international trade theory chapter 1: introduction hyun-hoon lee
TRANSCRIPT
International Trade TheoryInternational Trade Theory
Chapter 1: IntroductionChapter 1: Introduction
Hyun-Hoon Lee
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OUTLINEOUTLINE
1.1 Importance of International Economics
1.2 International Trade and the Nation’s Standard of Living
1.3 The Major U.S. Trade Partners: The Gravity Model
1.4 The Subject Matter of International Economics
1.5 Purpose of International Economic Theories and Policies
1.6 Current International Economic Problems
1.7 The Globalization Challenge
1.8 Organization and Methodology of the Text
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1.1 Importance of International Economics1.1 Importance of International Economics
International trade is crucial to the well-being of nations
Some knowledge of international economics is necessary to understand what goes on in the world of today and to be informed consumers, citizens, and voters.
On a more practical level, the study of international economics is required for numerous jobs in international banking, various government agencies, and international organizations.
- Case Study 1-1 The Dell and Other PCs Sold in the US are All but American
- Case Study 1-2 What is an “American” Car?.
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1.2 International Trade and the Nation1.2 International Trade and the Nation’’s s Standard of LivingStandard of Living
International trade is crucial to the well-being of nations
FIGURE 1.1. Imports and Exports as a Percentage of GDP in Various countries
FIGURE 1.2. Growth of World Production and Trade, 1994-2004
FIGURE 1-3 Rising Importance of International Trade
FIGURE 1-3-1 Trade as a Percentage of GDP, 1965-2003
FIGURE 1-3-2 U.S. Imports and Exports as a Percentage of GDP, 1965-2001.
FIGURE 1-3-3 Japan’s Imports and Exports as a Percentage of GDP, 1965-2003.
FIGURE 1-3-4 Korea’s Imports and Exports as a Percentage of GDP, 1965-2003.
FIGURE 1-3-5 China’s Imports and Exports as a Percentage of GDP, 1970-2003.
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FIGURE 1-3-1 Trade as a Percentage of GDP, 1965-2003.
ChinaJ apan
Korea, Rep.
U.S.
0
10
20
30
40
50
60
70
80
90
1965 1970 1975 1980 1985 1990 1995 2000Year
Tra
de a
s a
perc
enta
ge o
f G
DP
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FIGURE 1-3-3 Japan’s Imports and Exports as a Percentage of GDP, 1965-2003.
Imports
Exports
0
2
4
6
8
10
12
14
16
1965 1970 1975 1980 1985 1990 1995 2000
Year
Perc
ent
of
GD
P
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FIGURE 1-3-4 Korea’s Imports and Exports as a Percentage of GDP, 1965-2003.
Imports Exports
0
5
10
15
20
25
30
35
40
45
50
1965 1970 1975 1980 1985 1990 1995 2000
Year
Perc
ent
of
GD
P
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FIGURE 1-3-5 China’s Imports and Exports as a Percentage of GDP, 1970-2003.
Imports
Exports
0
5
10
15
20
25
30
35
40
1970 1975 1980 1985 1990 1995 2000
Year
Perc
ent
of
GD
P
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1.3 The Major Trading Partners of the U.S., 1.3 The Major Trading Partners of the U.S., and Korea: The Gravity Model and Korea: The Gravity Model
The Gravity Model postulates that the bilateral trade between countries is positively related to the product of the two countries’ GDP and negatively related to the distance between them.
Table 1.2a. Major Treading Partners of the U.S. in 2005
Table 1.2b. Major Treading Partners of Korea in 2005
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1.4 The Subject Matter of International 1.4 The Subject Matter of International Economics Economics
International economics deals with the economic interdependence among nations.
The microeconomic aspects (international trade)
- Part One (Chapters 2-7): pure trade theory
- Part Two (Chapters 8-12): trade (commercial) policies
The macroeconomic aspects (international finance)
- Part Three (Chapters 13-15): balance of payments and foreign exchange markets
- Part Four (Chapters 16-21): open-economy macroeconomics
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1.5 Purpose of International Economic 1.5 Purpose of International Economic Theories and PoliciesTheories and Policies
Assumptions and merits of economic models
Examples
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1.6.1 Current International Economic 1.6.1 Current International Economic ProblemsProblems
Trade Protectionism in Advanced Countries
Excessive Fluctuations and Large Disequilibria in Exchange Rates
Increasing International Competition from China
High Structural Unemployment and Slow Grow in Europe
Financial Crises in Emerging Market Economies
Restructuring Challenge of Transition Economies
Deep Poverty in Many Developing Countries
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1.6.2 Current International Economic 1.6.2 Current International Economic ProblemsProblems
Sustainable Development and Environment (Instructor’s addition)
Regionalism and Faltering Multilateralism (Instructor’s addition)
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1.7 The Globalization Challenge 1.7 The Globalization Challenge
Globalization: Increasing integration of economies around the world, particularly through trade and financial flows.
Pros vs Cons
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1.8 Organization and Methodology of the Text 1.8 Organization and Methodology of the Text
Organization (See table of contents.)
Methodology of the Text
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Appendix Appendix
Table 1.3 Commodity Composition of World Merchandise Trade, 2004
Table 1.4 Geographical Composition of World Merchandise Trade, 2004
Table 1.5 Geographical Destination of Merchandise Exports, 2001
Table 1.6 Leading Exporters and Importers of Merchandise, 2001
Table 1.7 Leading Exporters and Importers of Commodity Services