Transcript of 1 Chapter 1. Introduction to International Trade Theory Hyun-Hoon Lee Professor Kangwon National...
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- 1 Chapter 1. Introduction to International Trade Theory
Hyun-Hoon Lee Professor Kangwon National University
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- 2 Contents 1. Trend of world trade 2. What are the reasons for
fast expansion of international trade? 3. What are the fundamental
reasons for international trade? 4. What are the consequences (i.e.
benefits and costs) of international trade? 5. Who are the major
trade partners? 6. What are the consequences of (i.e. benefits and
costs) of trade policy? 7. Introduction to the course
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- 1. Trend of World Trade Source: World Bank, World Development
Indicators and OECD development data Trend of Worlds Exports
(Billion dollars)
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- Trend of Worlds Exports (% of GDP) 1. Trend of World Trade
Source: World Bank, World Development Indicators and OECD
development data
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- Comparison of Goods Trade and Financial Asset Trade 1. Trend of
World Trade
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- 6 1960(a)2011 (b)b/a GDP per capita (in
US$)155.2122,424.06144.27 GDP (in billion US$)3.891,116.25286.82
Exports (in billion US$)0.12626.885,100.36 [ Korea in 1962 and in
2007 ] 1. Trend of World Trade Koreas International Trade
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- 7 Trend of Koreas Exports and Imports 1. Trend of World
Trade
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- 2. What are the Reasons for Fast Expansion of International
Trade?
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- Liberalization of Trade GATT/WTO Economic Integration
Development of Transport Sea Transport Air Transport Development of
Telecommunication Telephone Internet 2. Reasons for Fast Expansion
of International Trade
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- Container shipping dramatically reduced shipping costs making
it much easier and cost effective to ship world-wide.
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- 3. What are the Reasons for International Trade?
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- Comparative advantage Difference in technology - David Ricardo
Difference in factor endowments Heckscher-Ohlin Inter-industry
trade Economies of scale and product differentiation Economies of
scale Product differentiation Intra-industry trade 3. Fundamental
Reasons for International Trade
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- 13 Top 10 export items of Korea (%) Source : KOTIS 3.
Fundamental Reasons for International Trade Ran k
197019801990200020102012
ItemShareItemShareItemShareItemShareItemShareItemShare
1Textiles40.8Garments16.0Garments11.7Semiconductor15.1
Semiconductor10.8 Petrochemical products10.2 2Plywood11.0 Steel
Plate- rolled Products 5.4Semiconductor7.0Computer8.5 Vessel 10.5
Semiconductor 9.2 3Wigs10.8Footwear5.2Footwear6.6Automobile7.7
Automobile 7.5 Automobile 8.6 4Iron ores5.9Vessel3.6Video
Apparatus5.6 Petrochemical products 5.3 Flat penal display6.9
Vessel 7.3 5 Electronic goods 3.5 Audio Apparatus
3.4Vessel4.4Vessel4.9 Petrochemical products 6.7 Flat Display and
Sensors 5.7 6 Confection ery 2.3 Man made filament fabrics
3.2Computer3.9 Wireless telecom 4.6 Wireless telecom 5.9Parts of
Automobile4.5 7Footwears2.1 Rubber Products 2.9Audio
Apparatus3.8Synthetic Resin2.9 Parts of Automobile 4.0Wireless
telecom4.2 8Tobaccos1.6 Woods & Wood items 2.8 Steel
Plate-rolled Products 3.8 Steel Plate- rolled Products 2.8
Synthetic Resin 3.6Steel Plate3.6 9 Iron products 1.5 Video
Apparatus 2.6 Man made filament fabrics 3.6Garments2.7 Steel
Plate-rolled Products3.5 Man made filament fabrics 3.6 10 Metal
products 1.5Semiconductor2.5Automobile3.0 Video Apparatus 2.1
Computer1.9 Electronic Application goods 1.6 Tota l
81.147.653.456.662.058.4
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- 14 Top 10 import items of Korea (%) Source : KOTIS 3.
Fundamental Reasons for International Trade 19962000200520102012
ItemShareItemShareItemShareItemShareItemShare 1Crude Oil9.6Crude
Oil15.7Crude Oil16.3Crude Oil16.1Crude Oil20.8
2Semiconductor7.0Semiconductor12.4Semiconductor9.6Semiconductor7.5Semiconductor6.2
3Gold3.9Computer4.9Natural Gas3.3Natural Gas5.1Natural Gas5.3
4Petroleum Product2.9Petroleum Product3.1Computer3.0Petroleum
Product4.2Petroleum Product5.2 5Computer2.8Natural Gas2.4Petroleum
Product3.0 coded and wireless telephone 4.1Coal3.1 6Other
Machinery2.2 Semiconductor production equipment 2.3Iron
panel2.9Coal3.1Iron panel2.0 7 Semiconductor production equipment
2.2Gold1.7 Semiconductor production equipment 2.3 Semiconductor
production equipment 2.4Iron ore1.8 8Measuring analyzer2.1 Cable
communication Product 1.6Coal2.1Iron panel2.4Computer1.8 9Aircraft
parts2.1Iron panel1.5Electronic applications1.7Precision
instrument2.3 Semiconductor production equipment 1.8 10Motor and
pump2.1Fine chemical materials1.4alloyed wire1.7Plastic
resins1.9Fine chemical materials1.7 36.947.145.949.249.7
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- Costs of International Trade 4. What are the Consequences
(Benefits and Costs) of International Trade? Benefits of
International Trade
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- Individuals Consumption of better quality products with lower
prices Consumption of diverse products Firms Greater business
opportunities Greater profit Nation Fast economic growth Job
creation 4. What are the Consequences (Benefits and Costs) of
International Trade?
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- Relation between Growth Rates of GDP and Trade 4. What are the
Consequences (Benefits and Costs) of International Trade?
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- Costs of International Trade Individuals Loss of jobs employed
in the less competitive industries Firms Face stronger competition
and may lose competitive edge Nation Greater income disparity
Possibility of environmental degradation in developing countries
Greater vulnerability to foreign shocks 4. What are the
Consequences (Benefits and Costs) of International Trade?
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- Net Benefit of International Trade Firms Greater business
opportunity but may lose competitive edge Individuals As consumers,
individuals become better off, but as workers, individuals may
become worse off. Nation Overall national welfare becomes greater,
but the nation may face the problems of income disparity,
environmental degradation, etc. 4. What are the Consequences
(Benefits and Costs) of International Trade?
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- 20 Top 10 export markets for Korea Source : KOTIS 5. Who are
the major trade partners Rank 197019801990200020102012 Country% % %
% % % 1 2 3 4 5 6 7 8 9 10 U.S. Japan Hong Kong Germany Canada
Netherlands U.K. Vietnam Singapore Sweden 47.3 28.1 3.3 2.3 1.6 1.5
1.3 0.9 U.S. Japan Saudi Arabia Germany Hong Kong Iran U.K.
Indonesia Netherlands Canada 26.3 17.4 5.4 5.0 4.7 3.5 3.3 2.1 2.0
U.S. Japan Hong Kong Germany Singapore U.K. Canada Taiwan France
Indonesia 29.8 19.4 5.8 4.4 2.8 2.7 1.9 1.7 U.S. Japan China Hong
Kong Taiwan Singapore U.K. Germany Malaysia Indonesia 21.8 11.9
10.7 6.2 4.7 3.3 3.1 3.0 2.0 China U.S. Japan Hong Kong Singapore
Taiwan Germany India Mexico Indonesia 25.1 10.7 6.0 5.4 3.3 3.2 2.5
2.3 2.1 1.9 China U.S. Japan Hong Kong Singapore Vietnam Taiwan
Indonesia India Russia 24.5 10.7 7.1 6.0 4.2 2.9 2.7 2.5 2.2 2.0
Total91.471.672.968.862.464.8
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- 21 Top 10 export and import markets for Korea (2012) Source :
KOTIS 5. Who are the major trade partners ExportImport
NoCountryBillion USDratioNoCountryBillion USDratio
1China13424.5%1China8115.5% 2USA5910.7%2Japan6412.4%
3Japan397.1%3USA438.3% 4Hong Kong336.0%4Saudi Arabia407.6%
5Singapore234.2%5Qatar264.9% 6Vietnam162.9%6Australia234.4%
7Taiwan152.7%7Germany183.4% 8Indonesia142.5%8Kuwait183.5%
9India122.2%9Arab Emirate152.9% 10Russia112.0%10Taiwan142.7%
Total54864.8%total34265.8%
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- Gravity Model Other things equal, the bilateral trade between
two countries is proportional, or at least positively related, to
the product of the two countries GDPs, and the greater the distance
between the two countries, the smaller is their bilateral trade.
That is, the larger (and more equal in size) and the closer two
countries are, the larger the volume of trade between them is
expected to be. Salvatore: International Economics, 10th Edition
2010 John Wiley & Sons, Inc. 5. Who are the major trade
partners
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- Multilateralism vs. regionalism 6. What are the Consequences
(Benefits and Costs) of Trade Policy? Free trade vs. non-free trade
Tariff and non-tariff barriers
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- Aims of the course To understand reasons for international
trade Traditional trade theory Modern trade theory To understand
benefits and costs of international trade To understand
international trade policy Effects of tariffs and non-tariff
barriers, etc. 7. Introduction to the course
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- Texts Main textbook Dominick Salvatore, International
Economics, 10th edition, John Wiley & Sons, 2010. Auxiliary
textbooks Recent research articles Economic daily news papers. 8.
Introduction to the course
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- Grading Mid-term exam: 35% Final exam: 35% Quiz: 10% Home work:
10% Attendance: 10% (absence: -2 pts; late show up: 1 pt) (Note:
More than five-time absences will incur automatically an F.) 5.
Introduction to the course
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- Contents 5. Introduction to the course
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- Requirements Intellectually Basic knowledge of microeconomics
Mentally Professionalism Physically Healthy enough not to miss any
of the lectures and homework!! 5. Introduction to the course
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- What is To Study( )?
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- : To learn letters? - , , , , ( ), ( ) . - i.e., To learn
old-time classical philosophy?
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- What is To Study( )? : To listen? - i.e., To listen to lectures
in classroom?
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- What is To Study( )? : To ask questions? - . - i.e., Learning
by asking
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- Who is your instructor? Ph.D. in economics from Univ of Oregon
Professor, Dept of International Trade and Business, KNU Senior
Analyst, Asia-Pacific Economic Cooperation (APEC) Senior
Environmental Affairs Officer, United Nations Economic and Social
Commission for Asia and the Pacific (UNESCAP) Visiting professor,
Keio Univ, Melbourne Univ, Univ of Oregon, Bank of Korea Homepage:
http://cc.kangwon.ac.kr/~hhlee/
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- Hyun-Hoon Lee hhlee@kangwon.ac.kr