1. International trade in perspective

Question 1

International trade

Answer 1

is the exchange of goods (merchandise trade) and
services with partners from foreign countries.

Question 2

Economic globalization

Answer 2

refers to the historical process of integration of
national economies around the world, particularly through international trade
and flows of capital (both financial and real) across borders.

Question 3

broader sense globalization

Answer 3

-migration of labor force
-trade in information (technology, data, and communication) across borders (so
called “digital globalization”)
- ideas, culture, and even the spread of diseases

Question 4

Main agents in process of globalization

Answer 4

Companies that engage in international trade
-invest in production sites abroad
-cooperate with foreign companies through mergers
-acquisitions and strategic alliances
-employ foreign workers
- borrow and lend in international financial markets…

However, national governments and international institutions set the rules-ofthe-game for the globalization process.

Question 5

Foreign portfolio investment

Answer 5

is buying financial assets (mainly equity and
bonds) issued by foreign entities (companies and governments)

Question 6

Foreign direct investment (FDI)

Answer 6

is a category of cross-border investment
made by a resident in one economy (the direct investor) with the objective of
establishing a lasting interest in an enterprise (the direct investment
enterprise) that is resident in an economy other than that of the direct
investor.

Question 7

distinction between Foreign direct investment / Foreign portfolio investment

Answer 7

FDI gives the direct investor a direct
control over business operations of the foreign enterprise, whereas portfolio
investment does not. 10% or more of ownership in stock is deemed to be
sufficient for a voice in the management.

Question 8

multinational company (MNC)

Answer 8

If a foreign company invests in at least 10% of the stock in a subsidiary,
the two firms are typically classified as a multinational company (MNC).
Multinational companies are businesses that own and control productive
assets in foreign subsidiaries in more than one country

Question 9

Most Flows are Primarily Domestic rather than International

Answer 9

Trade, Capital, People

Question 10

Majority of international trade transactions: (3)

Answer 10

Trade in merchandise goods,
mostly manufactured goods and
natural resources
(share of services (mainly business-related distribution services, financial
services, transport, travel, and communication) in global exports has increased)

Question 11

Global trade is dominated by:

Answer 11

intermediate goods (IG) (including parts and
components) and MNCs alongside global value chains (GVCs). About 50% of
international trade today involves GVCs, as services, raw materials, parts, and
components cross borders – often numerous times.

Question 12

) The world’s top exporter countries are the same as the world’s top importers.
Among the TOP-3:

Answer 12

China and Germany are usually net exporters, while the
USA is a net importe

Question 13

rapidly growing participation of some developing countries

Answer 13

including China, combined with a shift in their exports towards more complex manufacturing goods.

Question 14

Intermediate goods (IGs)

Answer 14

are inputs used to produce a final product

Question 15

Traditional trade and global value chains (GVCs)

Answer 15

China has emerged as an
important hub in traditional
trade and simple GVC
networks, but the United
States and Germany
remain the most important
hubs in complex GVC
network

Question 16

Traditional trade and global value chains (schéma)

Answer 16

-Pure domestic: no border crossing
-traditional trade: cross border for consumption
-GVCs: cross border for production

Question 17

Global value chains

Answer 17

-Simple GVCs: cross border once for production
-Complex GVCs: cross border at least twice

Question 18

Multi National Company (MNC) : Global Value Chains

Answer 18

-Being responsible for only ⅓ of global output, MNCs
are responsible for about ⅔ of world exports
-MNCs split production of final goods into production
tasks and spread them over many locations creating
global value chains (GVCs) and an intra-firm trade
in intermediate goods
-In international trade statistics, cross-border flows of
intermediate inputs can be counted multiple times,
which is partly responsible for the increase in global
trade to GDP ratio until 2008.

Question 19

Global Value Chain Trade:

Answer 19

GVC trade includes transactions in which a
country’s exports:
-embody value added that it has previously imported
from abroad (backward GVC participation,
buyer’s perspective).
– are embodied in the importing country’s exports to third countries (forward GVC participation, seller’s
perspective).

Question 20

Trade Balance

Answer 20

Trade balance = exports – imports = net exports

Trade surplus: trade balance is positive;
the country is a net exporter
Trade deficit: trade balance is negative;
the country is a net importer

Question 21

China 2020

Answer 21

n 2020, China was the largest export destination
for 38 countries, and the largest partner for imports for 51 countries, including the United States of America and Japan.

In 2020, high-skill and technology intensive
manufactures constituted about 40 per cent of Chinese exports of manufactured goods, or 7.8 per cent of the world exports of this group of products