Worksheet Questions 1 Question 1. Read The Economist Article Zero Sum The Destructive New Logic That Threatens Globalisation. In your own words, summarise the main findings from this article. Countries such as the US are beginning to undergo deglobalisation in certain areas. The governments are introducing subsidies for certain industries (e., semiconductors and electric cars) to bring production back locally. In addition, they are banning the flow of exports of certain products to China in order to protect national industries. Economic conflict with China looks inevitable as America is demanding countries to freeze out China. Overall, the effect of deglobalisation will cause more harm as it will reduce growth and raise the costs of certain products, such as those that help us make the world a better place by reducing climate change. Question 2. Discuss 3 new things you have learnt from reading this article. 1. Before this article I was not aware of the extent that the US were banning exports to China. 2. I was aware of the US government proving subsidies for green energy/electric cars, but I was not aware of the subsidies for semiconductor manufacturers. 3. This article highlighted to me that with a reduction in global trade among countries, this could lead to reduced global security and an increased likelihood of war. Question 3. Which country in the world interests you the most? North Korea Question 4. Why does this country interest you? Provide a thorough explanation. North Korea interests me the most as the country has a range of extremely strict laws and restrictions that seem very foreign to me. Some everyday tasks such as making an international phone call or using an iPhone or laptop is illegal. The dictatorship government have very tight control over organisations. I have little knowledge in this area but find it extremely interesting to learn about. Question 5. (i) Do you consider this country to export and or import large flows of goods and services with other countries? (ii) Do you expect there to be a large influx of migration into this country? Explain your answer. (i) (ii) North Korea does trade with other countries, although both imports and exports are highly concentrated (>90%) with their main trading partner, China. There will not be a large influx of migration into this country. North Korea has extremely strict protocols for entering the country. You need a visa to enter the country and if you arrive without a valid you may be detained and arrested. Their strict policies would not allow for a large influx of migration. Question 6. (i) What does it mean if a country is running a budget deficit? (ii) Give an example of a country running a large budget deficit. (i) (ii) If a country is running a budget deficit, it means that its imports are greater than its exports. Venezuela had the third largest trade deficit in 2017, with a deficit/GDP ratio of over -46%. Question 7. Provide an example of a misleading trade statistic. A misleading statistic may deceive readers rather than inform them. For example, if you are looking the below a bar chart of exports for a country per month, it looks like there was virtually no exports in February. At a closer look, the Y-axis of the bar chart starts at 1,100. Although it looks like there was over 10x the amount of exports in March than February, it is actually much less than 2x. Question 8. Describe how trade across the world changed from 1890 – 2022 i.e., refer to the first and second golden eras of trade. 1890-1918 (WWI) is known as the “First Golden Era” of trade. There was a drastic improvement in transportation such as ships and railroads and this caused an increase in international trade. Interwar Period: Smoot-Hawley Act raised tariffs to as high as 60% in some industries. This tariff increased caused a trade war among countries. Both Canada and France retaliated with tariffs and quotas which lead to a reduction in international trade. Since WWII, tariffs have fallen. The period after WWII is known as the “Second Golden Era” of trade. In addition to lower tariffs, further improvements in transport and a reduction in transportation costs has lead to further growth in trade. The invention of shipping containers were a main source of cost reduction. World trade has grown steadily since 1950 and an has caused an increase in both dollar trade and the trade/GDP ratio. Question 9. (i) How do we calculate the trade to GDP ratio? Give an example of a country where the trade to GDP ratio is (ii) high and (iii) low. (i) (ii) (iii) (Imports + Exports)/2 divided by country GDP. High ratio: Singapore (low overall GDP, but high GDP per capita). Low ratio: Brazil. Question 10. (i) What was the average U.S tariff against imports from China in January 2018? (ii) What did it rise to by September 2019? (i) (ii) 3% 21% Question 11. (i) What was the average Chinese tariff on US imports in January 2018? (ii)What did it rise to by September 2019? (i) (ii) 8% 21% Question 12. What does the term political economy mean? The term means that tariff decisions are due to both political and economic considerations. Question 13. What factors can influence trade between countries? List at least 5 factors. (i) (ii) (iii) (iv) (v) Tariffs Quotas Political beliefs/policies. Exchange rates Access to natural resources. Question 14. Write down 3 new things you learned from our first lecture. (i) (ii) (iii) How accounting issues/discrepancies work within trade balances. (e.g., iPhone being valued at $227 when it is shipped from China, but only $8 reflects value added in labour. The remaining $219 is counted as an export from China to the US but was likely imported into China from other countries. Europe has the largest amount of trade (with an estimated 21% of global trade). This shows the importance and success of the EU. I learned the difference between horizontal and vertical FDI. Horizontal = to gain market access (e.g., US company setting up in Ireland to gain export access to the EU). Vertical = to lower cost of production, such as hiring cheaper labour in vietnam. Question 15. What topic or research question in international economics fascinates you, explain why? I find the topic of how trade benefits everyone as very interesting. Many people believe trade is often a win/lose situation, but with comparative advantage we can see that this is not always the case when done correctly.
