Sara Hsu

 Adam Smith (1776) & David Ricardo (1826): stressed free trade  Heckscher Ohlin: states that countries will import products whose factors of production are scarce and export products whose factors of production are abundant

 Factor Price Equalization Theorem: countries that produce the same product with the same technologies, facing the same product prices, must have the same factor prices.  Stolper Samuelson Theorem: international trade lowers the real wage of scarce factors of production embodied in produced goods  Leamer: high wages come from product upgrading from labor-intensive to capital- intensive products, trading capital- intensive products for labor- intensive products; and second, that high wages come from high demand for non- traded goods that can be labor intensive, as long as a country produces capital- intensive products for export

 China, India and Japan are in top twenty trading nations  Service and merchandise exports have increased

 Lack of domestic resources  dependence on imports like raw cotton, raw wool, bauxite, copra, phosphate ore, nickel, and crude rubber  Little trading experience before Meiji  Exports increased over reform period  Manufactured exports grew faster than imports between 1890 and 1940  Foreign exchange fund built up through Yokohama Specie Bank, at first silk trade produced foreign exchange  Shipbuilding for trade or wars

 Unequal treaties of 1866: Japan’s import and export duties were limited to as low as 5% on most commodities. Japan regained tariff autonomy in 1899, and tariffs climbed until  Trading companies managed risks and used capital efficiently. Gvt trading co’s used first, then private trading co’s  Export promotion in WWI and after WWII, boosted by Korean War

 Trade lagged after WWI and WWII, as well as after Tokyo-Yokohama earthquake of 1923  Japan was heavily dependent on the US for oil, embargoed in lead up to and during WWII  Major trading companies eliminated after WWII and replaced with smaller ones but exchange rate consolidated

 Largest trading nation in the world  Mainly closed during Maoist period  Trade opening in late seventies with SEZs: allowed in imports without a duty for export processing  Foreign trade was centralized, but in mid- 1980s-trade liberalization occurred  Import substitution and export promotion  Dualist trade regime: export processing and ordinary trade  WTO membership  Exports in machinery

 China became a member of the World Trade Organization (WTO) on 11 December  China gained observer status with GATT and from 1986, began working towards joining that organization. To join GATT/ WTO, China had to carry out tariff reductions, open markets and industrial policies.  Accession meant that China would engage in global competition according to rules that it did not make. The admission of China to the WTO was „an enormous multilateral achievement” which marked a clear commitment towards multilateralism from the Chinese perspective.

 High barriers to trade until 1991 w tariff and non-tariff barriers  Reforms focused on manufacturing sector  India still remains highly protected in agriculture and sensitive products  Petroleum products comprise larger percentage of manufacturing goods, share of merchandise in exports has also risen

 Has built up several SEZs to encourage FDI in manufacturing, but these remain unpopular due to inefficiency  Service exports have grown since 1991 due to technological change and lower costs of communication  Member of GATT and WTO  Increase in trade openness and FDI, although lack of infrastructure adversely impacts FDI  Varying impact of trade openness by state

 Japan initiated the Asian model of export- led growth, which was followed by similar patterns in Singapore, Hong Kong, Taiwan, and South Korea in the 1960s. This was followed by growth in China, Malaysia, Thailand, Indonesia, and Vietnam.  Exports provided a pathway for developing countries to catch up to industrialized nations  Export-led growth is not only way to develop and may cause global imbalances

 China, India, and Japan relied heavily on exports to increase GDP and economic growth  India was a founding member of GATT and the WTO. China gained WTO accession in Japan became a member of GATT in 1955.