Upload
erik-bond
View
216
Download
0
Tags:
Embed Size (px)
Citation preview
INTERNATIONALTRADE
37C H A P T E R
Export Partners
Canada 13%, Mexico 8%, China 4%, Japan 3%
Import PartnersChina 15.4%, Canada 11.6%, Mexico, 9.1%, Japan, 4.9%, Germany 3.7%
$695.9 billion Trade Deficit in 2009
Export Goods & Services 16% of American GDP
KEY FACTS ON TRADE
United States
GermanyJapan
FranceUnited
KingdomCanada
Italy
0 2 4 6 8 10 12
GLOBAL PERSPECTIVEShares of World Exports, Selected Nations, 1999
Source: World Trade Organization
Source: WTO.Share of World Goods Exports, Leading Exporters, 1950-2008
The first decade of the 21st century have seen a significant shift in the share of global trade of the leading exporters (United States, Japan, Germany and China more recently). The enduring trend
involving the relative decline of American exports has accelerated to the point that Germany became the world's leading exporter in 2003 with China climbing to the second rank in 2007.
Japan's share has been declining for about 15 years and was overtaken in 2004 by China. However, it must be considered that many Japanese (and Korean) corporations have relocated in China parts
of their production facilities, so some Chinese exports are embedded within Japanese supply chains. There is thus a convergence and an enduring stability of the share of the world's four
leading exporters, hovering in the 30% of total exports range.
ECOMOMIC BASIS FOR TRADEECOMOMIC BASIS FOR TRADE
Distribution of Economic ResourcesDistribution of Economic ResourcesDifferent Technologies and/or Different Technologies and/or
ResourcesResourcesGoods are Differentiated as to Goods are Differentiated as to
Quality and other Nonprice Quality and other Nonprice AttributesAttributes
Labor-Intensive GoodsLabor-Intensive GoodsLand-Intensive GoodsLand-Intensive GoodsCapital-Intensive GoodsCapital-Intensive Goods
COMPARATIVE ADVANTAGE
Two Isolated NationsConstant Costs
Straight Line PPF’sDifferent Costs
Different Technology and Resources in Each Nation
Cost Ratio
Self-Sufficiency Output Mix
Trading According to Comparative Advantage
Graphically...
PRODUCTION POSSIBILITIES
A
B
Co
ffee
(to
ns)
Co
ffee
(to
ns)
45
40
35
30
25
20
15
10
5
0
30
25
20
15 10 5
05 10 15 20 25 30 5 10 15 20
Wheat (tons) Wheat (tons)
Curve For Each CountryUnited States Brazil
Total output will be greatest whenEach good is produced by the nationthat has the lowest domesticopportunity cost for that good.
U.S has comparative advantage in wheat
Brazil has comparative advantage in coffee
Principle of Comparative Advantage
PRODUCTION POSSIBILITIES
Terms of Trade
Gains From TradeImproved Options
Principle of Comparative Advantage
PRODUCTION POSSIBILITIES
Trading Possibilities Line
Graphically…
TRADING POSSIBILITIES LINES
Co
ffee
(to
ns)
Co
ffee
(to
ns)
45
40
35
30
25
20
15
10
5
0
30
25
20
15 10 5
05 10 15 20 25 30 5 10 15 20
A
B
Tradingpossibilities line
Tradingpossibilities line
Wheat (tons) Wheat (tons)
The Gains from TradeUnited States Brazil
TRADING POSSIBILITIES LINES
Co
ffee
(to
ns)
Co
ffee
(to
ns)
45
40
35
30
25
20
15
10
5
0
30
25
20
15 10 5
05 10 15 20 25 30 5 10 15 20
A
B
Tradingpossibilities line
Tradingpossibilities line
A’
B’
Wheat (tons) Wheat (tons)
The Gains from TradeUnited States Brazil
TRADING POSSIBILITIES LINES
Co
ffee
(to
ns)
Co
ffee
(to
ns)
45
40
35
30
25
20
15
10
5
0
30
25
20
15 10 5
05 10 15 20 25 30 5 10 15 20
A
B
Tradingpossibilities line
Tradingpossibilities line
A’
B’
Wheat (tons) Wheat (tons)
The Gains from TradeUnited States Brazil
The Case ForFree Trade
U.S. EXPORT SUPPLYAND IMPORT DEMAND
U.S. DomesticU.S. DomesticAluminum MarketAluminum Market
U.S. Export SupplyU.S. Export SupplyAnd Import DemandAnd Import Demand
Dd
Sd
If the world priceIf the world priceexceeds the U.S.exceeds the U.S.
price by 25 cents...price by 25 cents...
$1.50
1.25
1.001.00
.75
.50
.25Pri
ce (
per
po
un
d;
U.S
. do
llars
)
10050 75 125150Quantity of Aluminum
10050P
rice
(p
er p
ou
nd
; U
.S. d
olla
rs)
$1.50
1.25
1.001.00
.75
.50
.25
Quantity of Aluminum
EXPORTS = 50EXPORTS = 50
U.S. EXPORT SUPPLYAND IMPORT DEMAND
U.S. DomesticAluminum Market
U.S. Export SupplyU.S. Export SupplyAnd Import DemandAnd Import Demand
$1.50
1.25
1.001.00
.75
.50
.25
10050
DdPri
ce (
per
po
un
d;
U.S
. do
llars
)
Pri
ce (
per
po
un
d;
U.S
. do
llars
)
10050 75 125150
SURPLUS = 50
$1.50
1.25
1.001.00
.75
.50
.25
If the world priceIf the world pricegoes further up...goes further up...
Sd
Quantity of Aluminum Quantity of Aluminum
EXPORTS = 50EXPORTS = 50
EXPORTS = 100EXPORTS = 100
U.S. EXPORT SUPPLYAND IMPORT DEMAND
U.S. DomesticU.S. DomesticAluminum MarketAluminum Market
U.S. Export SupplyU.S. Export SupplyAnd Import DemandAnd Import Demand
$1.50
1.25
1.001.00
.75
.50
.25
10050
DdPri
ce (
per
po
un
d;
U.S
. do
llars
)
Pri
ce (
per
po
un
d;
U.S
. do
llars
)
10050 75 125150
SURPLUS = 50
SURPLUS = 100 $1.50
1.25
1.001.00
.75
.50
.25
If world pricesIf world pricesfall below $1.00...fall below $1.00...
Sd
U.S.exportsupply
Quantity of Aluminum Quantity of Aluminum
SHORTAGE = 50
U.S. EXPORT SUPPLYU.S. EXPORT SUPPLYAND IMPORT DEMANDAND IMPORT DEMAND
U.S. DomesticAluminum Market
U.S. Export SupplyAnd Import Demand
$1.50
1.25
1.001.00
.75
.50
.25
10050
DdPri
ce (
per
po
un
d;
U.S
. do
llars
)
Pri
ce (
per
po
un
d;
U.S
. do
llars
)
10050 75 125150
SURPLUS = 50
SURPLUS = 100 $1.50
1.25
1.001.00
.75
.50
.25
Sd
EXPORTS = 50EXPORTS = 50
EXPORTS = 100EXPORTS = 100
IMPORTS = 50IMPORTS = 50
U.S.U.S.exportexportsupplysupply
Quantity of Aluminum Quantity of Aluminum
SHORTAGE = 50
SHORTAGE = 100
U.S.U.S. EXPORTEXPORT SUPPLYAND IMPORT DEMANDU.S.U.S. EXPORTEXPORT SUPPLY
AND IMPORT DEMANDU.S. Domestic
Aluminum MarketU.S. Export Supply
And Import Demand
$1.50
1.25
1.00
.75
.50
.25
10050
DdPri
ce (
per
po
un
d;
U.S
. do
llars
)
Pri
ce (
per
po
un
d;
U.S
. do
llars
)
10050 75 125150
SURPLUS = 50
SURPLUS = 100
U.S.exportsupply
EXPORTS = 50EXPORTS = 50
EXPORTS = 100EXPORTS = 100
IMPORTS = 50IMPORTS = 50
IMPORTS = 100IMPORTS = 100
U.S.import
demand
$1.50
1.25
1.00
.75
.50
.25
Sd
Quantity of Aluminum Quantity of Aluminum
CANADIAN EXPORT SUPPLYCANADIAN EXPORT SUPPLYAND IMPORT DEMANDAND IMPORT DEMAND
CANADIAN EXPORT SUPPLYCANADIAN EXPORT SUPPLYAND IMPORT DEMANDAND IMPORT DEMAND
Canada’s DomesticAluminum Market
Canada’s Export SupplyAnd Import Demand
DdSHORTAGE = 50
$1.50
1.25
1.00
.75
.50
.25
10050
Pri
ce (
per
po
un
d;
U.S
. do
llars
)
Pri
ce (
per
po
un
d;
U.S
. do
llars
)
10050 75 125150
SURPLUS = 100
Canadianexportsupply
Canadianimport
demand
$1.50
1.25
1.00
.75
.50
.25
Sd
SURPLUS = 50
Quantity of Aluminum Quantity of Aluminum
EQUILIBRIUM WORLD PRICE ANDEQUILIBRIUM WORLD PRICE ANDQUANTITY OF EXPORTS & IMPORTSQUANTITY OF EXPORTS & IMPORTS
Pri
ce (
per
po
un
d;
U.S
. d
oll
ars)
U.S. exportU.S. exportsupplysupply
U.S. importU.S. importdemanddemand
Quantity of Aluminum
CanadianCanadianexportexportsupplysupply
Canadian importCanadian importdemanddemand
10050
$1.50
1.25
1.00
.75
.50
.25
25
.88 Equilibrium
TRADE BARRIERS
TariffsTariffs--excise taxes on imported goodsexcise taxes on imported goods
RevenueRevenue TariffTariff--provide Federal Government with revenue provide Federal Government with revenue (usually on products not produced domestically)(usually on products not produced domestically)
ProtectiveProtective TariffTariff--designed to shield domestic producersdesigned to shield domestic producers
ImportImport QuotaQuota--sets a maximum amount that may be sets a maximum amount that may be importedimported
NontariffNontariff BarrierBarrier (NTB)- (NTB)-licensing, safety, government licensing, safety, government ““red tapered tape””
Voluntary Export RestrictionVoluntary Export Restriction (VER) (VER)
ECONOMIC IMPACT OF TARIFFSDirect EffectsDirect Effects
• Decline in ConsumptionDecline in Consumption• Increased Domestic Increased Domestic
ProductionProduction• Decline in ImportsDecline in Imports• Tariff RevenueTariff Revenue
Direct EffectsDirect Effects• Decline in ConsumptionDecline in Consumption• Increased Domestic Increased Domestic
ProductionProduction• Decline in ImportsDecline in Imports• Tariff RevenueTariff Revenue
Indirect EffectsIndirect Effects•Promote inefficienciesPromote inefficiencies•Decrease Aggregate demandDecrease Aggregate demand
ECONOMIC IMPACT OF TARIFFS
Economic Impact of Quotas Revenue transferred to foreign producers
Net Costs of Tariffs and Quotas Price goes up to consumers
Impact On Income Distribution Burden disproportionately hits low
incomes
THE CASE FOR PROTECTIONMilitary Self-SufficiencyIncrease Domestic Employment
•Job Creation From Imports•Fallacy of Composition•Retaliation
•Smoot-Hawley Act of 1930•Long-run feedbacks
Diversification-For-StabilityInfant-Industry ArgumentStrategic Trade PolicyProtection-Against-DumpingCheap Foreign Labor
World Trade Organization (WTO)•Reductions in Tariffs Worldwide
• New Rules to Promote Trade in Services•Reduction in Agricultural Subsidies•Intellectual Property Protections•Phasing Out Textile Quotas and Tariffs
THE WORLD TRADE ORGANIZATIONTHE WORLD TRADE ORGANIZATION
World Trade Organization (WTO)•Reductions in Tariffs Worldwide
•New Rules to Promote Trade in Services
•Reduction in Agricultural Subsidies
•Intellectual Property Protections
•Phasing Out Textile Quotas and Tariffs
THE WORLD TRADE ORGANIZATION
ChapterConclusions
export supply curveimport demand curveequilibrium world pricetariffsrevenue tariffprotective tariffimport quotanontariff barrier (NTB)voluntary export
restriction (VER)strategic trade policydumpingWorld Trade
Organization (WTO)
labor-intensive goodsland-intensive goodscapital-intensive goodscost ratioprinciple of
comparative advantage
terms of tradetrading possibilities
linegains from tradeworld pricedomestic price
ENDBACKCopyright McGraw-Hill/Irwin 2002
EXCHANGE RATESTHE BALANCE OF PAYMENTS,AND TRADE DEFICITS
Chapter 38
Coming soon...