INTERNATIONAL TRADE LECTURE 1: The World of International Economics.

INTERNATIONAL TRADE

LECTURE 1:

The World of International Economics

Contents To make a brief introduction of international

economics

To research the nature of merchandise trade including geographical composition and the commodity composition of trade

To realize the increasing importance of service transaction

To understand the changing degree of economic interdependence

International Economics

The world is getting smaller every dayWhat does it mean?What proof it? Any sign?

International trade is very importantAncient timesNowadays

International Economics

The development of international trade and its attribute to early economic thinking Increase the well-being of nationDifferences between inside transaction and

foreign trade

International Economics

The contents of international economics studyConcern: allocate limited resources to meet

desired economic objectivesHow to influence social welfare, income

distribution, employment, growth, and price stability and so on…

The Nature of Merchandise Trade

The geographical composition of tradeTable 1

Composition Time tendency and reason Conclusion: exports outgrown production which

means countries are becoming more interdependent

The Nature of Merchandise Trade

Table 2 Focus on North America, Europe, and Asia Reason of different performance Conclusion: the industrialized countries dominate

world trade and new economies have become increasingly important.

The Nature of Merchandise Trade

Table 3 Category 1: North America, Europe, Asia Category 2: South and Central America, CIS Category 3: Africa and Middle East Conclusion: the major markets for all regions’

exports are in North America, Europe, and Asia

The Nature of Merchandise Trade

Table 4 2005 data 2008 data:

Exports: Germany 1327, China 1218, United States Imports: USA, Germany, China, Japan, France, UK

2010 data:

Exports: China 1577.8, United States 1278.1, Germany 1268.1, Japan, Netherland, France, South Korea, Italy, Belgium, Russia

Imports: USA, China, Germany, Japan France, UK, Netherland, Italy, Hong Kong, South Korea

Nature conditions, technology conditions, education, law, and political conditions differences

Conclusion: world trade tends to be concentrated among relatively few major traders

The Nature of Merchandise Trade

The commodity composition of tradeTable 5

Primary goods: food, beverage, fuel, mining, grease

Manufactures Conclusion: increasing importance of

manufactures trade and declining importance of primary goods

The Nature of Merchandise Trade

Example: U.S. International TradeGeographical: Canada, Mexico, China, JapanCommodity:

Exports: capital goods, industrial supplies and materials

Imports: industrial supplies and material, consumer goods, capital goods

The Nature of Merchandise Trade

Example: China Geographical

2005: E.U, U.S.A, Japan, Hong Kong, ASEAN, Korea, Taiwan, Russia, Australia, Canada (81.5%)

2006: E.U, U.S.A, Japan, Hong Kong, ASEAN, Korea, Taiwan, Russia, Australia, India (79.7% )

2007: E.U, U.S.A, Japan, ASEAN, Hong Kong, Korea, Taiwan, Russia, Australia, India (78.6%)

2008: E.U, U.S.A, Japan, ASEAN, Hong Kong, Korea, Taiwan, Australia, Russia, India (75.9%)

2009: E.U, U.S.A, Japan, ASEAN, Hong Kong, Taiwan, Korea, Australia, Russia, India

2010: E.U, U.S.A, Japan, ASEAN, Hong Kong, Korea, Taiwan, Australia, Brazil, India

Australia, Brazil, Kazakhstani, ASEAN, Burma, Malaysia, Japan, Africa, Angola, Iran, Russia, South Korea, Vietnam, South Africa…

The Nature of Merchandise Trade

Tendency: First eight countries are China’s fundamental market in the

future The rank will reflect political situation: Canada, India Hong Kong and Taiwan will keep stable and Taiwan may

exceed Hong Kong in the future The proportion of top ten partner is slowly declining and ratio

of Africa and Latin America will increased in the future Brazil has rapid development in trade and may squash in top

ten partner Also, India and Russia have tremendous potential in the

future

World Trade in Services

Service category now accounts for the largest share of income and employment in many industrial countries Including: 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: commercial services, investment income, and government services

World Trade in Services

Commercial service is hard to estimate accuratelyNo agreed definition of what constitutes a

traded serviceNo agreed ways to measure the service tradeMost service transactions are not observable

World Trade in Services

Geographical nature of trade in services—in line with merchandise trade Table 8

2005 data 2008 data

Exports: United States, U.K. Germany, France, China, Japan, Spain, Italy, India, Netherlands

Imports: United States, Germany, U.K. Japan, China, France, Italy, Spain, Ireland, Netherlands

2010 data Exports: United States, Germany, U.K., China, France, Japan,

Spain, Singapore, Netherlands, India Imports: United States, Germany, China, U.K., Japan, France,

India, Netherlands, Italy, Ireland Conclusion: concentrated on the industrial countries and

emerging economies

Industrialization and urbanization in progress

1978 2008 OECD

GDP decomposition

Agriculture 28% 11% 2.6%

Industry 48% 49% 27%

Service 24% 40% 70%

Population

Rural 81% 57% 23.3%

Urban 19% 43% 76.7%

World Trade in Services

GATT and WTOGATT: temporary instituteWTO: contemporary organization which

independent to UN Object: to eliminate the tariff and other restrictions

and develop a stable, fair, and free international trade

Core: all agreement Fundamental principle: indiscriminate principle Including intellectual property, investment

measure, and service transaction

The Changing Degree of Economic Interdependence Index of trade volume: international interdependence=(export + import) / GDP

export – import = net export GDP = C + I + G + NX

Table 9 Focus on Belgium, Netherlands, Czech Republic, and

Nigeria. Focus on Singapore

International interdependence= (ex+im)/economic aggregate (GDP + foreign products)

Conclusion: increasing importance of international interdependence

Review To make a brief introduction of international

economics

To research the nature of merchandise trade including geographical composition and the commodity composition of trade

To realize the increasing importance of service transaction

To understand the changing degree of economic interdependence

Homework

Research your own country’s trade data in last three years and in 1990, do a geographic and commodity composition analyze.

Try to find trade tendency of your country and explain.

Try to say something about consumption habits in your country.