International Trade

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International Trade

• Prof. McPherson
• Economics 4850/5850

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Intl Boundaries and National Sovereignty Give
Rise to Trade

• Exchange Rates Differ
• Commercial Policies Differ
• Domestic Economic Policies Differ
• The Extent of Markets Differs
• Marketing Considerations

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What is International Trade?

• International Trade is the study of the economic
  transactions that take place between countries,
  as well as the study of the impediments (natural
  and political) to those transactions.
• We will be concerned with real issues to study
  capital flows, balance of payments issues, ex.
  rates, etc. take Intl Finance

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The Fundamental Questions of International Trade

• Who gains and who loses from trade?
• What determines the pattern of trade?
• What are the barriers to trade?

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Growth and Composition of Trade

• The volume and value of world exports have grown
  tremendously

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Growth and Composition of Trade

• The volume and value of world exports have grown
  tremendously
• Of merchandise trade, manufacturing makes up
  about 75, with the difference split between
  agriculture and mining

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Growth and Composition of Trade

• The volume and value of world exports have grown
  tremendously
• Of merchandise trade, manufacturing makes up
  about 75, with the difference split between
  agriculture and mining
• Trade in services is also growing in importance

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Geographical Composition of Trade

• Industrialized countries dominate global
  exporting and importing (although that share is
  declining)

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Geographical Composition of Trade

• Industrialized countries dominate global
  exporting and importing (although that share is
  declining)
• The EU is the most important origin and
  destination of traded goods

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Geographical Composition of Trade

• Industrialized countries dominate global
  exporting and importing (although that share is
  declining)
• The EU is the most important origin and
  destination of traded goods
• The economically powerful regions tend to export
  to themselves

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Geographical Composition of Trade

• Industrialized countries dominate global
  exporting and importing (although that share is
  declining)
• The EU is the most important origin and
  destination of traded goods
• The economically powerful regions tend to export
  to themselves
• The big players are the Germany, U.S., Japan,
  China, U.K., and France

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Trade and the U.S.

• The U.S. is an economic giant among nations
• The U.S. is a relatively closed economy

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Geographical Composition of U.S. Trade
Destination of U.S. Exports

• NAFTA countries are the biggest recipients of our
  exports that share has increased over time.
• Europe, Japan, and NICs are very important
  recipients of our exports, but their share has
  decreased recently.

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Geographical Composition of U.S. Trade Sources
of U.S. Imports

• NAFTA countries are the source of our imports
  that share has increased over time.
• Western Europe, Japan, and NICs are very
  important sources of our imports, but their share
  has decreased recently.

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Commodity Composition of U.S. Merchandise Exports

• The U.S. tends to export capital goods and
  industrial supplies
• Capital goods and automotive exports have become
  more important over time.
• Agricultural products have diminished in
  importance

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Commodity Composition of U.S. Merchandise Imports

• The U.S. tends to import consumer goods and
  capital goods.
• Capital goods and consumer goods have taken up a
  larger share of imports over time.
• Petroleum products have diminished as a share of
  imports since the 1980s this will not likely
  continue to be the case.

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Trade in Services

• Over 2.4 trillion annually (2005)
• About 24 of total trade (closer to 30 for U.S.)

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Trade in Services

• Over 2.4 trillion annually (2003)
• About 24 of total trade
• Most exporters and importers of services are
  industrial countries

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International Trade Regional Impact

• Different regions in the country can be impacted
  differently from trade
• This has the potential of causing income effects
  in the different regions as well as other
  problems