4- International Trade
Motivation
Trade explained by different valuation of G&S derived of: taste, technology or production factors, firm characteristics...
Static benefits of trade
Specialization (different relative prices)
Change in production and consumption structure
Dynamic benefits of trade– Higher growth rate and welfare
Scale economies
Increase in competition -> efficiency, lower prices, variety, quality
Access to new technology
Consequences of trade
Increase in the production of G&S with greater comparative advantage and in the use of the productions factors in which the country is more intensive.
Change in consumption / increase in welfare.
Source: OECD
Note:Trade is the sum of exports and imports of goods and services measured as a share of GDP.
Relative prices different in the RW than in the country
Theories
Absolute advantage (Adam Smith) (1776). An Inquiry into the Nature and Causes of the Wealth of Nations
Comparative advantage (David Ricardo) David Ricardo's The Principles of Trade and Taxation
Understand David Ricardo's principle of comparative advantage Britannica
Comparative advantage Marginal Revolution University / Comparative advantage2 MRU
Investopedia Video: Explaining Comparative Advantage
Comparative Advantage Kahn Ac. / Ventaja comparativa Kahn Ac.
Relative factor endowments (Heckscher y Ohlin) Interregional and international trade, 1933
Vertical differentiation
Revealed Comparative Advantage Index
New theory of international trade (Krugman, Melitz)
Horizontal differentiation
Imperfect competition
Economies of scale
Monopolistic competition
Product differentiation
Tastes
Coverage rate (CR)
Coefficient of Trade Openess
Trade Account Balance (TAB)
Current Acount Balance (CAB)
Comparative advantage index
Relative trade balance (RTB)
Index of the contribution to the balance
Grubel y Lloyd (GL) Index of intraindustry trade
New theory of international trade
Modelo de Melitz
Exporters are more productive.
Trade openess - economic integration
GATT general agreement on tariffs and trade (1947)
OMC(164 countries)
A most-favored-nation (MFN) clause requires a country to provide any concessions, privileges, or immunities granted to one nation in a trade agreement to all other World Trade Organization member countries. Equal treatment
Exceptions
- Integration agreements
- Developing countries (tariff reductions to all developing countries)
Trade creation and trade diversion.
Economic integration
Preferential agreements - non-reciprocal barrier reductions
FTA – Reciprocal tariff reductions Nafta - USMCA
Customs union – common tariffs system
Common market + free movement of capital and people
Economic Union + common economic policies
Momentary union + common currency
Trade aggreements
Southern African Development Community (SADC)
Common Market for Eastern and Southern Africa (COMESA)
Economic Community of West African States (ECOWAS)
Central African Economic and Monetary Community (CEMAC)
West African Economic and Monetary Union (WAEMU)
European Union (EU)
North American Free Trade Agreement (NAFTA)
Association of Southeast Asian Nations (ASEAN)
Comunidad andina (CAN)
Customs unions
Andean Community (CAN)
Caribbean Community (CARICOM)
East African Community (EAC)
Eurasian Customs Union (EACU)
European Union Customs Union (EUCU; EU–Monaco; EU-Andorra; EU-San Marino; EU-Turkey)
Gulf Cooperation Council (GCC)
Southern Common Market (MERCOSUR)
Switzerland–Liechtenstein (CH-FL)
Source: Access2Markets
Proteccionism
Tariffs
Non tariff barriers (Tecnical Snitary, etc.)
Trade barriers
Beneficiaries- small groups
Reason
- Nascent industry ( infant industries)
- Strategic sectors
Distribution of trade
Source: https://resourcetrade.earth/
Geographic distribution
Trade concentration in developed countries (2/3 of trade inside the region)
Increasing presence of developing (mainly Asia)
Increase in the trade between the south
Specialization
Manufacturing but increasing role of services especially in developed countries. High intra industry trade. Primary good problems (Price variability-uncertainty, deterioration of terms of trade, technological improvement
Developing Agriculture and lower level of intra industry trade
Agricultural and extractive exports lower growth than manufacturing exports. Services higher growth (e.g. digital provided services) (growth rates depends on income elasticity)
Services content in manufacturing exports is increasing
Problems of specializing in raw or agricultural materials:
Variability of international prices (consequences on macroeconomic stability)
Deterioration of the real terms of trade (export prices vs. import prices)
Difficulties in the accumulation of technological capabilities.
Global Value Chains
Other effects of international trade:
Inequality
Polution (green whahing)
Labour explotation
...
Annex: Companies vd Countries
Learn more
Documents
Charting Globalization’s Turn to Slowbalization After Global Financial Crisis & The peak of globalisation myth & Which nation(s) drove globalisation’s peak?
What are the six facts you need to know about the future of trade?
A tale of two globalizations: gains from trade and openness 1800-2010
Statistics
World Integrated Trade Solutions Cadenas globales de valor OECD
World Integrated Trade Solution (WITS) | Data on Export, Import, Tariff, NTM
The Atlas of Economic Complexity Visualize global trade data and economic growth opportunities for every country
The Observatory of Economic Complexity | OEC Access monthly 2021 data for the world's largest economies. Explore the trade patterns of provinces cities and states, such as Bavaria in Germany, Beijing in China, or California in the United States.
https://www.imf.org/en/Publications/WEO/weo-database/2021/October
World Economic Outlook Database: October 2021
The World Economic Outlook (WEO) database contains selected macroeconomic data series from the statistical appendix of the World Economic Outlook report, which presents the IMF staff's analysis and projections of economic developments at the global level, in major country groups and in many individual countries.The WEO is released in April and September/October each year.
www.imf.org
Data and Tools for Trade and Global Value Chains Analyses
https://www.visualcapitalist.com/mapped-foreign-direct-investment-by-country/
https://www.visualcapitalist.com/the-importance-of-fdi-and-why-it-must-be-revived/
How containers are organized and stacked within a vessel’s structure.