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Introduction to International Trade

Introduction to International Trade. International Trade. Exports —goods and services produced in one country and sold to other countries. Imports —goods and services consumed in a country but which have been purchased from other countries.

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Introduction to International Trade

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  1. Introduction to International Trade

  2. International Trade Exports—goods and services produced in one country and sold to other countries. Imports—goods and services consumed in a country but which have been purchased from other countries. Trade Deficit (Surplus)—a country has a trade deficit (surplus) if its imports (exports) exceeds its exports (imports).

  3. Index of Openness Index of Openness—a measure of how much a country participates in international trade; defined as the ratio of a country’s exports to its GDP (or GNP). Open Economy—a country with a high value of the index of openness. Closed Economy—a country with a relatively low index of openness.

  4. Causes of Differences in Economic Growth of Countries Quantity and quality of resource endowments, particularly human capital Investment in plant and equipment (capital) Political and socioeconomic environment that is stable and conducive to competition

  5. Growth of World Exports What has caused the explosion of world trade? Reduction in trade barriers Advances in transportation, communication and technology Proliferation of trade agreements

  6. FIGURE 1.1 World Exports and Output in Real Terms: 1950–2007

  7. Geographic Trade Patterns Developed countries account for the bulk of world trade (largest exporters and importers). Developed countries trade primarily with each other. Developing countries rely on developed countries for their export markets. Countries trade mainly with neighbors.

  8. TABLE 1.2 Top Ten Trading Partners of Selected Countries, 2007

  9. Commodity Composition Top three most traded products Petroleum Office machines, computers, and parts Automobiles Increased role of global production (or outsourcing)

  10. World Trade in Major Products: 1994, 1999, 2003, 2006 (Rank, value in billions of $, percent share)

  11. GLOBALIZATION • Globalization is the term used to convey the idea that international factors are becoming a more important part of the world economy • The simplest measure of globalization is the ratio of exports to GDP • Countries with a high ratio of exports to GDP are generally more open to the world economy than countries with a low ratio

  12. GLOBALIZATION Table 1.6 Exports Plus Imports as a Percentage of GDP for Selected Countries

  13. GLOBALIZATION Table 1.6 Exports Plus Imports as a Percentage of GDP for Selected Countries

  14. GLOBALIZATION Table 1.6Exports Plus Imports as a Percentage of GDP for Selected Countries

  15. 25% – 20% – 15% – 10% – 5% – 0% – 1975 1980 1985 1990 1995 2000 2005 Exports as a Percent of GDP GLOBALIZATION Figure 1.4 Real World Exports of Goods as a Percentage of Real World GDP

  16. GLOBALIZATION • Globalization or the increasing openness of an economy, means changes that are not universally positive • Globalization involves not only the goods and service but the movement of people and money as well • International transactions occur because both parties expect the transaction to improve their welfare

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