Globalization
and
World Trade
Globalization a la Facebook
Openness
Trade in goods and services
Finance
Labor
Nations are more closely linked through
trade in goods and services, through flows
of money, through investments, but not
through labor flows.
Is the Study of International Economics
Important?
Examples:
– Countries that are very open to international
trade?
– Countries that are not participating in
international trade?
– Countries whose financial markets are very
open?
– Countries that are not open to flows of money?
– A previous era of globalization?
The Least Open Country
Current U.S. Trade Balance
http://www.bea.gov/newsreleases/internati
onal/trade/tradnewsrelease.htm
Recent Global Trade
Recent World Trade
U.S. Trade Balance
U.S. Average Tariff Rate
Chinese Trade
Trade Openness
(exports+imports)/GDP
U.S. Net Foreign Assets
Financial Openness
Flows of Capital to Developing Countries
(as Percentage of Advanced-Country GDP)
Labor Openness
Immigrants as a Percentage of the U.S. Population
What is different about the study of international
economics from a study of a national economy?
On the trade side:
– Governments regulate international trade (tariffs, quotas and
regulation) and investment (taxes and regulation).
– Governments can discriminate against a subgroup (typically
foreign) companies.
On the monetary side:
– Governments control the supply of their currency.
– Governments can control the (nominal) exchange rate.
– Governments can regulate capital flows.
On the labor side:
– Governments can set immigration policy, and to a lesser
extent, governments can also set emigration policy.
Patterns of Trade
Differences in labor productivity may explain why some
countries export/import certain products.
Differences in climate and resources can explain why
Brazil exports coffee and Australia exports iron ore.
How relative supplies of capital, labor and land are used
in the production of different goods may also explain why
some countries export certain products.
But why does Japan export automobiles, while the US
exports aircraft?
Historical developments can also inform us about the
patterns of trade.
Gains from Trade
Trade is a voluntary transaction, both sides receive
something that they want.
Even a country that is the most efficient producer of
everything will gain from trade.
1.
2.
–
Ricardian Comparative advantage.
Countries will export goods which use abundant
resources and imports goods which use scarce
resources.
3.
–
H-O trade theory
With trade, countries can specialize
4.
-
IRS theory
Harm from Trade
Trade is predicted to benefit countries as a
whole, but trade may harm particular groups
within a country.
– International trade can adversely affect the owners of
resources that are used intensively in industries that
compete with imports.
– Trade may therefore have effects on the distribution
of income within a country.
Specialization induced by trade can also make
countries more vulnerable to shocks.
International Trade
Versus International Finance
International trade focuses on transactions
of real goods and services across nations.
– These transactions usually involve a physical movement
of goods or a commitment of tangible resources like
labor services.
– Intra-temporal trade.
International finance focuses on financial or monetary
transactions across nations.
– For example, purchases of US dollars or financial assets
by Europeans.
– Inter-temporal trade.
The Effects of Government Policies
on Trade
Policy makers affect the amount of trade in goods,
services, and financial assets through
– tariffs: taxes on imports or exports,
– quotas: a quantity restriction on imports or exports,
– export subsidies: a payment to producers that export,
– or through other regulations (e.g., product specifications)
that exclude foreign products from the market, or restrict exports
of certain domestic products, services or financial assets.
What are the costs and benefits of these policies?
An Ethical Framework
– Describe the detailed impact of any trade policy;
both intended and unintended.
– What are the benefits and drawbacks of the policy
in question?
– How do we aggregate / evaluate the total impact
of this policy?
– Are there different frameworks of ethical reference
that lead to different conclusions?
– What do I think?