1. The United States in the Global Economy6
C H A P T E R
The United States in the Global Economy

2. OTHER NATIONAL ECONOMIES Information and Technology
INTERNATIONAL LINKAGES
UNITED STATES ECONOMY
OTHER NATIONAL ECONOMIES
Goods and Services
Trade Flows
Capital and Labor
Resource Flows
Information and Technology
Money

3. Volume Dependence Trade Patterns Financial Linkages
THE UNITED STATES & WORLD TRADE
Volume
Dependence
Trade Patterns
Financial Linkages

4. Exports - Percent of GDP, 2002
THE UNITED STATES & WORLD TRADE
Exports - Percent of GDP, 2002
Netherlands 62%
Canada 41%
Germany 36%
New Zealand 33%
Spain 29%
Italy %
France 27%
United Kingdom 26%
Japan 12%
United States 11%

5. Principal U.S. Exports & Imports, 2002
THE UNITED STATES & WORLD TRADE
Principal U.S. Exports & Imports,
2002
Exports
Amount
Imports
Amount
Chemicals $49.8
Semiconductors 42.3
Consumer Durables 40.1
Computers 38.6
Generating Equipment 27.6
Aircraft 26.7
Telecommunications 22.2
Automobiles 20.5
Grains 14.4
Nonferrous Metals 12.2
Automobiles $114.1
Petroleum 103.6
Computers 75.3
Household Appliances 66.4
Clothing 64.3
Chemicals 33.1
Consumer Electronics 32.8
Semiconductors 26.0
Telecommunications 23.2
Iron and Steel 17.7

6. U.S. Exports & Imports of Goods, 2002
THE UNITED STATES & WORLD TRADE
U.S. Exports & Imports of Goods,
2002
Exports to:
Value (Billions of Dollars)
Industrial Countries $381
Developing Countries
Total $683
Imports from:
Value (Billions of Dollars)
Industrial Countries $594
Developing Countries
Total $1167

7. Imports Exceed Exports By
THE UNITED STATES & WORLD TRADE
U.S. Exports & Imports of Goods,
2002
Exports to:
Value (Billions of Dollars)
Imports Exceed Exports By
$484 Billion
That’s over 9,680,000 Jobs at $50,000 Each!
Industrial Countries $381
Developing Countries
Total $683
Imports from:
Value (Billions of Dollars)
Industrial Countries $594
Developing Countries
Total $1167
Imports Exceeded Exports by
$346 Billion in 1999

8. RAPID TRADE GROWTH Transportation Technology Communications Technology
Facilitating Factors...
Transportation Technology
Communications Technology
General Decline in Tariffs
Participants
United States, Japan, and Western Europe
Multinational Corporations
New Participants
Collapse of Communism

9. GLOBAL PERSPECTIVE COMPARATIVE EXPORTS, 2001 IN BILLIONS OF DOLLARS
United States
Germany
Japan
France
United Kingdom
China
Canada
Italy
Netherlands
Belgium-Lux.
Mexico
South Korea
Taiwan
Singapore
Spain
Source: World Trade Organization

10. COMPARATIVE ADVANTAGE
SPECIALIZATION AND
COMPARATIVE ADVANTAGE
Basic Principle
Comparative Costs
Comparative Advantage
Terms of Trade
Gains from Specialization & Trade

11. GLOBAL PERSPECTIVE $1 will buy Foreign Currency per U.S. Dollar
EXCHANGE
RATES:
.63 British pounds
10.91 Mexican pesos
.93 European euros
119 Japanese yen
1237 South Korean won
47.68 Indian rupee
1.48 Canadian dollars
1.36 Swiss francs
8.54 Swedish krona

12. THE FOREIGN EXCHANGE MARKET
A Competitive Market
Linkages to All Domestic and Foreign Prices
Dollar-Yen Market
Changing Rates:
Depreciation & Appreciation

13. THE FOREIGN EXCHANGE MARKET
The Market for Yen P
Exchange
Rate: $.01 = ¥1 Sy
.01
Dollar Price of 1 Yen Dy Qe Q
Quantity of Yen

14. THE FOREIGN EXCHANGE MARKET
Currency Appreciation and Depreciation
International
value of dollar
falls (dollar
depreciates)
Equals
Dollar price
of foreign
currency
rises
Equals
Equals
Foreign
currency
price of
dollar falls
International
value of foreign
currency rises
(foreign currency
appreciates)
Equals

15. Protective Tariffs Import Quotas Nontariff Barriers Export Subsidies
GOVERNMENT & TRADE
Trade Impediments & Subsidies
Protective Tariffs
Import Quotas
Nontariff Barriers
Export Subsidies

16. Misunderstanding of the Gains From Trade Political Considerations
GOVERNMENT & TRADE
Why Government Trade Interventions?
Misunderstanding of the Gains From Trade
Political Considerations
Costs To Society
Multilateral Trade Agreements
Free-trade Zones
Smoot-Hawley Tariff Act

17. GOVERNMENT & TRADE Reciprocal Trade Agreements Act, 1934
Why Government Trade Interventions?
Reciprocal Trade Agreements Act, 1934
Negotiating Authority
Generalized Reductions
Most-Favored-Nation Clauses
General Agreement on Tariffs and Trade (GATT)
Uruguay Round
World Trade Organization (WTO)

18. The European Union (EU) The EU Trade Bloc The Euro
GOVERNMENT & TRADE
Why Government Trade Interventions?
The Doha Round (Qatar)
The European Union (EU)
The EU Trade Bloc
The Euro
North American Free Trade Agreement (NAFTA)
Increased Global Competition

19. Key Terms multinational corporations comparative advantage
Reciprocal Trade Agreements Act
most-favored-nation clauses
General Agreement on Tariffs & Trade (GATT)
World Trade Organization (WTO)
Doha Round
European Union (EU)
trade bloc
euro
North American Free Trade Agreement (NAFTA)
multinational corporations
comparative advantage
terms of trade
foreign exchange market
exchange rates
depreciation
appreciation
protective tariffs
import quotas
nontariff barriers
export subsidies
Smoot-Hawley Tariff Act
BACK
END
Copyright McGraw-Hill/Irwin, 2005

20. Measuring Domestic Output
Coming up next...
Measuring Domestic Output
and National Income
Chapter 7