International-Economics-(By-Robert-J.-Carbaugh)-(9

InternationalEconomicsByRobertJ.Carbaugh9thEditionCh1TheInternationalEconomyCh10InternationalFactorMovementsandMultinationalEnterprisesCh2FoundationsofModernTradeTheoryCh11TheBalanceofPaymentsCh3InternationalEquilibriumCh12ForeignExchangeCh4TradeModelExtensionsandApplicationsCh13Exchange-RateDeterminationCh5TariffsCh14Balance-of-PaymentsAdjustmentsUnderFixedExchangeRatesCh6NontariffTradeBarriersCh15Exchange-RateAdjustmentsandtheBalanceofPaymentsCh7TradeRegulationsandIndustrialPoliciesCh16Exchange-RateSystemsCh8TradePoliciesfortheDevelopingNationsCh17MacroeconomicPolicyinanOpenEconomyCh9RegionalTradingArrangementsCh18InternationalBanking:Reserves,DebtandRiskInternationalEconomicsByRobertJ.Carbaugh9thEditionChapter1:TheInternationalEconomy4ElementsofinterdependenceTrade:goods,services,rawmaterials,energyFinance:foreigndebt,foreigninvestment,exchangeratesBusiness:multinationalcorporations,globalproductionEconomicinterdependence5ForcesdrivingglobalizationTechnologicalchange:ProductionCommunication&informationTransportLiberalizationoftrade&investment:Tariff,non-tariffbarrierreductionsLiberalizedfinancialtransactionsInternationalfinancialmarketsEconomicinterdependence6WavesofGlobalization1stwave:1870-1914Fallingtariffbarriersimprovedtransportation2ndwave:1945-1980AgreementstolowerbarriersagainRichcountrytradespecializationPoornationsleftbehind3rdwave:1980-presentGrowthofemergingmarketsinternationalcapitalmovementsregainimportanceEconomicinterdependence7ExportsofgoodsandservicesaspercentofGrossDomesticProduct,2001EconomicinterdependenceCountryExports(%ofGDP)Imports(%ofGDP)Netherlands68%62%Norway4830SouthKorea4641Canada4539Germany3534France2927UnitedKingdom2830Mexico2830UnitedStates1114Japan11108LeadingtradingpartnersoftheUnitedStates,2000EconomicinterdependenceValueofUSValueofUSCountryexports($bill.)imports($bill.)Canada$202.4$250.1Mexico125.2147.9Japan98.4165.3Germany45.274.3France30.640.6Italy16.431.0Netherlands28.915.0Belgium/Luxembourg17.912.8China(2011)122.2324.59Interdependence:ImpactOverallstandardoflivingishigherAccesstorawmaterials&energynotavailableathomeAccesstogoods&componentsmadelessexpensivelyelsewhereAccesstofinancingandinvestmentnotavailableathomeInternationalcompetitionencouragesefficiencyEconomicinterdependence10Interdependence:Impact(cont’d)Otherimpacts-good&badCurtailsinflationarypressuresathomeLimitsdomesticwageincreasesMakeseconomyvulnerabletoexternaldisturbancesLimitsimpactofdomesticfiscalpolicyoneconomyEconomicinterdependence11Comparativeadvantagemeans:Iftherelativecostofmakingtwoitemsisdifferentintwocountries,eachcangainbyspecializingintheoneitmakesmostcheaply-eachhasacomparativeadvantageinthatproductEvencountriesthatmakenothingcheaplycanbenefitfromspecializationComparativeadvantage12CommonfallaciesofinternationaltradeTradeiszero-sum-tradecanbringbenefitstobothpartnersImportsbad,exportsgood-ifyoubuynothingfromothercountries,theyhavenoincometobuyfromyouTariffsandquotassavejobs-cuttingimportsmakesithardertoexport,sootherjobsarelostEconomicinterdependence13Competitiveness&tradeMainobjectiveofanynationistogeneratehighandrisingstandardoflivingNonationcanefficientlymakeeverythingitselfInternationaltradeallowscountriestofocusonproducingwhattheymakeefficientlyInefficientsectorswillbesqueezedoutSectorsopentocompetitionbecomemoreefficientandproductiveComparativeadvantage14UpsanddownsofglobalizationAdvantagesProductivityincreasesfasterwhencountriesproduceaccordingtocomparativeadvantageGlobalcompetitionandcheapimportskeeppriceslowandinflationatbayAnopeneconomyencouragestechnologicaldevelopmentandinnovationwithideasfromabroadJobsinexportindustriespaymorethanthoseinimport-competingindustriesFreemovementofcapitalgivestheUSaccesstoforeigninvestmentandkeepsinterestrateslowEconomicinterdependence:globalization15UpsanddownsofglobalizationDisadvantagesMillionsofUSjobslosttoimportsorproductionabroad;thosedisplacedfindlower-payingjobsMillionsofotherAmericansfeargettinglaidoffWorkersfacepressureforwageconcessionsunderthreatofhavingthejobsmoveabroadServiceandwhite-collarjobsarejoiningblue-collaronesinbeingvulnerabletomovingoverseasUSworkerscanlosetheircompetitivenesswhenfirmsbuildstate-of-the-artfactoriesinlow-wagecountries,makingthemasproductiveasplantsintheUSEconomicinterdependence:globalizationInternationalEconomicsByRobertJ.Carbaugh9thEditionChapter2:FoundationsofModernTradeTheory17HistoricaldevelopmentoftradetheoryMercantilismRegulationtoensureapositivetradebalanceCritics:possibleonlyforshortterm;assumesstaticworldeconomyAbsoluteadvantage(AdamSmith)CountriesbenefitfromexportingwhattheymakecheaperthananyoneelseBut:nationswithoutabsoluteadvantagedonotgainfromtradeComparativeadvantage(DavidRicardo)Nationscangainfromspecialization,eveniftheylackanabsoluteadvantageFoundationsoftradetheory18Absolute&ComparativeAdvantageComparativeadvantageAbsoluteadvantage:eachnationismoreefficientinproducingonegoodOutputperlaborhourNationWineClothUnitedStates5bottles20y