Chapter 2
International trade in goods and services
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An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
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2–1
Lecture plan
• Changes in merchandise trade patterns
–
–
–
–
–
changes in value, volume
reasons for changes in trade composition
processing trade
intra-industry trade
prices trends
• Services trade patterns
–
–
changes in product composition
leading players
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2–2
World exports growth, by value
(merchandise and services)
Value
(US$b.)
Annual change (% p.a.)
2004
1990–
2000
‘01
‘02
‘03
’04
Merchandise
8880
6.0 –4
5
17
21
Services
2100
6.0
7
13
16
0
Source: PRESS/401,14 April 2005
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2–3
Annual real growth rates of world
merchandise exports and production, %
8
6
4
% p.a.
2
0
-2
1991-00
2001
2002
2003
Exports
7.4
-0.5
3.5
5
Production
2.9
-0.7
0.8
2.8
Source:adapted from WTO International Trade Statistics 2004
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An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
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2–4
International merchandise trade
value vs volume (Table 2.1)
• Value growth factors
–
–
–
–
–
physical demand
variations in international prices
product mix and product quality
exchange rates (‘the valuation effect’)
capital flows and trade policy
• Volume growth
–
e.g. measured at constant prices and exchange rates
–
more realistic expression of trade growth
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2–5
Product composition of world
merchandise exports, (% by product
group)
80
% of world exports
70
60
50
Agricultural products
40
Mining products
30
Manufactures
20
10
0
1970
1980
1985
1990
1995
2003
Source: adapted from GATT Annual Reports 1987–88, WTO International Trade
Statistics 2004
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2–6
O
th
er
O
ffi
se
O
ce O
th
m
& th
er
i-m
Te e
Iro
co
n
C an Au le r m
ns
an he uf to co a
C
T
a
d
m c m m ch ex lo . go
st ic tu ot . E in ti th
o
ee a re iv
qt ery les ing ds
l
e
s
s
l
World manufactured exports as % of
world merchandise exports, 1990, 2003
2003
1990
0.0
5.0
10.0
15.0
20.0
%
Source: adapted from WTO International Trade Statistics 2001 and 2004
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2–7
Recent trend: ‘processing trade’
• Preferential tariff duty-free access to those
imports bound for processing and assembling
of goods destined for exports
• About 850 ‘export processing zones’
• Mixed success in expanding trade and
employment
• Value varies from US$0.7 billion in
Bangladesh to US$104.6 billion in China
• On the way down in NAFTA
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2–8
Recent trend: ‘intra-industry trade”
• Exchange of the same category of products
• T = 1 - I X - M I / (X + M)
• Reasons
– trade takes place in differentiated products
– economies of scale (which require a limited
range specialisation)
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2–9
Leading global exporters of services,
2003 (Fig. 2.4)
US
16%
UK
7%
Other
43%
Germany
6%
France
6%
Hong Kong
3%
Netherlands
4%
China
3%
Spain
Italy 4%
4%
Source: adapted from WTO International Trade Statistics 2004
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2–10
Leading services traders




Eight of the top 10 exporters of services are also
among the world’s top 10 exporters of goods (only
Spain and Hong Kong are not)
EU (15): about 40% of world trade in services
US is largest individual exporter(16 %) and importer
(12.5%)
Share of developing Asian countries in world’s
services exports up from <10% to about 15%
- China, up by 17 places from 26 to 9
- Hong Kong, China and Spain (up 3 rankings each)
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2–11
International prices trends
• Long-term downward trend in relative prices of most
primary products
• Consecutive declines of international manufactured
prices over 1996–2001
– inflation receded worldwide to 1960s levels
– office and telecom equipment: strong decline in
prices, high exports volumes
– firm US dollar over last years, which led to dollar
price decline for those goods traded at nearly
stable prices in depreciating currencies
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2–12
International prices trends cont
• Prices of manufactured goods rose nearly
10% in 2003 (along with prices of farm
products), the first annual increase since
1995.
• Commodity prices and exchange rates
changes led to a 10.5 strengthening of all
internationally-traded goods in 2003.
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An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
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2–13
Terms of trade
• Terms of trade index = export price index/
import price index x 100
- TTI > 100
favourable
- TTI < 100
unfavourable
- TTI = 100
unchanged
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2–14
Terms of trade index, 2001
(1995 = 100)
Economy
Terms of Trade
Movement
1995–2001
1990
98
91
2001
99
88
unfavourable
unfavourable
Australia
New Zealand
Hong Kong
Thailand
117
103
101
102
105
106
102
78
favourable
favourable
favourable
unfavourable
Singapore
111
92
unfavourable
USA
Japan
Source: adapted from World Bank Development Indicators 2004, Table 4.4
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2–15
Share of world merchandise exports,
by region, 1983, 2003
1983
ia
As
Ea
st
a
id
dl
e
Af
ric
M
er
n
er
ic
W
es
t
Am
er
ic
La
t in
Am
Nt
h
Eu
ro
pe
E.
Eu
ro
pe
a
2003
a
% of world exports
50
45
40
35
30
25
20
15
10
5
0
Source: adapted from WTO International Trade Statistics 2004
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2–16
Merchandise trade recovery in Asia (5)*,
1997–2000
Year
Exports (% p.a.)
Imports (% p.a.)
1997
5.1
-3.1
1998
-3.5
-30.9
1999
10.2
15.1
2000
18.5
27.9
* Indonesia, Korea Rep., Malaysia, Philippines Thailand
Source: adapted from WTO data
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2–17
% Share of main regions in world
merchandise imports, 1983, 2003
Economy
% share
% share
1983
2003
North America
17.8
20.5
Latin America
4.5
4.8
Western Europe
40.1
42.0
Eastern Europe
8.4
5.0
Africa
4.6
2.2
Middle East
6.2
2.5
Asia
4.5
18.5
Source: adapted from WTO International Trade Statistics 2004
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2–18
Reasons for changes in trade patterns
•
•
•
•
•
Engel’s law
Price trends
Technological developments
Multinational enterprises
Regional trading blocks
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An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
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2–19
Merchandise and services as a
percentage of world exports
1970
1980
2000
2004
Merchandise
81
83
81
81
Services
19
17
19
19
Source: adapted from WTO data
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An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
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2–20
Exports of commercial services by
category, %, 1990, 2003
50
40
30
% of total services
20
10
0
Transportation
Travel
Other Services
1990
28.5
33.9
37.6
2003
22.6
29.4
48
Source: adapted from WTO International Trade Statistics 2004
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An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
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2–21
Services trade in developing countries
• Services—a protected sector
– balance of payments considerations
– support for indigenous providers of services
• Arguments pro protection
– indigenous firms are too weak
– abrupt liberalisation would eliminate domestic firms
• Arguments against protection
– transfer of skills
– more competition, better quality of service
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An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea..
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2–22