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.