1. International Trade
Mgmt. 418

2. Chapter 1 The World of International Economics
The importance of international trade to the economic health and overall standard of living of countries is very clear today.
International trade had been very important all the time, in the past, too.
We examine how international transactions influence social welfare, income distribution, employment, growth, price stability, and public policy.

3. The Nature of Merchandise Trade
Since 1970’s, world trade surpassed world merchandise production.
Growth in world production and trade:

4. The Gegraphical Composition of Trade
In terms of major economic areas, industrialized countries dominated world trade until 2000.
In the last decade, in international merchandise trade the share of West is reduced and the share of Developing countries increased.

5. Leading exporters and importers in world merchandise trade (1999):
Exporters value % Importers value %
(bn $) of world trade (bn $) of world trade
EU US
US EU
Japan Japan
Canada Canada
China Hong Kong
Hong Kong China
Korea Mexico

6. Exports and imports by region:
Exports Imports
World
N. America
S. & C. America
Europe
EU (25)
CIS
Asia
Japan
Six EA traders

7. Geographical destination of Exports (2005):
Imports value (bn $)
North America 2,290
South and Central
America
Europe
CIS
Africa
Middle East
Asia 2,881

8. Leading-country merchandise exporters and importers (2007):
Exporters value share % changeImporters value share %change
US US
UK Germany
Germany UK
France Japan
Spain China
Japan France
China Italy
Italy Spain
India Ireland
Ireland Netherland
Netherlands Korea
Hong Kong Canada
(China)
Belgium India

9. The commodity composition of world trade (%):
Imports Exports
ISM-ex
(industrial supplies
And materials)
Capital goods
Consumer g
Autos
Other
Trade as
% of GDP

10. Growth in world production and trade (%):
All
Agriculture
Mining
Manufacturing
Exports
All
Agriculture
Mining
Manufacturing

11. World Trade in Services
The trade in services is increasing rapidly.
The share of service production in GDP of many industrialized countries is increasing, as well. For example, services account for 72 % of GDP in the USA, 56 % in Canada, 70 % in Netherlands, 66 % in the UK, 61 % in Germany, 71 % in France, and 60 % in Japan.

12. International Standard Industrial Classification (ISIC) system
Categorizes services as; wholesale and retail trade, restaurants and hotels, transport, storage, communications, financial services, insurance, real estate, business services, personal services, community services, social services, and government services.

13. International trade in services
This category broadly consists of; commercial services, investment income, and government services.
The nature of trade in “services” is such that it is extremely difficult to obtain accurate estimates of the value of these transactions.
Many service transactions are not observable, hence they are sometimes referred as “invisibles”.

14. Liberalization of trade in services
Mainly industrialized countries advocated the liberalization of services trade, like banks, financial services, insurance, telecommunications sectors to open up to foreign firms.
In 1996, telecommunications sector was liberalized by WTO.

15. The changing degree of interdependence
The relative size of trade is measured by comparing the size of a country’s exports with its GDP.
Increases in export/GDP ratio indicates that a higher percentage of output of final goods and services produced within a country’s borders is being sold abroad.
It indicates a higher interdependence.
Exports could be raw materials, intermediary goods, semi-finished goods, finished goods, services, and/or capital goods

16. Dependence on exports
As dependence on exports increase, the prosperity of importing countries become important for the exporting country.
So dependence requires adjustments and policy coordination among the trading countries.
This situation leads to economic integrations in diferent regions of the world; such as, NAFTA, EU, ECOWAS, ASEAN, GCC, etc.