Chapter 1 PPT

Chapter 1
Growth and Direction

of International Trade
Growth and direction of trade
🞂 International trade: Exchange of goods and

services across national boundaries
🞂 International Trade requires the least

commitment of/ risk to the companies’
resources. A firm can use intermediaries
🞂 It is an inexpensive way of testing a product

Growth in Trade
🞂 Growth of trade: Dollar value of
merchandise
export: $18.3 trillion (2012); services: $4.3
trillion (2012). Growth rate in value
(volume): 0.2 percent (2.1 percent),
respectively.
⮚ Merchandise trade: four-fifths of world

trade.
⮚ Slower growth attributed to falling prices

for traded goods such as coffee, cotton etc.
Importance of Trade
🞂 Trade allows manufacturers and
distributors to seek out products and
services from other countries
🞂 Trade helps acquire low cost merchandise
(not necessarily low quality)
🞂 Trade provides consumers with a variety of

goods and services
🞂 Trade increases incomes and employment

(see examples)
Importance of trade
🞂 Example 1: The number of US jobs
supported by exports ($2.2 trillion) reached
9.8 million in 2012.
🞂 Example 2: A survey of 3032 small and

medium sized manufacturing firms in
Canada (during 1994-1997) shows the
association of exports to increase in jobs.
🞂 Example 3: Exporters in the US pay wages
that are 6% higher than non-exporters.
Exports Vs Imports
🞂 Imports are associated with loss of jobs
(plant closings, production cutbacks due to
competition).
🞂 Export job generation effect is about 7.5%

larger than the import job loss effect.
🞂 Imports also have a positive effect on

wages through their positive effects on
productivity.
Determinants of Exports
❖Trade and exchange rate regime
❖Presence of an entrepreneurial class
❖Efficiency-enhancing government policy
❖Secure access to transport and marketing
services
Determinants of import
demand
🞂 High per capita incomes

🞂 price of imports
🞂 Exchange rates
🞂 Government restrictions
🞂 Availability of foreign currency (in the case
of developing countries)
Volume and Direction of Trade
Cont…,
❖Volume of trade: The volume of world
exports in 2012 was over four times what it
was in 1990 and approached 19 trillion U.S
dollars. Some of the major factors for this
increase include increased incomes due to the
expanding middle class in many countries,
trade liberalization and new technologies that
assist in the physical integration of world
markets.
Dependence on Trade
🞂 Larger countries (in terms of population)

tend to depend less on trade than small
ones.
🞂 Larger countries such as the US or Japan

tend to have a more diversified economy
that enables them to produce many
products and services locally.
Value and Direction of Trade
🞂 The Value of World trade: $ 18 trillion
(merchandise exports); $4 trillion (export of
services)
🞂Direction of trade: Industrial countries
account for the largest share (52 percent) of
world merchandise trade. Their share (value)
declined from 69 percent in 1995 to 52 percent
in 2011.
Trends in global exports
🞂Steady growth in the role of developing

nations, especially emerging economies
🞂 Increasing levels of trade among developing

nations
Important Developments in Trade
❖ Complete Stalemate in the Doha Round WTO
negotiations.
❑ Focused on reducing trade distorting
agricultural subsidies in developed nations and
equitable rules for developing nations
❑ Failure also attributed to the emerging
multipolar world (where no one is in charge)
and proliferation of national interests
Developments in Trade
🞂 Increase in the establishment of regional Trading
blocs ( common markets, free trade areas) between
countries
❑ US: Trans-Pacific Partnership for Asia;

Transatlantic trade and investment partnership with
Europe
❑ Developing nations: Find such agreements as more

feasible than the multilateral ones
Developments in Trade Cont’d
❖Global trade imbalances: US trade deficit: 5
percent of GDP. East Asian economies with
increasing trade surpluses hold over $ 6
trillion in foreign currency reserves in 2012.
❖ Growing trade imbalances between nations

leading to destabilizing capital flows.
Developments in trade
🞂Developing nations in world trade: Share of
developing nations (merchandise trade)
jumped from 29 percent (1995) to 48 percent
in 2011.
🞂Another significant development is the

opening up of China and its dynamic role in
world trade. China’s share alone increased
from 2.6 percent in 1995 to 11 percent in
2011.
🞂 China Joined the WTO in 2001. Within three
years, its exports doubled. It is now the
world’s largest merchandise exporter ($1.9
trillion in 2011) and the second largest
importer of goods (1.74 trillion in 2011).
🞂 The BRICs account for about one-thirds of
world exports and two-thirds of developing
countries’ exports in 2011.
🞂 South-South trade increased at a rate of 14
percent per year during the period 1995-
2010.
🞂 Transportation and security
❑ About 60 percent (by value) of total world
merchandise trade is carried by sea. In
volume terms, 75 percent of world
merchandise trade is carried by sea
whereas 16 percent is by rail and road (9
percent by pipeline, and 0.3 percent by air).
❑ World air cargo traffic has grown during the
past decade due to increased trade in high-
value-low weight cargo, globalization and
associated just-in time production and
distribution systems.
❑ In light of increasing threats of terrorism,

countries have put in place procedures to
screen cargo across the entire supply chain.

Chapter 1 PPT

Uploaded by

Copyright:

Available Formats

Chapter 1 PPT

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 1 PPT

Uploaded by

Copyright:

Available Formats

Chapter 1

Growth and Direction

🞂 International trade: Exchange of goods and

🞂 International Trade requires the least

🞂 It is an inexpensive way of testing a product

⮚ Merchandise trade: four-fifths of world

⮚ Slower growth attributed to falling prices

🞂 Trade provides consumers with a variety of

🞂 Trade increases incomes and employment

🞂 Example 2: A survey of 3032 small and

🞂 Export job generation effect is about 7.5%

🞂 Imports also have a positive effect on

🞂 High per capita incomes

🞂 Larger countries (in terms of population)

🞂 Larger countries such as the US or Japan

🞂Steady growth in the role of developing

🞂 Increasing levels of trade among developing

❑ US: Trans-Pacific Partnership for Asia;

❑ Developing nations: Find such agreements as more

❖ Growing trade imbalances between nations

🞂Another significant development is the

❑ In light of increasing threats of terrorism,

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.