1.1. Introduction to International Trade Flashcards
What is international economics?
Study of how nations interact through the trade of goods and services; flows of money and investment.
Developments in international economics
International trade has roughly tripled in importance in the past 60 years.
Both imports and exports fell substantially in 2009 and again in 2020.
The US now lies in a trade deficit, as it imports more than it exports.
Other countries compared to the US
Due to the size of the US, it relies less on international trade than almost any other country.
Other countries import and export more as a share of their GDP.
Introductory gains from trade
Countries trading with each other almost always extract a mutual benefit.
Countries export goods that make heavy use of resources that are locally abundant.
Countries import goods that make heavy use of resources that are locally scarce.
Most efficient producers can still benefit
Countries that hold an absolute advantage can specialise in producing goods in which they hold a comparative advantage.
Patterns of trade
Who sells what to whom.
Some are easy to understand (i.e. Saudi Arabia exports oil and Brazil exports coffee).
Some are more complex (i.e. Japan exports cars and the US exports aircraft).
How much trade is good?
Governments can restrict or promote trade if they are concerned.
Tariffs; quotas (quantity restrictions); export subsidies (payments made to domestic producers) and product specifications (restrictions on foreign goods) can be implemented.
Balance of payments
Trade surplus: export more than import.
Trade deficit: import more than export.
Exchange rates
Goods denoted in a foreign currency (imports) cost in the domestic currency.
Goods denoted in a domestic currency (exports) cost in the foreign markets.
International coordination
One country’s trade policies usually affect other countries as well, leading to the need for some policy coordination.
International capital markets
Arrangements by which individuals and firms exchange money now, for promises to pay in the future.
