Download Mankiw 5/e Chapter 1: The Science of Macroeconomics

International Trade Theory
Chapter 1: Introduction
Hyun-Hoon Lee
OUTLINE
 1.1 Importance of International Economics
 1.2 International Trade and the Nation’s Standard of
Living
 1.3 The Major U.S. Trade Partners: The Gravity Model
 1.4 The Subject Matter of International Economics
 1.5 Purpose of International Economic Theories and
Policies
 1.6 Current International Economic Problems
 1.7 The Globalization Challenge
 1.8 Organization and Methodology of the Text
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1.1 Importance of International Economics
 International trade is crucial to the well-being of nations
 Some knowledge of international economics is necessary
to understand what goes on in the world of today and to
be informed consumers, citizens, and voters.
 On a more practical level, the study of international
economics is required for numerous jobs in international
banking, various government agencies, and international
organizations.
- Case Study 1-1 The Dell and Other PCs Sold in the US are All but
American
- Case Study 1-2 What is an “American” Car?.
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1.2 International Trade and the Nation’s
Standard of Living
 International trade is crucial to the well-being
of nations
FIGURE 1.1. Imports and Exports as a Percentage of GDP in Various countries
FIGURE 1.2. Growth of World Production and Trade, 1994-2004
FIGURE 1-3 Rising Importance of International Trade
FIGURE 1-3-1 Trade as a Percentage of GDP, 1965-2003
FIGURE 1-3-2 U.S. Imports and Exports as a Percentage of GDP, 1965-2001.
FIGURE 1-3-3 Japan’s Imports and Exports as a Percentage of GDP, 1965-2003.
FIGURE 1-3-4 Korea’s Imports and Exports as a Percentage of GDP, 1965-2003.
FIGURE 1-3-5 China’s Imports and Exports as a Percentage of GDP, 1970-2003.
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FIGURE 1-1 Imports and Exports as a Percentage of GDP in
Various Countries in 2001.
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FIGURE 1-2 Growth of World Production and Trade, 1990-2001
(annual percentage changes).
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Trade as a percentage of GDP
90
80
70
Korea, Rep.
60
50
40
Japan
30
China
U.S.
20
10
0
1965
1970
1975
1980
1985
Year
1990
1995
2000
FIGURE 1-3-1 Trade as a Percentage of GDP, 1965-2003.
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FIGURE 1-3-2 U.S. Imports and Exports as a Percentage of
GDP, 1965-2001.
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16
Percent of GDP
14
12
Exports
10
8
6
Imports
4
2
0
1965
1970
1975
1980
1985
Ye ar
1990
1995
2000
FIGURE 1-3-3 Japan’s Imports and Exports as a Percentage of
GDP, 1965-2003.
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50
45
Imports
Exports
Percent of GDP
40
35
30
25
20
15
10
5
0
1965
1970
1975
1980
1985
Ye ar
1990
1995
2000
FIGURE 1-3-4 Korea’s Imports and Exports as a Percentage of
GDP, 1965-2003.
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40
Percent of GDP
35
30
Exports
25
20
15
Imports
10
5
0
1970
1975
1980
1985
1990
Ye ar
1995
2000
FIGURE 1-3-5 China’s Imports and Exports as a Percentage of
GDP, 1970-2003.
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1.3 The Major Trading Partners of the U.S.,
and Korea: The Gravity Model
 The Gravity Model postulates that the bilateral trade between
countries is positively related to the product of the two
countries’ GDP and negatively related to the distance between
them.
 Table 1.2a. Major Treading Partners of the U.S. in 2005
 Table 1.2b. Major Treading Partners of Korea in 2005
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Table 1.2b. The Major Trade partners of Korea
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1.4 The Subject Matter of International
Economics
 International economics deals with the economic
interdependence among nations.
 The microeconomic aspects (international trade)
- Part One (Chapters 2-7): pure trade theory
- Part Two (Chapters 8-12): trade (commercial) policies
 The macroeconomic aspects (international finance)
- Part Three (Chapters 13-15): balance of payments and foreign
exchange markets
- Part Four (Chapters 16-21): open-economy macroeconomics
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1.5 Purpose of International Economic
Theories and Policies
 Assumptions and merits of economic models
 Examples
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1.6.1 Current International Economic
Problems
 Trade Protectionism in Advanced Countries
 Excessive Fluctuations and Large Disequilibria in Exchange
Rates
 Increasing International Competition from China
 High Structural Unemployment and Slow Grow in Europe
 Financial Crises in Emerging Market Economies
 Restructuring Challenge of Transition Economies
 Deep Poverty in Many Developing Countries
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1.6.2 Current International Economic
Problems
 Sustainable
Development
(Instructor’s addition)
 Regionalism
and
and Faltering
(Instructor’s addition)
Environment
Multilateralism
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1.7 The Globalization Challenge
 Globalization:
Increasing integration of
economies around the world, particularly
through trade and financial flows.
 Pros vs Cons
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1.8 Organization and Methodology of the Text
 Organization (See table of contents.)
 Methodology of the Text
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Appendix
 Table
1.3 Commodity
Merchandise Trade, 2004
Composition
of
World
 Table 1.4 Geographical Composition of World
Merchandise Trade, 2004
 Table 1.5 Geographical Destination of Merchandise
Exports, 2001
 Table 1.6 Leading Exporters and Importers of
Merchandise, 2001
 Table 1.7 Leading Exporters and Importers of
Commodity Services
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