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International Trade

International Trade. Dr. David J. Molina Economics 4850/5850. Int’l Boundaries Affect Trade. Exchange Rates Differ Commercial Policy Differs Domestic Economic Policies Differ The Extent of Markets Differs Marketing Considerations. What is International Trade?.

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International Trade

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  1. International Trade Dr. David J. Molina Economics 4850/5850

  2. Int’l Boundaries Affect Trade • Exchange Rates Differ • Commercial Policy Differs • Domestic Economic Policies Differ • The Extent of Markets Differs • Marketing Considerations

  3. 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 Int’l Finance

  4. 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?

  5. Growth and Composition of Trade • The volume and value of world exports have grown tremendously

  6. Growth and Composition of Trade • The volume and value of world exports have grown tremendously • Manufacturing exports have increased dramatically in the past two decades to where it now makes up more than 75% of the Commodity exports. The difference split between agriculture and mining

  7. Growth and Composition of Trade • Manufacturing exports have increased dramatically in the past two decades to where it now makes up more than 75% of the Commodity exports. The difference split between agriculture and mining • Services is also growing rapidly and changing in composition (Source WTO)

  8. World Export of Commercial Services by Category 1990, 2000, and 2004 (percent) Source WTO Chapter 4 of World Trade Statistics

  9. Geographical Composition of Trade • Many non-industrial countries are increasing in their participation of world trade

  10. 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

  11. 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

  12. 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

  13. Trade and the U.S. • The U.S. is an economic giant among nations • The U.S. is a relatively “closed” economy

  14. 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. • Western Europe, Japan, and NICs are very important recipients of our exports, but their share has decreased recently.

  15. 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.

  16. 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

  17. 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.

  18. Trade in Services • Over $1.7 trillion annually (2003) • About 20% of total trade (closer to 30% for U.S.)

  19. Trade in Services • Over $1.7 trillion annually (2003) • About 20% of total trade • Most exporters and importers of services are industrial countries

  20. Geographical Composition of U.S. Trade • In 1999, 36.3% of exports and 29.5% of imports go to or are received from NAFTA

  21. International Trade Regional Impact • Different Regions in the Country can be impacted differently from trade • This has the potential of having income effects in the different regions - among other problems

  22. One Last Point • While the US remains the largest country in terms of International Trade • As a Economic Unit the European Union is a more powerful group

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