克鲁格曼国际经济学第十版英文版
克鲁格曼国际经济学课件英文官方第10版1第十章
10-13
Counter-Argument
• For some countries like the U.S., an import tariff and/or export tax could improve national welfare at the expense of other countries.
3. Free trade provides competition and opportunities for innovation (dynamic benefits).
– By providing entrepreneurs with an incentive to seek new ways to export or compete with imports, free trade offers more opportunities for learning and innovation.
10-9
The Cases for Free Trade (cont.)
• The political argument for free trade
– Taking politics into account, free trade is the best feasible policy, even though there may be better policies in principle.
• Any policy that deviates from free trade would be quickly manipulated by political groups, leading to decreased national welfare.
克鲁格曼国际经济学课件英文官方第10版1第一章
•
1-9
Gains from Trade (cont.)
3. Trade benefits countries by allowing them to export goods made with relatively abundant resources and import goods made with relatively scarce resources. 4. When countries specialize, they may be more efficient due to larger-scale production. 5. Countries may also gain by trading current resources for future resources (international borrowing and lending) and due to international migration.
1-8
Gains from Trade (cont.)
2. How could a country that is the moБайду номын сангаасt (least)
efficient producer of everything gain from trade?
•
Countries use finite resources to produce what they are most productive at (compared to their other production choices), then trade those products for goods and services that they want to consume. Countries can specialize in production, while consuming many goods and services through trade.
克鲁格曼 国际经济学第10版 英文答案 国际贸易部分krugman_intlecon10_im_06_GE
Chapter 6The Standard Trade Model⏹Chapter OrganizationA Standard Model of a Trading EconomyProduction Possibilities and Relative SupplyRelative Prices and DemandThe Welfare Effect of Changes in the Terms of TradeDetermining Relative PricesEconomic Growth: A Shift of the RS CurveGrowth and the Production Possibility FrontierWorld Relative Supply and the Terms of TradeInternational Effects of GrowthCase Study: Has the Growth of Newly Industrializing Countries Hurt Advanced Nations?Tariffs and Export Subsidies: Simultaneous Shifts in RS and RDRelative Demand and Supply Effects of a TariffEffects of an Export SubsidyImplications of Terms of Trade Effects: Who Gains and Who Loses?International Borrowing and LendingIntertemporal Production Possibilities and TradeThe Real Interest RateIntertemporal Comparative AdvantageSummaryAPPENDIX TO CHAPTER 6: More on Intertemporal Trade⏹Chapter OverviewPrevious chapters have highlighted specific sources of comparative advantage that give rise to international trade. This chapter presents a general model that admits previous models as special cases. This “standard trade model” is the workhorse of international trade theory and can be used to address a wide range of issues. Some of these issues, such as the welfare and distributional effects of economic growth, transfers between nations, and tariffs and subsidies on traded goods, are considered in this chapter.© 2015 Pearson Education LimitedThe standard trade model is based upon four relationships. First, an economy will produce at the point where the production possibilities curve is tangent to the relative price line (called the isovalue line). Second, indifference curves describe the tastes of an economy, and the consumption point for that economy is found at the tangency of the budget line and the highest indifference curve. These two relationships yield the familiar general equilibrium trade diagram for a small economy (one that takes as given the terms of trade), where the consumption point and production point are the tangencies of the isovalue line with the highest indifference curve and the production possibilities frontier, respectively.You may want to work with this standard diagram to demonstrate a number of basic points. First, an autarkic economy must produce what it consumes, which determines the equilibrium price ratio; and second, opening an economy to trade shifts the price ratio line and unambiguously increases welfare. Third, an improvement in the terms of trade (ratio of export prices to import prices) increases welfare in the economy. Fourth, it is straightforward to move from a small country analysis to a two-country analysis by introducing a structure of world relative demand and supply curves, which determine relative prices.These relationships can be used in conjunction with the Rybczynski and the Stolper-Samuelson theorems from the previous chapter to address a range of issues. For example, you can consider whether the dramatic economic growth of China has helped or hurt the United States as a whole and also identify the classes of individuals within the United States who have been hurt by China’s particular growth biases. In teaching these points, it might be interesting and useful to relate them to current events. For example, you can lead a class discussion on the implications for the United States of the provision of forms of technical and economic assistance to the emerging economies around the world or the ways in which a world recession can lead to a fall in demand for U.S. exports.The example provided in the text considers the popular arguments in the media that growth in China hurts the United States. The analysis presented in this chapter demonstrates that the bias of growth is important in determining welfare effects rather than the country in which growth occurs. The existence of biased growth and the possibility of immiserizing growth are discussed. The Relative Supply (RS) and Relative Demand (RD) curves illustrate the effect of biased growth on the terms of trade. The new termsof trade line can be used with the general equilibrium analysis to find the welfare effects of growth. A general principle that emerges is that a country that experiences export-biased growth will have a deterioration in its terms of trade, while a country that experiences import-biased growth has an improvement in its terms of trade. A case study argues that this is really an empirical question, and the evidence suggests that the rapid growth of countries like China has not led to a significant deterioration of the U.S. terms of trade nor has it drastically improved China’s terms of trade.The second area to which the standard trade model is applied is the effects of tariffs and export subsidies on welfare and terms of trade. The analysis proceeds by recognizing that tariffs or subsidies shift both the relative supply and relative demand curves. A tariff on imports improves the terms of trade, expressed in external prices, while a subsidy on exports worsens terms of trade. The size of the effect depends upon the size of the country in the world. Tariffs and subsidies also impose distortionary costs upon the economy. Thus, if a country is large enough, there may be an optimum, nonzero tariff. Export subsidies, however, only impose costs upon an economy. Internationally, tariffs aid import-competing sectors and hurt export sectors, while subsidies have the opposite effect.The chapter then closes with a discussion of international borrowing and lending. The standard trade model is adapted to trade in consumption across time. The relative price of future consumption is defined as 1/(1 r), where r is the real interest rate. Countries with relatively high real interest rates (newly industrializing countries with high investment returns for example) will be biased toward future consumption and will effectively “export” future consumption by borrowing from established developed countries with relatively lower real interest rates.Chapter 6 The Standard Trade Model 29Answers to Textbook Problems1.If the relative price of palm oil increases in relation to the price of lubricants, this would increase theproduction of palm oil, because Indonesia exports palm oil. Similarly, an increase in relative price of lubricants leads to a shift along the indifference curve, towards lubricants and away from palm oil for Indonesia. This is because Palm oil is relatively expensive, hence reducing palm oil consumption in Indonesia.Expensive palm oil increases the relative income of Indonesia. The income effect would induce more for the consumption of palm oil whereas the substitution effect acts to make the economy consume less of palm oil and more of lubricants. However, if the income effect outweighs the substitution effect, then the consumption of palm oil would increase in Indonesia.2.In panel a, the re duction of Norway’s production possibilities away from fish cause the production of fish relative to automobiles to fall. Thus, despite the higher relative price of fish exports, Norway moves down to a lower indifference curve representing a drop in welfare.In panel b, the increase in the relative price of fish shifts causes Norway’s relative production of fish to rise (despite the reduction in fish productivity). Thus, the increase in the relative price of fish exports allows Norway to move to a higher indifference curve and higher welfare.3. The terms of trade of the home country would worsen. This is because a strong biased productiontowards cloth would increase the home country’s supply of cloth and shifts the supply curve to the right. At the same time, the production of wheat would decline relative to the production of cloth. An increased supply of cloth would reduce the price at the domestic and at the international market. The reduction in international price of cloth would worsen the terms of trade of the home country as the home country exports. On the other hand, if the home country’s production grows in favor of wheat, the terms of trade would improve in favor of the home country. This is because wheat is imported by the home country.© 2015 Pearson Education Limited。
克鲁格曼 国际经济学第10版 英文答案 国际贸易部分krugman_intlecon10_im_11_GE
Chapter 11Trade Policy in Developing Countries⏹Chapter OrganizationImport-Substituting IndustrializationThe Infant Industry ArgumentPromoting Manufacturing Through ProtectionismCase Study: Mexico Abandons Import-Substituting IndustrializationResults of Favoring Manufacturing: Problems of Import-Substituting IndustrializationTrade Liberalization since 1985Trade and Growth: Takeoff in AsiaBox: India’s BoomSummary⏹Chapter OverviewThe final two chapters on international trade, Chapters 11 and 12, discuss trade policy considerations in the context of specific issues. Chapter 11 focuses on the use of trade policy in developing countries and Chapter 12 focuses on new controversies in trade policy.Although there is great diversity among developing countries, they share some common policy concerns. These include the development of domestic manufacturing industries, the uneven degree of development within the country, and the desire to foster economic growth and improve living standards. This chapter discusses both the successful and unsuccessful trade policy strategies that have been applied by developing countries in attempts to address these concerns.Many developing countries pose the creation of a significant manufacturing sector as a key goal of economic development. One commonly voiced argument for protecting manufacturing industries is the infant industry argument, which states that developing countries have a potential comparative advantage in manufacturing and can realize that potential through an initial period of protection. This argument assumes market failure in the form of imperfect capital markets or the existence of externalities in production. Such a market failure makes the social return to production higher than the private return. Without some government support, the argument goes, the amount of investment that will occur in this industry will be less than socially optimal levels. Government support can theoretically raise investment up to the socially optimal level. Given these arguments, many nations have attempted import-substituting industrialization, where government support is focused on those industries that compete directly with imports. In the 1950s and 1960s, the strategy was quite popular and did lead to a dramatic reduction in imports in some countries. The overall result, though, was not a success. The infant industry argument did not always hold, as protection could let young industries survive but could not make them efficient. The methods used to protect industries© 2015 Pearson Education Limited60 Krugman/Obstfeld/Melitz •International Economics: Theory & Policy, Tenth Editionwere often complex and overlapped across industries, in some cases leading to exorbitantly high rates of protection. Furthermore, protection often led to an inefficiently small scale of production within countries by creating competition over monopoly profits that would not have existed without protection. By the late 1980s, most countries had shifted away from the strategy, and the chapter includes a case study of Mexico’s change from import substitution to a more open strategy.Since 1985, many developing countries have abandoned import substitution and pursued (sometimes aggressively) trade liberalization. The chapter notes two sides of the experience. On the one hand, trade has gone up considerably and changed in character. Developing countries export far more of their GDP than prior to liberalization, and more of it is in manufacturing as opposed to primary commodities. On the other hand, the growth experience of these countries has not been universally good, and it is difficult to tell if the success stories are due to trade or due to reforms that came at the same time as liberalization. While countries such as the “Asian Tigers,” China and India, have experienced spectacular rates of growth following trade liberalization, only part of this growth can be attributed to trade reform. Furthermore, countries such as Brazil and Mexico that have also moved toward freer trade have not experienced the same rates of economic growth.Answers to Textbook Problems1. The countries that seem to benefit most from international trade include many of the countries of thePacific Rim: South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Indonesia, and others. Though the experience of each country is somewhat different, most of these countries employed some kind of infant industry protection during the beginning phases of their development but then withdrew protection relatively quickly after industries became competitive on world markets. Concerningwhether their experiences lend support to the infant industry argument or argue against it is still a matter of controversy. However, it appears that it would have been difficult for these countries to engage in export-led growth without some kind of initial government intervention. Similarly, both China and India have experienced rapid economic growth following economic liberalization and increased openness. Although part of their growth may be attributed to a reduction in trade barriers, other factors certainly played a role. This disparity is underscored by the fact that nations such as Mexico and Brazil also liberalized trade but have yet to see comparable rates of economic growth. 2. The Japanese example gives pause to those who believe that protectionism is always disastrous.However, Japanese success does not demonstrate that protectionist trade policy was responsible for that success. Japan was an exceptional society that had emerged into the ranks of advanced nations before World War II and was recovering from wartime devastation. It is arguable that economicsuccess would have come anyway, so the apparent success of protection represents a “pseudo-infant industry” case of the kind discussed in the text.3. a. The initial high costs of production would justify infant industry protection if the costs to thesociety during the period of protection were less than the future stream of benefits from a mature, low-cost industry.b. An individual firm does not have an incentive to bear development costs itself for an entireindustry when these benefits will accrue to other firms. The first firm will not factor in how itsinvestment benefits other firms, yielding an inefficiently low level of investment relative to thesocial optimum. There is a stronger case for infant industry protection in this instance because of the existence of market failure in the form of the appropriability of technology.© 2015 Pearson Education Limited4. India ceased being a colony of Britain in 1948; thus, its dramatic break from all imports in favor ofhomemade products following WWII was part of a political break from colonialism. In fact, thepreference for homemade clothing production over British-produced textiles was one of the early battles leading up to independence in India. The presence of a domestic manufacturing lobby inMexico (as opposed to recently deposed colonial firms in India) may have helped keep Mexico open to importing capital goods necessary in the manufacturing process.5. In some countries, the infant industry argument simply did not appear to work well. Such protectionwill not create a competitive manufacturing sector if there are basic reasons why a country does not have a competitive advantage in a particular area. This was particularly the case in manufacturing where many low-income countries lack skilled labor, entrepreneurs, and the level of managerialacumen necessary to be competitive in world markets. The argument is that trade policy alone cannot rectify these problems. Often manufacturing was also created on such a small scale that it made the industries noncompetitive where economies of scale are critical to being a low-cost producer.Moreover protectionist policies in less-developed countries have had a negative impact on incentives, which has led to “rent-seeking” or corruption.。
克鲁格曼国际经济学课件英文官方第10版1第四章
4-10
Production Possibilities (cont.)
• For the economy as a whole, the total labor employed in cloth and food must equal the total labor supply: LC + LF = L (4-3) • Use these equations to derive the production possibilities frontier of the economy.
4-2
Introduction
• If trade is so good for the economy, why is there such opposition? • Two main reasons why international trade has strong effects on the distribution of income within a country:
• the slope becomes steeper as an economy produces more clon Possibilities (cont.)
• Opportunity cost of producing one more yard of cloth is MPLF/MPLC pounds of food.
– T is the supply of land – LF is the labor force employed in food
4-7
(4-2)
Production Possibilities
• How does the economy’s mix of output change as labor is shifted from one sector to the other? • When labor moves from food to cloth, food production falls while output of cloth rises. • Figure 4-1 illustrates the production function for cloth.
克鲁格曼国际经济学课件英文官方第10版1第八章
AC = nF/S + c
• If the number of firms is greater than or less than the equilibrium n, then firms have an incentive to exit or enter the industry.
8-9
Monopolistic Competition (cont.)
8-10
Monopolistic Competition (cont.)
8-11
Monopolistic Competition (cont.)
8-12
Monopolistic Competition (cont.)
8-13
– AC = 5/Q – MC = 1
• Marginal cost is the cost of producing an additional unit of output.
8-7
Fig. 8-1: Monopolistic Pricing and Production Decisions
• The profit-maximizing output occurs where marginal revenue equals marginal cost.
– And because AC decrease, consumers can also benefit from a lower price.
克鲁格曼 国际经济学第10版 英文答案 国际贸易部分krugman_intlecon10_im_12_GE
Chapter 12Controversies in Trade Policy⏹Chapter OrganizationSophisticated Arguments for Activist Trade PolicyTechnology and ExternalitiesImperfect Competition and Strategic Trade PolicyBox: A Warning from Intel’s FounderCase Study: When the Chips Were UpGlobalization and Low-Wage LaborThe Anti-Globalization MovementTrade and Wages RevisitedLabor Standards and Trade NegotiationsEnvironmental and Cultural IssuesThe WTO and National IndependenceCase Study: A Tragedy in BangladeshGlobalization and the EnvironmentGlobalization, Growth, and PollutionThe Problem of “Pollution Havens”The Carbon Tariff DisputeSummary⏹Chapter OverviewAlthough the text has shown why, in general, free trade is a good policy, this chapter considers two controversies in trade policy that challenge free trade. The first regards strategic trade policy. Proponents of activist government trade intervention argue that certain industries are desirable and may be underfunded by markets or dominated by imperfect competition and warrant some government intervention. The second controversy regards the recent debate over the effects of globalization on workers, the environment, and sovereignty. While the anti-globalization arguments often lack sound structure, their visceral nature demonstrates that the spread of trade is extremely troubling to some groups.As seen in the previous chapters, activist trade policy may be justified if there are market failures. One important type of market failure involves externalities present in high-technology industries due to their knowledge creation. Existence of externalities associated with research and development and high technology make the private return to investing in these activities less than their social return. This means© 2015 Pearson Education, Inc.64 Krugman/Obstfeld/Melitz •International Economics: Theory & Policy, Tenth Editionthat the private sector will tend to invest less in high-technology sectors than is socially optimal. Although there may be some case for intervention, the difficulties in targeting the correct industry and understanding the quantitative size of the externality make effective intervention complicated. To address this market failure of insufficient knowledge creation, the first best policy may be to directly support research and development in all industries. Still, although it is a judgment call, the technology spillover case for industrial policy probably has better footing in solid economics than any other argument.Another set of market failures arises when imperfect competition exists. Strategic trade policy by a government can work to deter investment and production by foreign firms and raise the profits of domestic firms.An example is provided in the text that illustrates the case where the increase in profits following the imposition of a subsidy can actually exceed the cost of a subsidy to an imperfectly competitive industryif domestic firms can capture profits from foreign firms. Although this is a valid theoretical argument for strategic policy, it is nonetheless open to criticism in choosing the industries that should be subsidized and the levels of subsidies to these industries. These criticisms are associated with the practical aspects of insufficient information and the threat of foreign retaliation. The case study on the attempts to promote the semiconductor chips industry shows that neither excess returns nor knowledge spillovers necessarily materialize even in industries that seem perfect for activist trade policy.The next section of the chapter examines the anti-globalization movement. In particular, it examines the concerns over low wages in poor countries. Standard analysis suggests that trade should help poor countries and, in particular, help the abundant factor (labor) in those countries. Protests in Seattle, which shut down WTO negotiations, and subsequent demonstrations at other meetings showed, though, that protestors either did not understand or did not agree with this analysis.The concern over low wages in poor countries is a revision of arguments in Chapter 2. Analysis in the current chapter shows again that trade should help the purchasing power of all workers and that if anyone is hurt, it is the workers in labor-scarce countries. The low wages in export sectors of poor countriesare higher than they would be without the export-oriented manufacturing, and although the situation of these workers may be more visible than before, that does not make it worse. Practically, the policy issue is whether or not labor standards should be part of trade pacts. Although such standards may act in ways similar to a domestic minimum wage, developing countries fear that such standards would be used as a protectionist tool. A case study on the 2013 collapse of a garment factory in Bangladesh highlights this tension. The Bangladeshi garment industry would not be globally competitive if it had to raise labor standards to rich country standards. Bangladeshi garment workers, though very poorly paid by rich country standards, earn more than workers in non-export sectors. A potential solution would be for consumers in rich countries to pay more for goods certified to have been produced under improved labor standards, thereby giving producers in poor countries both the means and the incentive to improve labor standards,Anti-globalization protestors were by no means united in their cause. There were also strong concerns that export manufacturing in developing countries was bad for the environment. Again, the issue is whether these concerns should be addressed by tying environmental standards into trade negotiations, and the open question is whether this can be done without destroying the export industries in developing countries. Globalization raises questions of cultural independence and national sovereignty. Specifically, many countries are disturbed by the WTO’s ability to overturn laws that do not seem to be trade restrictions but which nonetheless have trade impacts. This point highlights the difficulty of advancing trade liberalization when the clear impediments to trade—tariffs or quotas—have been removed, yet national policies regarding industry promotion or labor and environmental standards still need to be reformed.© 2015 Pearson Education LimitedThe final section of the chapter examines the link between trade and the environment. In general, production and consumption can cause environmental damage. Yet, as a country’s GDP per capita grows, the environmental damage done first grows and then eventually declines as the country gets rich enough to begin to protect the environment. As trade has lifted incomes of some countries, it may have been bad for the environment—but largely by making poor countries richer, an otherwise good thing. In theory, there could be a concern about “pollution havens,” that is countries with low environmental standards that attract “dirty” industries. There is relatively little evidence of this ph enomenon thus far. Furthermore, the pollution in these locations tends to be localized and is therefore better left to national rather than international policy. The chapter concludes with a discussion of the cap and trade system for greenhouse gases (an example of transboundary pollution) currently being debated in the U.S. Congress. Part of this policy aimed at reducing carbon emissions is an imposition of a “carbon tariff” on imports from countries that do not have their own carbon taxes. Proponents argue that such tariffs are necessary to prevent production from shifting to pollution havens and to reduce the overall level of carbon emissions, while opponents argue that these tariffs are simply more protectionism masquerading as environmental regulation.Answers to Textbook Problems1. The main disadvantage is that strategic trade policy can lead to both “rent-seeking” and beggar-thy-neighbor policies, which can increase one country’s welfare at the other country’s expense. Such policies can lead to a trade war in which every country is worse off, even though one country could become better off in the absence of retaliation. This is the danger in enacting strategic trade policy: It often provokes retaliation, which, in the long run, can make everyone worse off. Furthermore, it can be difficult to identify both which industries to subsidize and how much to subsidize them. Failure to correctly identify these factors can lead to a net loss from a subsidy.2. Globalization has many pros and cons, well-illustrated in famous controversies—like the onestimulated by Joseph Stiglitz’s book, Globalization and Its Discontents. Initiatives like the Doha Development Agenda try to address some of them and find solutions acceptable to every country. 3. The results of basic research may be appropriated by a wider range of firms and industries thanthe results of research applied to specific industrial applications. The benefits to the United States of Japanese basic research would exceed the benefits from Japanese research targeted to specific problems in Japanese industries. A specific application may benefit just one firm in Japan, perhaps simply subsidizing an activity that the market is capable of funding. General research will provide benefits that spill across borders to many firms and may be countering a market failure, externalities present in the advancement of general knowledge.4. The reason why strategic trade policies attract retaliation from other countries is because they presentthe same problems that are faced when considering the use of a tariff to improve the terms of trade.Strategic policies are, in essence, a type of beggar-thy-neighbor policies that increase one country’s welfare at other countries’ expense. A good example is represented by export quot as on scarcemineral ores—like the one adopted by China for Rare Earth Elements (REE) exports since 2006—that have already provoked filing a complaint to the WTO by the US, the EU, and Japan.。
国际经济学克鲁格曼英文版
国际经济学克鲁格曼英文版Here is an essay on the topic of "International Economics by Krugman (English Version)" with a word count of over 600 words.The field of international economics has long been dominated by the influential works of renowned economist Paul Krugman. His English-language publications have had a profound impact on the understanding and analysis of global economic dynamics. Krugman's seminal contributions have challenged traditional theories and offered new perspectives that have reshaped the way we conceptualize the complexities of the international economic landscape.At the core of Krugman's work lies a deep understanding of the intricate interplay between trade, investment, and economic growth. His groundbreaking research has shed light on the role of comparative advantage, economies of scale, and imperfect competition in shaping the patterns of global trade and commerce. Krugman's insights have been instrumental in redefining the conventional wisdom regarding the benefits and drawbacks of free trade, highlighting the nuanced and multifaceted nature of international economic integration.One of Krugman's most significant contributions is his analysis of the geography of trade and the emergence of economic agglomerations. By examining the spatial distribution of economic activity, he has challenged the traditional notion of homogeneous and evenly distributed production. Krugman's work has shown how the clustering of industries and the concentration of economic resources can lead to the development of regional hubs and centers of innovation, with profound implications for policymakers and business leaders alike.Moreover, Krugman's work has addressed the complex dynamics of exchange rate fluctuations and their impact on international competitiveness. His models and theories have provided a deeper understanding of the factors that drive exchange rate movements, the consequences of currency misalignments, and the implications for trade balances and global financial stability. This knowledge has been instrumental in informing policy decisions and guiding the efforts of central banks and governments in managing exchange rate regimes.Krugman's contributions extend beyond the realm of trade and finance. His work on the relationship between economic growth and development has shed light on the challenges faced by developing countries in their pursuit of prosperity. By exploring the role oftechnology, human capital, and institutional frameworks, Krugman has offered insights into the drivers of economic development and the policy interventions that can foster inclusive and sustainable growth.Furthermore, Krugman's influence has reached beyond the academic sphere, as his writings have sought to bridge the gap between economic theory and public policy. His accessible and engaging style has made complex economic concepts more comprehensible to a wider audience, empowering policymakers, business leaders, and the general public to engage in informed discussions and debates on the pressing issues of the global economy.In conclusion, the work of Paul Krugman, as articulated in his English-language publications, has been pivotal in shaping the field of international economics. His groundbreaking research, innovative theories, and thought-provoking analyses have challenged conventional wisdom and pushed the boundaries of our understanding of the intricate web of global economic interactions. Krugman's contributions have not only advanced academic discourse but have also informed policy decisions and public discourse, ultimately contributing to a more informed and nuanced understanding of the dynamics of the international economy.。
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Source: U.S. Department of Commerce, European Commission
Copyright © 2012 Pearson Education. All rights reserved.
2-7
The Gravity Model
Other things besides size matter for trade:
2-4
Size Matters: The Gravity Model
• 3 of the top 10 trading partners with the U.S. in 2008 were also the 3 largest European economies: Germany, U.K., and France.
– influence of an economy’s size on trade – distance and other factors that influence trade
• Borders and trade agreements • Globalization: then and now • Changing composition of trade • Service outsourcing
– Larger economies produce more goods and services, so they have more to sell in the export market.
– Larger economies generate more income from the goods and services sold, so they are able to buy more imports.
1. Distance between markets influences transportation costs and therefore the cost of imports and exports.
– Distance may also influence personal contact and communication, which may influence trade.
Copyright © 2012 Pearson Education. All rights reserved.
2-5
Size Matters: The Gravity Model (cont.)
• In fact, the size of an economy is directly related to the volume of imports and exports.
• The total value of imports from and exports to Canada in 2008 was about $550 billion dollars.
• The largest 15 trading partners with the U.S. accounted for 69% of the value of U.S. trade in 2008.
Copyright © 2012 Pearson Education. All rights reserved.
Chapter 2 World Trade: An Overview
Copyright © 2012 Pearson Education. All rights reserved.
Preview
• Largest trading partners of the United States • Gravity model:
Copyright © 2012 Pearson Education. All rights reserved.
2-3
Fig. 2-1: Total U.S. Trade with Major Partners, 2008
Source: U.S. Department of Commerce
Copyright © 2012 Pearson Education. All rights reserved.
Copyright © 2012 Pearson Education. All rights reserved.
Hale Waihona Puke 2-2Who Trades with Whom?
• The 5 largest trading partners with the U.S. in 2008 were Canada, China, Mexico, Japan, and Germany.
• These countries have the largest gross domestic product (GDP) in Europe.
– GDP measures the value of goods and services produced in an economy.
• Why does the U.S. trade most with these European countries and not other European countries?
Copyright © 2012 Pearson Education. All rights reserved.
2-6
Fig. 2-2: The Size of European Economies, and the Value of Their Trade with the United States
2. Cultural affinity: if two countries have cultural ties, it is likely that they also have strong economic ties.
3. Geography: ocean harbors and a lack of mountain barriers make transportation and trade easier.