EC3040B Topic 2 International Trade Cf Todaro and Smith Chap. 12

Fig. 19.7

Fig Perkins, Radelet, Lindauer Trends in trade: up, especially middle income and since about 1989

Table 19.1 East Asia is the big growth area for trade

Table 19.3 Intra-regional trade is relatively small

Figure 12.3 …but growing

Developing countries have traditionally relied on primary products (agriculture, mining) for exports. This is changing. Some countries are still very dependent on a handful of export products The structure of developing country imports is much more similar across countries. Fuel, machinery and other capital goods, intermediate producer goods, and consumer products are usually involved

Table 12.2

Fig Bigger economies trade less!

Table 12.1

Table 19.2 Dependence on primary products is falling

Terms of Trade and the Prebisch-Singer Thesis Total export earnings depend on: –Total volume of exports sold AND –Price paid for exports Terms of trade: relative price of exports and imports –Many alternative calculations –Simplest is average unit price of exports divided by average unit price of imports (barter TOT) –Also: income TOT measures export receipts divided by price of imports (takes account of shifting volumes of primary products) Prebisch and Singer: “export prices fall over time, so LDCs lose purchasing power unless they can continually increase export volumes” –Implication: LDCs need to avoid dependence on primary exports

Source: Weil (2007)

Source: FT Jan 2008

Oil prices Brent futures ICE FT

Copper prices Comex futures FT

Wheat prices CBT futures FT

Coffee prices ICE futures FT

The Basic Static Theory of International Trade The principle of comparative advantage Different production possibilities…based on –Technology differences (Ricardo) or –Relative factor endowments (Heckscher-Ohlin) Need to add: imperfect competition, increasing returns to scale, learning by doing…

Figure 12.1

Figure 12.2 The point of the vent-for-surplus theory is that it deals with situations where surpluses are just unused without trade: Trade here is not so much about reallocation: more about finding a use for underused resources Position before trade opens up

Figure 12.2 The point of the vent-for-surplus theory is that it deals with situations where surpluses are just unused without trade: Trade here is not so much about reallocation: more about finding a use for underused resources Position before trade opens up Position with trade

Mozambique