • U.S. provides about 8.5% of world’s exports LO1 23-5 Some Key Trade Facts LO1 23-6 Some Key Facts Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Key Terms Shares of World Exports, Selected Nations GLOBAL PERSPECTIVE Percentage Share of World Exports, 2004 0 Germany United States China Japan France Netherlands Italy United Kingdom 2 4 6 8 10 10.0 8.9 6.5 6.2 4.9 3.9 3.8 3.8 End Show Source: World Trade Organization 23-7 Copyright 2008 The McGraw-Hill Companies 12 Some Key Trade Facts LO1 23-8 Economic Basis for Trade • Nations have different resource • • • LO2 endowments Labor-intensive goods Land-intensive goods Capital-intensive goods 23-9 Comparative Advantage • Assumptions • Two nations • Same size labor force • Constant costs in each country • Different costs between countries • U.S. absolute advantage in both • Opportunity cost ratio • Slope of the curve • Wheat sacrificed per ton of Coffee LO2 23-10 The Economic Basis for Trade (a) United States 45 40 40 35 35 30 30 Coffee (Tons) Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Coffee (Tons) 45 25 20 12 10 A 5 4 Key Terms 5 10 15 18 20 Wheat (Tons) 23-11 20 10 5 End Show 25 15 15 0 (b) Brazil Copyright 2008 The McGraw-Hill Companies 25 30 0 B 5 8 10 15 Wheat (Tons) 20 The Economic Basis for Trade Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word • Self-Sufficiency Output Mix • Specializing Based on Comparative Advantage – Principle of Comparative Advantage • Terms of Trade – 1W ≡ 1C in the U.S. – 1W ≡ 2C in Brazil • Gains from Trade • Trading Possibility Line – Improved Options – Added Output Key Terms End Show 23-12 Copyright 2008 The McGraw-Hill Companies W23.1 Comparative Advantage • Gains from trade • Trading possibilities line • Slope equals terms of trade • Improved options • Complete specialization • More of both goods • More efficient resource allocation LO2 23-13 The Economic Basis for Trade (a) United States 45 C’ 40 40 35 C 25 20 A’ 15 12 10 A 20 c B’ 5 4 W 5 10 15 18 20 Wheat (Tons) 23-14 Trading Possibilities Line 25 10 Key Terms End Show 30 15 5 0 35 Trading Possibilities Line Coffee (Tons) 30 Coffee (Tons) Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word (b) Brazil 45 Copyright 2008 The McGraw-Hill Companies 25 30 0 B 5 w w’ 8 10 15 Wheat (Tons) 20 The Economic Basis for Trade Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word • Trade with Increasing Costs (curve would be concave, not linear) • The Case for Free Trade Key Terms End Show 23-15 Copyright 2008 The McGraw-Hill Companies Supply and Demand Analysis of Exports and Imports Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Key Terms • World Price • Domestic Price • Supply and Demand in the United States –U.S. Export Supply • Export Supply Curve –U.S. Import Demand • Import Demand Curve End Show 23-16 Copyright 2008 The McGraw-Hill Companies Supply and Demand Analysis of Exports and Imports U.S. Aluminum Market (a) U.S. Domestic Aluminum Market Sd 1.50 1.50 Surplus = 50 1.00 1.00 .75 Shortage = 50 .50 50 75 100 125 Quantity of Aluminum (Millions of Pounds) 23-17 Copyright 2008 The McGraw-Hill Companies b U.S. Export Supply a U.S. Import Demand .75 x .50 y Dd 0 End Show c 1.25 1.25 Shortage = 100 Key Terms (b) U.S. Export Supply and Import Demand Price (Per Pound; U.S. Dollars Surplus = 100 Price (Per Pound; U.S. Dollars Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word 150 0 50 100 Quantity of Aluminum (Millions of Pounds) Supply and Demand Analysis of Exports and Imports Canadian Aluminum Market (a) Canada’s Domestic Aluminum Market 1.50 1.50 Surplus = 100 Sd 1.25 1.25 Surplus = 50 .75 .50 0 50 75 100 Dd 125 Quantity of Aluminum (Millions of Pounds) End Show 23-18 s 1.00 1.00 Shortage = 50 Key Terms (b) Canada’s Export Supply and Import Demand Price (Per Pound; U.S. Dollars Price (Per Pound; U.S. Dollars Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Copyright 2008 The McGraw-Hill Companies 150 .75 r Canadian Export Supply a Canadian Import Demand .50 t 0 50 100 Quantity of Aluminum (Millions of Pounds) Equilibrium World Price and Quantity of Exports and Imports Price (Per Pound; U.S. Dollars Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Supply and Demand Analysis of Exports and Imports World Market for Aluminum U.S. Export Supply 1.00 .88 Canadian Export Supply e Equilibrium U.S. Import Demand .75 Canadian Import Demand 0 Key Terms 50 100 Quantity of Aluminum (Millions of Pounds) End Show 23-19 Copyright 2008 The McGraw-Hill Companies W23.2 Trade Barriers and Export Subsidies • Tariffs • Revenue tariff • Protective tariff • Import quota • Nontariff barrier (NTB) • Voluntary export restriction • LO4 (VER) Export subsidy 23-20 Economic Impact of Tariffs • Direct effects • Decline in consumption • Increase in domestic production • Decline in imports • Tariff revenue • Indirect effects LO4 23-21 Economic Impact of Quotas • Decline in consumption • Increase in domestic production • Decline in imports • Quotas do not provide for any government revenue but instead transfer it to foreign producers LO4 23-22 Trade Barriers Sd Sd + Q Price Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Economic Effects of a Protective Tariff or an Import Quota Pd Pt Pw Dd Key Terms 0 End Show a b Q c d Quantity 23-23 Copyright 2008 The McGraw-Hill Companies Consider Tariff Impact Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word • Example of tariff gone awry: Water Intensive California Rice (shortage of water and uncertain future of meeting water needs). “The U.S. government supports domestic rice production through tariffs on imported rice and direct taxpayer subsidies based on production, prices, and historical acreage”.. Key Terms End Show 23-24 Copyright 2008 The McGraw-Hill Companies Trade Barriers • The Case for Protection: A Critical Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Key Terms Review – Military Self-Sufficiency Argument – Diversification-for-Stability Argument – Infant Industry Argument • Counterarguments • Strategic Trade Policy – Protection-Against-Dumping Argument • Dumping – Increased Domestic Employment Argument • Smoot-Hawley Tariff Act – Cheap Foreign Labor Argument End Show 23-25 Copyright 2008 The McGraw-Hill Companies Economic Impact of Quotas • Decline in consumption • Increase in domestic production • Decline in imports • Quotas do not provide for any government revenue but instead transfer it to foreign producers LO4 23-26 Multilateral Trade Agreements • General Agreement on Tariffs and • • • LO5 Trade (GATT) World Trade Organization (WTO) European Union (EU) North American Free Trade Agreement (NAFTA) 23-27 GATT • Three principles: • Equal, nondiscriminatory trade between member nations • Reduction in tariffs • Elimination of import quotas LO5 23-28 WTO • Established by Uruguay Round of • • • LO5 GATT 153 member nations in 2010 Oversees trade agreements and rules on disputes Critics argue that it may allow nations to circumvent environmental and worker-protection laws 23-29 European Union • Initiated in 1958 as Common Market • Abolished tariffs and import quotas • • LO5 between member nations Established common tariff with nations outside the EU Created Euro Zone with one currency 23-30 NAFTA • Agreement between U.S., Canada, • • • LO5 and Mexico Established a free trade zone between the countries Trade has increased in all countries Enhanced standard of living 23-31 Trade Adjustment and Offshoring • Trade Adjustment Assistance Act • Designed to help individuals hurt by • LO5 international trade Offshoring of jobs • Shifting of work previously done by American workers to workers abroad 23-32 Petition of the Candlemakers • Petition of candlemakers asking for • LO5 protection from natural light producers such as the sun Tongue-in-cheek argument supporting the idea of free trade 23-33 Key Terms Some Key Facts The Economic Basis for Trade Supply and Demand Analysis of Exports and Imports Trade Barrier Trade Adjustment Assistance Last Word Key Terms • • • • • • • • • • • • • • labor-intensive goods land-intensive goods capital-intensive goods opportunity-cost ratio principle of comparative advantage terms of trade trading possibilities line gains from trade world price domestic price export supply curve import demand curve equilibrium world price tariffs End Show 23-34 Copyright 2008 The McGraw-Hill Companies • • • • • • • • • • • • revenue tariff protective tariff import quota nontariff barrier (NTB) voluntary export restriction (VER) strategic trade policy dumping Smoot-Hawley Tariff Act Trade Adjustment Assistance Act offshoring World Trade Organization (WTO Doha Round