International Economics Prof. D. Sunitha Raju Introduction to International Economics

International Economics

Prof. D. Sunitha Raju

Introduction to International Economics


Session Objectives

1. Review of trends in global trade

2. Structure of trade-by countries, regional blocs

3. Institutional structure for trade – WTO, UNCTAD, IMF

4. Trade Policy Framework


World Trade Trends

a) Significant increase in the value of manufactures compared to primary commodities

b) Growing importance of developing countries in world trade

c) Significant increase in south-trade

d) Internationalization of production system & growth of FDI


1995 2000 2006 GrowthRateOf

Values19952006(%)

Reporter Name

Value($billions)

Share inWLD toWLD(%)

Value($billions)

Share inWLD toWLD (%)

Value($billions)

Share inWLD toWLD(%)

World 5037.5 100.0 6316.1 100.0 11565.8 100.0 129.6

Developingeconomies

1417.4 28.1 2061.7 32.6 4110.8 35.5 190.0

Developingeconomies

570.2 11.3 786.6 12.5 1824.2 15.8 219.9

Source: UNCTAD’s South-South Trade Information System

Total Merchandise Exports1995-2006


MATRIX OF WORLD MERCHANDISE TRADE BY MAJOR PRODUCT CATEGORY, 1965, 1985 AND 2003

Importers

Developed countries Developing countries

Exporters Value

($ billion)

Share

(Per cent)

Value

($ billion)

Share

(Per cent)

1965

Developed countries

All merchandise 87.0 67.2 29.3 22.6

Manufactures 55.3 64.5 22.6 26.4

Primary commodities 30.4 75.2 6.2 15.2

Developing Countries

All merchandise 17.6 68.9 6.4 25.1

Manufactures 2.0 53.4 1.6 43.8


Contd:-


Importers

Developed countries Developing countries

Exporters Value

($ billion)

Share

(Per cent)

Value

($ billion)

Share

(Per cent)

2003

Developed countries

All merchandise 3555.1 74.7 1033.4 21.7

Manufactures 2829.7 74.0 864.3 22.6


Developing Countries

All merchandise 1141.7 53.8 921.4 43.4

Manufactures 879.1 54.4 714.3 44.2



Commodity Composition of World Merchandise Trade, 2001 (billion dollars and percentage share of world total)

Category Value of Exports Percent of World Exports

Agricultural products

$547 9.1

Food 437 7.3

Raw materials 110 1.8

Mining Products 790 13.2

Ores and other minerals

63 1.0

Fuels 616 10.3

Nonferrous metals 111 1.9

Manufactures 4,477 74.8

Iron and Steel 130 2.4

Chemicals 595 9.9

Other semi-manufactures

432 7.5 Contd.:-


Category Value of Exports Percent of World Exports

Machinery and transport equipment

2,453 41.0

Automotive products

565 9.5

Office and telecom equipment

828 13.8

Other machinery and transport equipment

1,061 17.7

Textiles 147 2.5

Clothing 195 3.3

Other consumer goods 525 8.8

Products not classified elsewhere

171 2.9

Total merchandise exports

5,984 100

Source: WTO, International Trade (Geneva, 2002) Table A8

Contd…


Geographical Composition of World Merchandise Trade, 2001

(billion dollars and percentage share of world total)

Region or Country Value of Exports

Share (%)

Value of Imports

Share (%)

North America $994 16.1 $1,410 21.9

United States 731 11.9 1,181 18.2

Latin America 349 5.7 381 5.9

Mexico 159 2.6 176 2.7

Western Europe 2,484 40.3 2,527 39.2

European Union (15)a 2,290 37.2 2,335 36.3

Excl. intra-EU trade 873 14.2 914 14.2

Transition economies 285 4.6 268 4.2

Central /Eastern Europe 129 2.1 159 2.5

Russian Federation 103 1.7 54 0.8

Contd.:-

a Australia, Belgium, Denmark, Finland, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom


Region or Country Value of Exports

Share (%)

Value of Imports

Share (%)

Africa 141 2.3 134 2.1

Middle East 239 3.9 174 2.7

Asia 1,671 27.1 1,544 24.0

Japan 405 6.6 350 5.4

China 266 4.3 244 3.8

IT traders (6)b 582 9.4 530 8.2

Total 6,162 100.0 6,439 100.0

b Republic of Korea, Malaysia, Philippines, Chinese Taipei, Thailand, and Singapore

Source: WTO, Annual Report (Geneva, 2002) p.13


Characteristics of World Trade Developments

(a) Uneven growth across countries – Severe imbalances in world economy

(b) Focus on poverty reduction– Improved export opportunities

(c) Importance of national policies– External demand condition important determinants of

national policies– Emergence of macro policies/instruments as important

tool• Exchange rate


World Output Growth, 2001-2006(Annual percentage change)

Region/country 1990-2000 2001 2002 2003 2004 2005 2006

World 2.9 1.5 1.8 2.7 4.1 3.6 3.6

Developed countries

of which:

2.5 1.2 1.2 2.0 3.1 2.7 2.7

Japan 1.1 0.4 0.1 1.8 2.3 2.7 2.8

United States 3.5 0.8 1.6 2.7 4.2 3.5 3.1

European Union 2.2 1.9 1.2 1.2 2.5 1.6 2.3

of which:

European Union-15 2.2 1.9 1.1 1.1 2.3 1.4 2.2

Euro area 2.1 1.8 0.9 0.8 2.1 1.3 2.0

France 2.0 2.1 1.2 0.9 2.3 1.2 2.1

Germany 1.8 1.2 0.1 -0.2 1.6 0.9 1.8

Italy 1.6 1.8 0.4 0.3 1.2 0.0 1.0

United Kingdom 2.7 2.2 2.0 2.5 3.2 1.7 2.3


Region/country 1990-2000

2001 2002 2003 2004 2005 2006

South-East Europe and CIS -4.3 5.9 5.2 7.2 7.9 6.3 6.0

CIS -5.0 6.2 5.3 7.8 8.2 6.8 6.3

South-East Europe -1.0 4.8 4.8 4.5 6.6 4.6 4.8

Developing Countries 4.9 2.6 3.8 5.1 7.0 6.2 6.2

Developing countries, excluding China

4.0 1.4 2.6 3.9 6.2 5.3 5.3

Latin America 3.2 0.3 -0.8 2.0 5.7 4.4 4.6

Africa 2.7 3.7 3.4 4.7 5.1 5.3 5.9

Asia 6.3 3.6 6.1 6.5 7.9 7.2 7.0

West Asia 3.9 -0.2 3.9 5.0 7.3 5.7 5.1

East and South Asia 7.0 4.5 6.5 6.8 8.0 7.4 7.3

Source: UNCTAD 2006


GDP Growth in Selected Developing Countries and Regions,1960-2004

(Average annual percentage change)

Region/country 1960-1965

1965-1970

1970-1975

1975-1980

1980-1985

1985-1990

1990-1995

1995-2000

2000-2004

Africa

Sub-Saharan Africa,

excl. South Africa

5.4

3.9

4.9

3.9

4.4

3.9

3.8

1.9

2.2

1.7

2.6

3.2

1.1

1.5

3.4

3.7

3.9

4.2

Latin America 4.6 5.8 6.6 5.1 0.5 1.8 3.6 2.8 1.5

East Asia 5.0 7.5 6.8 7.6 7.1 8.2 8.8 4.9 6.2

China 2.1 5.3 5.1 6.1 11.0 7.8 12.9 8.5 9.4

First-tier NIEs 8.0 9.8 8.3 9.0 7.1 9.1 7.3 4.2 3.8

South Asia 4.5 4.9 2.3 3.6 5.3 5.9 5.0 5.3 5.7

India 4.2 4.9 2.4 3.0 5.3 6.6 5.3 5.8 6.1

Developing countries 4.8 6.0 6.4 5.1 2.9 4.3 5.4 4.1 4.4

Source: UNCTAD


Exports and Imports of Goods and Services as a Percentage of Gross Domestic Product (GDP), 2001

Country Exports as Percentage of GDP

Imports of Percentage of GDP

Netherlands 68% 62%

Norway 48 30

South Korea 46 41

Canada 45 39

Germany 35 34

Finance 29 27

United Kingdom 28 30

Mexico 28 30

United States 11 14

Japan 11 10Source: International Monetary Fund, International Financial Statistics, June 2002.


Leading Exporters and Importers of Merchandise, 2001 (billion dollars and percentage share of world total)

Exporters ImportersRank

Country Value Share(%)

Rank


1 United States $730.9 11.9 1 United States $1,180.5 18.3

2 Germany 569.6 9.2 2 Germany 493.0 7.7

3 Japan 404.7 6.6 3 Japan 350.1 5.4

4 France 319.5 5.2 4 United Kingdom

332.5 5.2

5 United Kingdom

273.5 4.4 5 France 322.9 5.0

6 China 266.2 4.3 6 China 243.6 3.8

7 Canada 262.2 4.3 7 Italy 233.7 3.6

8 Italy 241.3 3.9 8 Canada 228.3 3.5

9 Netherlands 229.8 3.7 9 Netherlands 207.9 3.2

10 Hong Kong, China domestic exports re-exports

190.720.0

170.7

3.10.32.8

10 Hong Kong, China

retained

importsa

202.331.5

3.20.5

a Retained imports are defined as imports less re-exports Contd.:-

International Economics Exporters Importers

Rank

Country Value Share(%) Rank


11 Belgium 179.9 2.9 11 Mexico 176.2 2.7

12 Mexico 158.5 2.6 12 Belgium 169.9 2.6

13 Korea, Republic of

150.7 2.4 13 Spain 144.5 2.2

14 Taipei, Chinese 122.9 2.0 14 Korea, Rep. of 141.1 2.2

15 Singapore Domestic Exports re-exports

121.766.156.6

2.01.10.9

15 Singapore retained importsa

116.060.4

1.80.9

16 Spain 110.8 1.8 16 Taipei, Chinese 117.2 1.7

17 Russian Federation

103.2 1.7 17 Switzerland 84.1 1.3

18 Malaysia 88.5 1.4 18 Malaysia 74.4 1.2

19 Ireland 83.4 1.4 19 Austria 73.9 1.1

20 Switzerland 82.1 1.3 20 Australia 63.9 1.0

Total of aboveb 4,690.1

76.1 Total of aboveb 4,945.1 76.8

Worldb 6,162.4

100.0 Worldb 6,438.8 100.0

b includes significant re-exports or imports for re-exportsSource: WTO, Annual Report (Geneva, 2002) p.22


Leading Exports and Importers of Commercial Services, 2001 (billion dollars and percentage share of world total)

Exporters ImportersRank Country Value Share(%) Ran

kCountry Value Share(%)

1 United States $262.9 18.3 1 United States $187.6 13.1

2 United Kingdom

108.3 7.5 2 Germany 128.5 9.0

3 Germany 79.8 5.5 3 Japan 106.7 7.5

4 France 79.0 5.5 4 United Kingdom

88.5 6.2

5 Japan 63.3 4.4 5 France 60.0 4.2

6 Italy 59.5 4.1 6 Italy 58.5 4.1

7 Spain 56.7 3.9 7 Netherlands 52.3 3.7

8 Netherlands 50.9 3.5 8 Canada 39.6 2.8

9 Hong Kong, China

43.0 3.0 9 Belgium -Luxembourg

38.9 2.7

10 Belgium -Luxembourg

42.6 3.0 10 China 36.4 2.5

Contd.:-

International Economics Exporters Importers

Rank Country Value Share(%) Rank


11 Canada 34.7 2.4 11 Ireland 33.6 2.4

12 China 31.0 2.2 12 Korea, Rep. of 32.6 2.3

13 Austria 30.0 2.1 13 Spain 32.2 2.3

14 Korea, Rep. of 28.4 2.0 14 Austria 29.0 2.0

15 Singapore 26.4 1.8 15 India 23.7 1.7

16 Switzerland 25.9 1.8 16 Taipei, Chinese 23.6 1.7

17 Denmark 22.8 1.6 17 Hong Kong, china

22.9 1.6

18 Sweden 20.8 1.4 18 Sweden 22.7 1.6

19 Taipei, Chinese 20.8 1.4 19 Russian Federation

20.5 1.4

20 India 20.1 1.4 20 Singapore 20.0 1.4

Total of above 1,106.9

76.9 Total of above 1,057.8 74.0

World 1,440.0

100.0 World 1,430.0 100.0Source: WTO, Annual Report (Geneva, 2002) p.24


Pro

du

cts

and

mar

ket

s

Simple Average

1994 2005

Developed countries

Developing countries

Developed countries

Developing countries

All products

Developed countries 5.43 5.73 2.54 3.80

Developing countries 18.83 19.96 9.14 9.87

Agriculture



Manufactures



Effectively Applied Tariffs in Developed and Developing Countries

by Selected Product Group, 1994 And 2005 (per cent)


1994 2005

Developedcountries

Developingcountries

Developedcountries

Developingcountries

Labour-intensive manufacturers



Other manufactures



Pro

du

cts

and

mar

ket

s


International Economic Problem

(a) Trade protectionism in Industrial countries

(b) Excessive fluctuations in Exchange Rate

(c) Structure unemployment & slow growth

(d) Restructuring problems in transition economies

(e) Poverty in developing countries


Trade Concerns for Africa

Reliance on trade taxes for government revenue

Liberalization may increase macroeconomic volatility

How to deal with costs of adjustment to trade reform

Food import prices may rise

Trade preferences may decline


Dependence on trade taxes in Sub-Saharan Africa

Trade tax revenue

(as percentage of total revenue)

Number of Countries

1985-1994 2000-2003

0-10.9 5 7

11-20.9 11 8

21-30.9 5 10

31-40.9 11 10

41-50.9 7 7

51-100 3 2

Total 42 44Source: FAO 2007


Share of Agriculture in Employment (%)

Region/Group 1970 2000

Africa 76 58

Sub-Saharan Africa 82 66

Asia 71 56

Latin America and Caribbean

42 20

European Union (15) 13 4

Canada 8 2

United States 4 2

Japan 20 4

Developed Countries 18 7Source: FAO 2007


Value of Preferences under EU Schemes (as % of exports to the EU)

Range Country

0 to 10 per cent Sudan, Mali, Niger, Chad, Gambia, Guinea-Bissau, Guinea, Sierra Leone, Liberia, Cote d’Ivoire, Ghana, Togo, Benin, Nigeria, Central African Republic, Equatorial Guinea, Sao Tome and Principe, Democratic Republic of Congo, Rwanda, Burundi, Ethiopia, Eritrea, Djibouti, Somalia, Kenya, Uganda, Tanzania, Madagascar, Comoros, Zambia, and Zimbabwe

Greater than 10 but less than 30 per cent

Lesotho, Botswana, Namibia, Malawi, Mozambique, Seychelles, Angola, Gabon, Cameroon, Senegal, Cape Verde, Burkina Faso, and Mauritania

Greater than 30 per cent Swaziland, Mauritius and Republic of Congo

Source: FAO 2007

Documents

International Economics Prof. D. Sunitha Raju Introduction to International Economics