2 International TradeExports—goods and services produced in one country and sold to other countries.Imports—goods and services consumed in a country but which have been purchased from other countries.Trade Deficit (Surplus)—a country has a trade deficit (surplus) if its imports (exports) exceeds its exports (imports).
3 Index of OpennessIndex of Openness—a measure of how much a country participates in international trade; defined as the ratio of a country’s exports to its GDP (or GNP).Open Economy—a country with a high value of the index of openness.Closed Economy—a country with a relatively low index of openness.
4 Causes of Differences in Economic Growth of Countries Quantity and quality of resource endowments, particularly human capitalInvestment in plant and equipment (capital)Political and socioeconomic environment that is stable and conducive to competition
5 Growth of World Exports What has caused the explosion of world trade?Reduction in trade barriersAdvances in transportation, communication and technologyProliferation of trade agreements
6 FIGURE 1.1 World Exports and Output in Real Terms: 1950–2007
7 Geographic Trade Patterns Developed countries account for the bulk of world trade (largest exporters and importers).Developed countries trade primarily with each other.Developing countries rely on developed countries for their export markets.Countries trade mainly with neighbors.
8 TABLE 1.2 Top Ten Trading Partners of Selected Countries, 2007
9 Commodity Composition Top three most traded productsPetroleumOffice machines, computers, and partsAutomobilesIncreased role of global production (or outsourcing)
10 World Trade in Major Products: 1994, 1999, 2003, 2006 (Rank, value in billions of $, percent share)
11 GLOBALIZATIONGlobalization is the term used to convey the idea that international factors are becoming a more important part of the world economyThe simplest measure of globalization is the ratio of exports to GDPCountries with a high ratio of exports to GDP are generally more open to the world economy than countries with a low ratio
12 Real Export plus Imports as a Percent of GDP GLOBALIZATIONTable 1.6 Exports Plus Imports as a Percentage of GDP for Selected CountriesCountryReal Export plus Imports as a Percent of GDPSingapore462.9%Hong Kong334.4Luxembourg282.0Hungary180.0Ireland176.7Belgium174.0Netherlands146.9Taiwan118.1Honduras109.7Philippines107.7Austria103.0Costa Rica96.4Korea95.5
13 Real Export plus Imports as a Percent of GDP GLOBALIZATIONTable 1.6 Exports Plus Imports as a Percentage of GDP for Selected CountriesCountryReal Export plus Imports as a Percent of GDPDenmark94.5Switzerland90.7Sweden88.9Canada81.8Indonesia81.7Portugal79.9Nicaragua79.3Iceland78.9Israel78.3Finland77.9Ecuador76.9Germany76.6Norway76.4
14 Real Export plus Imports as a Percent of GDP GLOBALIZATIONTable 1.6 Exports Plus Imports as a Percentage of GDP for Selected CountriesCountryReal Export plus Imports as a Percent of GDPTurkey71.2Chile71.1Poland69.5Mexico66.8Spain65.1U.K.59.9France57.5Italy54.5China54.4South AfricaGreece54.3Australia48.9U.S.26.6Japan23.4
15 GLOBALIZATIONFigure 1.4 Real World Exports of Goods as a Percentage of Real World GDP25% –20% –15% –10% –5% –0% –1975198019851990199520002005Exports as a Percent of GDP
16 GLOBALIZATIONGlobalization or the increasing openness of an economy, means changes that are not universally positiveGlobalization involves not only the goods and service but the movement of people and money as wellInternational transactions occur because both parties expect the transaction to improve their welfare