Embed Size (px)
Citation preview
Copyright 2008 The McGraw-Hill Companies24-1
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
24
InternationalTrade
Copyright 2008 The McGraw-Hill Companies24-2
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Chapter Objectives• The Graphical Model of Comparative
Advantage, Specialization, and the Gains From Trade
• How Differences Between World Prices and Domestic Prices Prompt Exports and Imports
• How Economists Analyze the Economic Effects of Tariffs and Quotas
• The Rebuttals to the Most Frequently Presented Arguments for Protectionism
• How Offshoring relates to the Growing International Trade in Services
Copyright 2008 The McGraw-Hill Companies24-3
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Some Key Facts• S.A. Trade Deficit $782 Billion in
Goods in 2005• S.A. Trade Surplus $58 Billion in
Services in 2005• S.A. Exports Chemicals, Consumer
Durables, Agricultural Products, Semiconductors
• S.A. Imports Petroleum, Automobiles, Appliances, Computers
• Some of Same Categories are Exported and Imported
• Canada Largest S.A. Partner Quantitatively
Copyright 2008 The McGraw-Hill Companies24-4
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Some Key Facts• S.A. Sizable Trade Deficit with
China• S.A. Dependence on Oil is
Reflected• S.A. has World’s Highest Trading
Volume• Exports are 11% of S.A. Output• China a Major Trade Force• International Trade Links World
Economies• International Trade is the Center
of Policy Debates
Copyright 2008 The McGraw-Hill Companies24-5
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Some Key Facts
GLOBAL PERSPECTIVE
GermanyUnited States
ChinaJapan
FranceNetherlands
ItalyUnited Kingdom
0 2 4 6 8 10 12
10.0
8.9
6.5
6.2
4.9
3.9
3.8
3.8
Source: World Trade Organization
Shares of World Exports, Selected Nations
Percentage Share of World Exports, 2004
Copyright 2008 The McGraw-Hill Companies24-6
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
The Economic Basis for Trade• Labor-Intensive Goods• Land-Intensive Goods• Capital-Intensive Goods• Comparative Advantage
–Graphical Analysis–Two Isolated Nations
• Constant Costs• Different Costs• S.A. Absolute Advantage in
Both Products• Opportunity Cost Ratio
Graphically…
24.1
Copyright 2008 The McGraw-Hill Companies24-7
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
The Economic Basis for Trade
Mea
t (T
on
s)
30
25
20
15
10
5
0
35
40
45
5 10 15 20 25 30
Wheat (Tons)M
eat
(To
ns)
30
25
20
15
10
5
0
35
40
45
5 10 15 20
Wheat (Tons)
(a) South Africa (b) Namibia
12
18 8
4
A
B
Copyright 2008 The McGraw-Hill Companies24-8
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
The Economic Basis for Trade• Self-Sufficiency Output Mix• Specializing Based on
Comparative Advantage– Principle of Comparative
Advantage• Terms of Trade
– 1W ≡ 1C in the S.A– 1W ≡ 2C in Namibia
• Gains from Trade• Trading Possibility Line
– Improved Options– Added Output
24.1
Copyright 2008 The McGraw-Hill Companies24-9
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
The Economic Basis for Trade
Mea
t (T
on
s)
30
25
20
15
10
5
0
35
40
45
5 10 15 20 25 30
Wheat (Tons)M
eat
(To
ns)
30
25
20
15
10
5
0
35
40
45
5 10 15 20
Wheat (Tons)
(a) United States (b) Brazil
12
18 8
4
A
B
A’
B’
C
C’
W
c
w w’
TradingPossibilities Line
TradingPossibilities Line
Copyright 2008 The McGraw-Hill Companies24-10
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
The Economic Basis for Trade
• Trade with Increasing Costs
• The Case for Free Trade
Copyright 2008 The McGraw-Hill Companies24-11
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Supply and Demand Analysis of Exports and Imports
• World Price• Domestic Price• Supply and Demand in
South Africa–S.A. Export Supply
• Export Supply Curve
–S.A. Import Demand• Import Demand Curve
Copyright 2008 The McGraw-Hill Companies24-12
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Supply and Demand Analysis of Exports and Imports
Pri
ce (
Per
Kg
; S
.A.
ran
d)1.50
1.25
1.00
.75
.50
050 75 100 125 150
Quantity of Maize(Millions of Kgs)
1.50
1.25
1.00
.75
.50
050 100
Quantity of Maize(Millions of Kgs)
Pri
ce (
Per
Kg
; S
.A.
ran
d)
(a) S.A. Domestic Maize Market
(b) S.A. Export Supplyand Import Demand
Dd
Sd
S.A.ExportSupply
S.A.Import
Demand
a
b
c
x
y
Surplus = 50
Surplus = 100
Shortage = 50
Shortage = 100
S.A. Maize Market
Copyright 2008 The McGraw-Hill Companies24-13
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Supply and Demand Analysis of Exports and Imports
Pri
ce (
Per
Kg
; S
.A.
ran
d)1.50
1.25
1.00
.75
.50
050 75 100 125 150
Quantity of Maize(Millions of Kgs)
1.50
1.25
1.00
.75
.50
050 100
Quantity of Maize(Millions of Kgs)
Pri
ce (
Per
Kg
; S
.A.
ran
d)
(a) Canada’s Domestic Maize Market
(b) Canada’s Export Supplyand Import Demand
Dd
Sd
CanadianExportSupply
CanadianImport
Demand
a
r
s
t
Surplus = 50
Surplus = 100
Shortage = 50
Canadian Maize Market
Copyright 2008 The McGraw-Hill Companies24-14
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Supply and Demand Analysis of Exports and Imports
1.00
.75
.88
050 100
Quantity of Maize(Millions of Kgs)
Pri
ce (
Per
Kg
; S
.A.
ran
d)
Equilibrium World Price andQuantity of Exports and Imports
CanadianExportSupply
CanadianImport Demand
e
World Market for Maize
S.A.ExportSupply
S.A.Import
Demand
Equilibrium
24.2
Copyright 2008 The McGraw-Hill Companies24-15
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Trade Barriers• Revenue Tariff• Protective Tariff• Import Quota• Nontariff Barrier (NTB)• Voluntary Export Restriction
(VER)• Economic Impact of Tariffs
– Direct Effects• Decline in Consumption• Increased Domestic Production• Decline in Imports• Tariff Revenue
– Indirect Effect
24.2
Copyright 2008 The McGraw-Hill Companies24-16
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Trade Barriers
Quantity
Pri
ce
0
Dd
Sd
Pd
Q
Sd + Q
Pt
Pw
a b c d
Economic Effects of a Protective Tariff or an Import Quota
Copyright 2008 The McGraw-Hill Companies24-17
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Trade Barriers• The Case for Protection: A Critical
Review– Military Self-Sufficiency Argument– Diversification-for-Stability
Argument– Infant Industry Argument– Protection-Against-Dumping
Argument– Increased Domestic Employment
Argument– Cheap Foreign Labor Argument
• Offshoring
Copyright 2008 The McGraw-Hill Companies24-18
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
The WTO Protests
• Various Protest Groups Angrily Target WTO– Environmentalists, Socialists,
Anarchists• Labor Protections• Environmental Standards• Desire to Liberalize Trade
Through Multilateral Negotiations
• International Labour Organization (ILO)
Last
Word
Copyright 2008 The McGraw-Hill Companies24-19
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Key Terms• labor-intensive goods• land-intensive goods• capital-intensive goods• opportunity-cost ratio• principle of comparative
advantage• terms of trade• trading possibilities line• gains from trade• world price• domestic price• export supply curve• import demand curve• equilibrium world price• tariffs
• revenue tariff• protective tariff• import quota• nontariff barrier (NTB)• voluntary export restrict
ion (VER)• strategic trade policy• Dumping• offshoring
Copyright 2008 The McGraw-Hill Companies24-20
Some Key FactsThe Economic Basis for TradeSupply and Demand Analysis of Exports and ImportsTrade BarrierTrade Adjustment AssistanceLast Word
Key Terms
End Show
Next Chapter Preview…
Exchange Rates, the Balance of Payments, and Trade Deficits
